A 15-year mortgage saves an enormous amount of interest. A 30-year mortgage gives you a much lower payment and more room in your budget. Neither is automatically the right answer: the choice depends on how comfortably you can carry the higher payment, what else you would do with the difference, and how much you value flexibility.
This guide puts real numbers on the trade-off using the latest Freddie Mac average rates: monthly payments and total interest on a $300,000 and a $400,000 loan, the popular “take a 30-year and pay it like a 15-year” strategy, what investing the difference would have to earn, the income you need to qualify, PMI, refinancing and a 20-year middle option. You can rerun every scenario with your own figures in the free Mortgage Calculator.
This guide is educational, not financial advice. It explains how the math works with stated assumptions; it does not recommend a loan, lender or investment. Get written quotes and, if needed, speak to a qualified professional before you commit.
Current 15- and 30-year mortgage rates
Freddie Mac's Primary Mortgage Market Survey (PMMS) is the most widely quoted weekly benchmark for US fixed-rate mortgages. For the week of 22 October 2026 it reported:
| Loan type | Average rate, 22 Oct 2026 | Week before | A year earlier |
|---|---|---|---|
| 30-year fixed | 7.32% | 7.40% | 6.19% |
| 15-year fixed | 6.68% | 6.71% | 5.44% |
The 15-year loan is 0.64 percentage points cheaper. Lenders price shorter loans lower because their money is tied up for less time and the balance falls faster. These are survey averages for borrowers with strong credit and around 20% down; your quote will depend on your credit score, down payment, points and lender. PMMS is published every Thursday, so check the latest figure before comparing offers.
Monthly payment and total interest compared
All figures below use the standard amortization formula M = P × r × (1 + r)n ÷ ((1 + r)n − 1), the same one our mortgage calculator uses, where r is the annual rate ÷ 12 and n is the number of monthly payments. They cover principal and interest only. PMMS does not publish a 20-year average, so the 20-year rows use an assumed 7.00%, roughly between the other two.
$300,000 loan
| Term and rate | Monthly payment | Total interest | Total repaid |
|---|---|---|---|
| 30 years at 7.32% | $2,060.79 | $441,885 | $741,885 |
| 20 years at 7.00% (assumed) | $2,325.90 | $258,215 | $558,215 |
| 15 years at 6.68% | $2,643.10 | $175,758 | $475,758 |
$400,000 loan
| Term and rate | Monthly payment | Total interest | Total repaid |
|---|---|---|---|
| 30 years at 7.32% | $2,747.72 | $589,180 | $989,180 |
| 20 years at 7.00% (assumed) | $3,101.20 | $344,287 | $744,287 |
| 15 years at 6.68% | $3,524.13 | $234,344 | $634,344 |
On $300,000 the 15-year payment is $582.31 a month higher (about 28%), but it saves $266,127 of interest. On $400,000 the gap is $776.41 a month and the saving is $354,836. With the 30-year loan you repay more than twice what you borrowed in interest alone.
The difference shows up from the first payment. Month one on the $300,000 loan carries $1,830 of interest on the 30-year and $1,670 on the 15-year. After five years, the 30-year borrower has paid $106,987 of interest and still owes $283,339; the 15-year borrower has paid $89,493 and owes $230,907, more than $52,000 less.
How much of the saving comes from the lower rate? If the 15-year loan were priced at the same 7.32% as the 30-year, it would cost $2,750.44 a month and $195,079 in interest. So the shorter term alone saves about $246,800, and the 0.64-point rate discount adds roughly another $19,300.
The “30-year and prepay” strategy vs a true 15-year
A common alternative is to take the 30-year loan and voluntarily pay the 15-year amount each month, sending the extra to principal. The required payment stays at the lower 30-year level, so in a tight month you can simply pay less. Here is what that costs on $300,000 with the same $2,643.10 a month going out of your account in both cases:
| $300,000, paying $2,643.10 a month | Paid off after | Total interest |
|---|---|---|
| 15-year loan at 6.68% | 180 months (15 years) | $175,758 |
| 30-year loan at 7.32%, prepaying $582.31 a month | 194 months (16 years 2 months) | $212,349 |
| 30-year loan at 7.32%, minimum payments only | 360 months | $441,885 |
Prepaying gets you most of the way there, but the true 15-year loan finishes 14 months sooner and costs $36,591 less, purely because of the lower rate. On $400,000 the gap is $48,788 ($283,132 of interest against $234,344). Think of that as the price of flexibility. It is worth paying if your income is irregular, if you are self-employed, or if you are not yet sure the higher payment is sustainable. It is not worth paying if you know you will make the higher payment anyway.
Two practical points. Check that your loan has no prepayment penalty (most US conforming mortgages do not), and make sure your servicer applies extra payments to principal rather than holding them as an advance on the next payment.
Investing the difference: the opportunity cost
The strongest case for the 30-year loan is that the $582 a month you do not send to the lender could be invested instead. To compare fairly, both households below spend exactly the same amount each month for 30 years:
- Household A takes the 30-year loan at 7.32% and invests $582.31 a month for 15 years, then lets that pot grow for another 15 years while it keeps paying the mortgage.
- Household B takes the 15-year loan at 6.68%. Once it is paid off, B invests the $2,060.79 a month that A is still paying on its mortgage, for years 16 to 30.
Illustration only. Assumptions: $300,000 loan, a constant annual return compounded monthly, returns are after all taxes and fund fees, no mortgage interest deduction (most households now take the standard deduction), and both homes are fully paid off at year 30. Real returns vary year to year and can be negative.
| Annual return after tax and fees | A: 30-year + invest (year 30) | B: 15-year, then invest (year 30) | Ahead |
|---|---|---|---|
| 4% | $256,572 | $504,187 | 15-year by $247,615 |
| 6% | $400,395 | $591,266 | 15-year by $190,871 |
| 8% | $623,619 | $695,736 | 15-year by $72,117 |
On these assumptions the break-even is about 8.8% a year after tax. Below that, the 15-year loan leaves you wealthier at year 30; above it, the 30-year-and-invest plan wins. The 15-year loan's rate discount does much of the work here: if both loans carried the same rate, the break-even would drop to about 6.9%.
Midway the picture is starker. At year 15, with 6% returns, Household A has about $167,071 invested but still owes $224,778 on its mortgage, while Household B owns its home outright. The investing plan also depends on discipline: the $582 has to be invested every single month, not absorbed into everyday spending. If part of the difference would go into a 401(k) with an employer match you are not yet collecting, the case for the 30-year loan becomes much stronger, because a match is an immediate return no mortgage can beat.
Affordability and debt-to-income
The higher 15-year payment means you need more income to qualify for the same loan. Lenders look at your debt-to-income ratio (DTI), your monthly debt payments divided by gross monthly income, and limits vary by lender and loan program. A widely used rule of thumb is that housing costs should stay within 28% of gross income. Assuming $500 a month for property tax and homeowners insurance:
| Loan | 30-year | 20-year (assumed 7.00%) | 15-year |
|---|---|---|---|
| $300,000: monthly housing cost | $2,561 | $2,826 | $3,143 |
| $300,000: income needed at 28% | about $109,700 | about $121,100 | about $134,700 |
| $400,000: monthly housing cost | $3,248 | $3,601 | $4,024 |
| $400,000: income needed at 28% | about $139,200 | about $154,300 | about $172,500 |
In other words, the same income buys a noticeably smaller loan on a 15-year term. A household that qualifies comfortably for $400,000 over 30 years would qualify for only around $300,000 to $320,000 over 15. To see how term, rate and existing debts change your maximum price, use the Home Affordability Calculator. Being able to qualify is not the same as being comfortable: if the 15-year payment would leave no emergency fund or retirement saving, the lower 30-year payment is usually the safer choice.
PMI: a hidden advantage of the shorter term
With less than 20% down on a conventional loan you will usually pay private mortgage insurance. Under federal rules summarised by the CFPB, you can ask to cancel PMI when your balance is scheduled to reach 80% of the home's original value, and it must end automatically at 78% (or at the loan's midpoint), provided you are current on payments. Because a shorter loan pays down principal faster, it reaches those points years earlier. With 10% down on a $333,333 home ($300,000 loan):
| Term | Can request removal (80%) | Automatic removal (78%) |
|---|---|---|
| 30 years at 7.32% | Month 104 (8 yrs 8 mths) | Month 119 |
| 20 years at 7.00% (assumed) | Month 51 | Month 59 |
| 15 years at 6.68% | Month 32 (2 yrs 8 mths) | Month 38 |
Extra principal payments on a 30-year loan can also bring the 80% date forward, and you can then request cancellation early. FHA and VA loans follow different rules.
Refinancing: choosing now vs changing later
Your first choice is not permanent. Many people take a 30-year loan when rates are high and refinance if they fall. For example, after three years on the $300,000 30-year loan at 7.32%, the balance is about $290,740. If rates had dropped, refinancing that balance into a 15-year loan at a hypothetical 5.75% would cost $2,414.33 a month, less than today's 15-year payment, while a new 30-year loan at 6.25% over the remaining 27 years would cost $1,859.81.
But refinancing is never free. It comes with closing costs, often several thousand dollars, a fresh credit check and appraisal, and there is no guarantee rates will fall: the PMMS averages above are more than a point higher than a year earlier. Divide the closing costs by the monthly saving to see how many months it takes to break even, and only plan on a refinance if you would be fine keeping the original loan.
When each term makes sense
A 15-year mortgage tends to fit when
- The higher payment fits within your budget with an emergency fund and retirement saving still in place
- Your income is stable and you are not relying on future raises
- You want to own your home outright before a specific date, such as retirement or college costs
- You value a guaranteed return (the interest you avoid) over market returns
- You are refinancing an existing loan with a smaller balance
A 30-year mortgage tends to fit when
- You need the lower payment to qualify or to keep a safe margin in your monthly budget
- Your income is irregular and you want the option to prepay rather than the obligation
- You still have high-interest debt, no emergency fund or an unclaimed employer 401(k) match
- You expect to move or refinance within a few years, so the long-run interest gap matters less
A 20-year mortgage as the middle option
At an assumed 7.00%, the 20-year loan costs $265 a month more than the 30-year on $300,000 but saves $183,670 of interest, and it removes PMI years sooner. Compared with the 15-year, it is $317 a month cheaper and costs $82,457 more in interest. Not every lender advertises 20-year loans, so ask for a quote.
If you are still deciding whether to buy at all, the Rent vs Buy Calculator compares your net worth from buying against renting and investing, year by year.
The short answer
At today's rates, a 15-year mortgage saves about $266,000 of interest on a $300,000 loan and, in our illustration, leaves you wealthier after 30 years unless you could earn close to 9% a year after tax on the invested difference. Its cost is a payment roughly 28% higher and less room for error. If that payment fits comfortably, the 15-year is hard to beat on the numbers. If it does not, a 30-year loan with voluntary extra payments, or a 20-year loan, gets you much of the saving while keeping flexibility. Run your own quotes before you choose.
Frequently asked questions
How much more is a 15-year mortgage payment than a 30-year?
At Freddie Mac's averages for the week of 22 October 2026 (7.32% for 30 years, 6.68% for 15 years), a $300,000 loan costs $2,060.79 a month over 30 years and $2,643.10 over 15 years, a difference of $582.31 a month or about 28%. On $400,000 the gap is $776.41 a month. Property tax, insurance and any PMI come on top of both.
How much interest does a 15-year mortgage save?
On a $300,000 loan at those rates, total interest is $441,885 over 30 years and $175,758 over 15 years, a saving of $266,127. On $400,000 it is $589,180 against $234,344, a saving of $354,836. About a quarter of the saving comes from the lower 15-year rate and the rest from repaying the balance in half the time.
Is it better to get a 30-year mortgage and pay it off in 15 years?
It is more flexible but costs more. Paying the 15-year amount ($2,643.10) on a $300,000 30-year loan at 7.32% clears it in 194 months, about 16 years and 2 months, with $212,349 of interest. The true 15-year loan finishes 14 months sooner and costs $36,591 less because its rate is 0.64 points lower. You are paying that premium for the right to drop back to the lower payment in a bad year.
Should I take a 30-year mortgage and invest the difference instead?
Only if you expect to earn clearly more after tax than your mortgage costs, and you will actually invest every month. In our illustration with today's rate gap, investing the $582 difference only came out ahead of the 15-year loan at returns above about 8.8% a year after tax and fees, sustained for 30 years. With no rate discount the break-even falls to about 6.9%. Investment returns are not guaranteed; mortgage interest saved is.
Does a 15-year mortgage help me get rid of PMI faster?
Yes. With 10% down on a $333,333 home, a 15-year loan at 6.68% is scheduled to reach 80% of the original value in month 32, when you can ask to cancel PMI, against month 104 on a 30-year at 7.32%. Automatic termination at 78% comes in month 38 versus month 119.
Is a 20-year mortgage a good compromise?
It can be. Freddie Mac does not publish a 20-year average, but at an assumed 7.00% a $300,000 loan costs $2,325.90 a month, $265 more than the 30-year and $317 less than the 15-year, and total interest of $258,215, which saves $183,670 against the 30-year. Ask lenders for a 20-year quote, since not all of them advertise it.
This guide is general information, not professional advice. Rates and rules change — check the official source before you file or sign anything. See our Disclaimer.