15-year vs 30-year mortgage: which wins?

The 15-year mortgage saves you hundreds of thousands in interest but requires a 40-50% higher monthly payment. The 30-year gives flexibility but costs more over time. The best answer for most people: take the 30-year and pay it like a 15-year — you get most of the savings with all the flexibility.

The numbers on a $300,000 loan

• 30-year at 6.5% (typical 2024): $1,896/month, $682,633 total paid, $382,633 interest
• 15-year at 5.75% (typically 0.5-0.75% lower rate): $2,492/month, $448,587 total paid, $148,587 interest
• Difference: 15-year costs $596 more/month but saves $234,046 total

Why 15-year wins mathematically

Two reasons: (1) less interest because you're paying it off faster, (2) typically lower interest rate — lenders see 15-year borrowers as lower risk. Combined, 15-year saves roughly 60% of total interest vs 30-year.

Why 30-year wins for most people

• Flexibility: if income drops, the required payment is lower
• Cash flow for other goals: retirement, kids' college, home improvements
• Better for aggressive investors: $596/month difference invested at 8% over 15 years = $205,000
• Keeps emergency fund larger (required payment is smaller)

The hybrid winner: 30-year + extra payments

• Take 30-year mortgage for flexibility
• Pay an extra $596/month toward principal (same as 15-year payment)
• Result: pays off in ~17 years, saves $180K-$200K in interest
• Benefit: if income drops, you can skip extra payments without penalty

Investing the difference: the counter-argument

Instead of paying $596 extra toward a 6.5% mortgage, invest it at 8-10%. Over 30 years at 8%, $596/month becomes $898,000 — while the 30-year mortgage costs $234K more than 15-year. Net gain from investing: ~$664K.

When to pick straight 15-year

• You have strong income stability and solid emergency fund
• You don't have employer 401(k) match or Roth IRA to max out first
• You find the discipline of a required higher payment valuable
• You want to be mortgage-free before retirement