15 vs 30 Year Mortgage: The Real Tradeoff
A dollar-for-dollar comparison of 15-year and 30-year mortgages on the same loan, including the case for taking the 30 and investing the difference.
The numbers on $400,000
Assume a $400,000 loan. 15-year rates are usually ~0.5% lower than 30-year rates.
| Term | Rate | Monthly P&I | Total interest |
|---|---|---|---|
| 30-year | 6.5% | $2,528 | ~$510,000 |
| 15-year | 6.0% | $3,375 | ~$207,000 |
The 15-year saves ~847 more per month.
The "invest the difference" argument
The classic counter: take the 30-year and invest the $847/month difference. If markets return 7% annually and you invest for 15 years:
- Invested: 152,460
- Ending balance: ~$268,000
At year 15 you have:
- 15-year path: House paid off, $0 in investments.
- 30-year path: ~268,000 in investments.
Roughly a wash at year 15. But then the 30-year still owes 15 more years of interest, while the 15-year household is investing the full $3,375/month. By year 30, the 30-year path is usually still ahead — if the household actually invests the difference every month for 15 years without touching it.
What actually happens in real life
Studies of household finance consistently show that when given a lower required payment, most people don't invest the difference — they spend it. The 15-year mortgage is forced savings.
When 30-year wins
- You're disciplined about actually investing the difference in retirement accounts (401(k), IRA) where you get tax deferral on top of returns.
- You have other high-return uses — paying off higher-rate debt, funding a business.
- Job or income stability is uncertain and lower required payments create margin.
When 15-year wins
- You're within 15 years of retirement and want to eliminate housing costs before then.
- You've maxed retirement accounts already and would otherwise invest in taxable brokerage (where the tax drag narrows the gap).
- You need the discipline. Being honest here matters more than the spreadsheet.
The middle path
- Take the 30-year for flexibility.
- Set an automatic extra principal payment each month equal to the difference. You get the lower required payment as a safety valve while still paying it off in ~15 years.
Try both scenarios
The 15 vs 30 year mortgage calculator shows exact monthly payments and total interest for your loan amount and rates.