15- vs. 30-Year Mortgage: Which One is Right for You?
A key homebuying decision is weighing a 15- versus 30-year mortgage. While the 30-year mortgage is most popular, a 15-year mortgage offers some key advantages — if you can afford one. Find out whether one of these loan terms, or an alternative loan type, will best suit your finances.
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15- vs. 30-year mortgage: What’s the difference?
A mortgage term is the length of time you’ll need to pay back the loan. Typically, lenders offer terms of 15, 20 or 30 years, but other terms may also be available.
The difference between a 15- versus 30-year mortgage simply comes down to the number of payments you’ll be required to make and the amount of interest you’ll pay over time. With a 15-year mortgage, your monthly payments will be higher because you’re paying back the loan in less time than you would with a 30-year mortgage. But that means you’ll also pay less in interest over the life of the loan. Fifteen-year mortgages also tend to have lower interest rates than 30-year mortgages.
15 vs. 30-year mortgage comparison
Here’s an example of the monthly payment differences between 15- and 30-year mortgage rates.
Costs of a 15- vs. 30-year mortgage
|15-year mortgage||30-year mortgage|
|Monthly payment (principal and interest)||$2,075.98||$2,235.31|
|Total amount paid over loan term||$747,352.00||$804,710.11|
What are current mortgage rates for 30- vs. 15-year mortgages?
DTI Ratio Fee Changes in 2023
As of Aug. 1, 2023, conventional loan borrowers will see interest rate changes or additional costs at closing if they have a debt-to-income (DTI) ratio over 40%. This could affect the financial picture for buyers choosing between 15- and 30-year mortgages, so be sure to consider this additional cost as you evaluate your options.
15- vs. 30-year mortgage calculator
If you don’t have access to a specialized 15- versus 30-year mortgage calculator, don’t worry — it’s easy to use a regular mortgage calculator to compare the payments you can expect to see for these two loan types. LendingTree’s calculator can tell you what your individual payments will look like, as well as how much principal and interest you’ll pay with each payment, how much interest you’ll pay over the life of the loan and more.
15- vs. 30-year mortgage: Pros and cons
Both a 15-year and 30-year mortgage have their benefits and drawbacks. Here are the most important ones to consider.
15-year loan pros and cons
Faster payoff. With a 15-year mortgage, you’ll be mortgage debt-free in half the time of a traditional, 30-year mortgage.
Less interest paid. With fewer payments, you’ll also pay less in interest. Depending on your loan size, this could be a difference of tens of thousands of dollars over the life of the loan.
Lower interest rate. Lenders typically charge lower rates on a 15-year mortgage, a difference that will also translate to savings over the course of your loan.
More equity, faster. With a 15-year mortgage, you’re paying down more of the principal more quickly. This means you’re building equity in your home faster, which you can tap down the line if needed.
Higher monthly payment. With the shorter loan, you’ll be paying much more each month. In the example above, the 15-year option had payments almost 8% higher than the 30-year option — but in other scenarios your payments could be as much as 40% higher.
Smaller loan amount. Since the payment is higher, lenders won't qualify you for as large a loan with a 15-year mortgage. If your dream house is on the higher end of your affordability scale, you might not be able to choose a 15-year loan.
Less flexible repayment. While you can choose to pay off a 30-year loan faster if you have room in your budget, you can’t choose to pay off a 15-year loan slower if your budget gets tight.
30-year loan pros and cons
Lower monthly payment. With the longer time frame, your monthly payment will be significantly lower. This gives you more buying power.
Easier to qualify. The lower monthly payment makes it easier for a borrower to meet DTI ratio requirements and qualify for a loan.
More room in your budget. A lower payment means you’ll have more money to put into savings or spend on other priorities.
Flexibility in how you repay. You’ll enjoy the lowest monthly payment available but, if you receive a raise or windfall, you’ll have the option to make extra payments.
More interest paid. Since you’ll be paying interest longer, you’ll pay much more over the life of your mortgage.
Higher interest rates. Lenders deem a 30-year mortgage a greater risk and charge higher rates.
Higher DTI ratio. If you’re choosing a 30-year mortgage because it allows you to borrow more, your DTI will be higher. That can make your current loan more expensive and affect future loans.
Slower equity. Lower payments also mean you’re building equity less quickly. This could also prolong the time you have to pay for private mortgage insurance.
Should you choose a 15- or 30-year mortgage?
So how do you decide? Take a look at your personal financial situation and consider the following.
A 15-year loan is best if …
- You can comfortably afford a higher monthly mortgage payment. Your monthly principal and interest payments will be significantly higher with a 15-year loan. Only take this route if you have room in your budget and can still afford to cover your other obligations, including other loan payments.
- You want to build equity more quickly. You’re paying more toward your principal each month with a 15-year mortgage, which allows you to build equity in your home at a faster pace. Having access to more equity means you can later use a cash-out refinance, home equity loan or home equity line of credit to pursue other financial goals. It also means you’ll own your home free and clear much sooner.
Things You Should Know
To see exactly how quickly you’ll build equity, use an amortization table. This will show you how much total equity you’ll have after each payment and exactly what portion of each mortgage payment is going toward your principal and interest. You can generate an amortization table easily with most mortgage calculators.
- You’re buying a house well within your means. You’ll likely qualify for a smaller loan if you go with the 15-year option. If you’re not looking to buy the most house you can afford, this could be the better option.
- You plan to stay in your home short term. If you know you’ll have to sell relatively quickly, choosing a 15-year mortgage can help you build more equity and make more money when reselling. You’ll be paying more principal and less interest, meaning you’ll have a bigger profit once all of the fees and commissions are paid.
A 30-year loan is best if …
- You want a lower monthly mortgage payment. Your repayment term is longer with a 30-year loan, which spreads out your mortgage payments over a greater period of time and makes them more affordable.
- You want more room in your budget. A lower monthly mortgage payment gives you more wiggle room month to month for budgeting and focusing on other financial goals, such as boosting your emergency fund or retirement savings.
- You want the option to pay off your mortgage faster without being tied down. If you borrow a 15-year loan, you’re committing to a higher monthly mortgage payment for the entire loan term. However, you can shave time off of a 30-year repayment term by paying extra whenever you have the financial bandwidth to do so.
- You want to buy the most house you can afford. You’ll likely qualify for a larger loan with a 30-year mortgage. This means you can buy a more expensive house.
How can I pay down a 30-year loan faster?
You have many options when it comes to paying off your mortgage faster, even if you have a 30-year mortgage:
- Larger payments each month. If you add a little bit extra to your required mortgage payment each month, you’ll speed up how quickly you’ll pay off the loan. Just be sure to ask your lender to apply the extra you’ve paid to your principal balance.
→ Great if: You have plenty of room in your budget and want to commit to regularly chipping in more.
- Biweekly payments. If you make biweekly instead of monthly payments, you’ll pay the equivalent of one full extra payment over the course of the year.
→ Great if: You want to make a plan for your extra payments that has a known outcome.
- Extra lump-sum payments. You can make an extra payment of any amount toward your principal balance at any time. It doesn’t have to be a large amount, or paid with your regular payments, to help shift your payoff timeline.
→ Great if: You want to contribute irregular amounts any time you have extra funds.
- Mortgage recast. Recasting a mortgage means paying a large lump sum at one time and then asking your lender to recalculate your loan amount and payment schedule. You’ll come out with lower monthly payments without having to go through the hassle and cost of a refinance.
→ Great if: You suddenly find yourself sitting on a large amount of money due to an inheritance, a windfall, your own business savvy or simply good fortune.
Watch Out for Prepayment Penalties
Double-check that your mortgage doesn’t have a prepayment penalty before making extra payments of any kind. Most of the time, such a penalty only applies if you pay off your entire mortgage early. But in some cases, you might face a fee if you make small payments toward principal ahead of time.
Alternatives to 15- and 30-year loans
Shorter loan terms
Looking to own your home outright even faster than 15 years? Here are some options:
- 10-year fixed-rate mortgages These loans aren’t uncommon and are offered by several of our picks for the best mortgage lenders. They come with lower interest rates than either 15- or 30-year mortgages and could be a great choice if you can afford the higher payments.
- Custom loan terms Some lenders offer conventional fixed-rate mortgages with custom loan terms that allow you to choose a loan term between 8 and 14 years. Want to own your home outright by your 50th birthday, or some other major life event? In some cases, you can even choose exactly when your loan will be paid off.
Longer loan terms
Wondering if there’s a way to stretch out your loan term beyond the standard 30 years? It’s possible to get a 40-year mortgage, but not very common. Most lenders will only offer a 40-year loan to homeowners who are struggling to make payments and only as part of a loan modification that will help them avoid mortgage default.
That’s because 40-year loans don’t follow the rules put in place by the Consumer Financial Protection Bureau to protect borrowers from risky home loans — this makes them “non-qualified” mortgages. Most lenders don’t want to offer non-QM loans to everyday borrowers who are just looking to purchase a home and aren’t in dire financial straits.
If you’re looking to get into a loan with rock-bottom monthly payments and a 30-year loan won’t provide payments low enough for you, an interest-only loan could give you what you’re looking for. Interest-only loans allow you to pay nothing toward your principal balance — to pay interest only — for a number of years at the beginning of your loan term. The interest-only period may last anywhere from three to 10 years, which will give you a healthy amount of time to enjoy your low monthly payments.
That said, buyer beware: You’ll face higher payments once the initial interest-only period ends or, in some cases, a balloon payment. Either of these could be very expensive. If you choose an interest-only loan make sure you understand what you’re getting into — and that you have a reasonable plan for how you’ll get out.
Frequently asked questions
Over the long term, you will undoubtedly save more money with a 15-year mortgage. Your total interest costs and total amount paid will be dramatically lower. Short term, though, you save money on your monthly payment by choosing the 30-year mortgage.
The mortgage term is not the only way to control the size of the mortgage payment. You can also lower your monthly mortgage payment by making a larger down payment, improving your credit score or shopping around for the lowest interest rate.
Yes, this choice isn’t just one you need to make when buying a new home. You can also refinance to a 30-year or 15-year mortgage. For instance, if you currently have a 30-year mortgage, you can change that later by refinancing to a 15-year term.
To find out the answer to this question, you’ll need to know the following:
- How much you’ll pay in interest over the remainder of your mortgage loan term
- How much you expect to make on the investments you’re targeting
If you have a solid idea of these factors, you can evaluate whether it’s more feasible for you to continue making your mortgage payments as scheduled, or to pay off the mortgage and invest the funds.