15-Year vs. 30-Year Mortgage: Which Costs Less?

Which costs less depends on whether you mean this month or the life of the loan. The 15-year note almost always costs less interest. The 30-year note almost always costs less per month. First-time buyers who will be house-poor on a 15-year should not take it to win an internet argument about interest.

The same $300,000 loan

At 6.5%, 30-year P&I ≈ $1,896. 15-year P&I ≈ $2,613. Difference ≈ $717 a month. Over the full term, 30-year interest is on the order of $382,000; 15-year interest is on the order of $170,000. Those are model totals at a constant rate, no extra payments, no refinance.

15-year rates are often lower than 30-year rates. If the 15-year is 6.25% and the 30-year is 6.5%, the gap in interest gets wider and the payment gap narrows slightly. Type both rates; do not assume they are equal.

A practical rule

If the 15-year payment still leaves a funded emergency account and retirement contributions, it is usually the cheaper loan. If it only works by skipping savings, take the 30-year and add extra principal when you actually have surplus. Extra principal on a 30-year is optional; a 15-year payment is not.

Worked example

$375,000 house, 20% down, $300,000 loan. Compare 15-year and 30-year calculators with the same tax and insurance. PITI changes only because P&I changes. Educational only.