15- vs. 30-Year Mortgage: Which One is Better?
When it’s time for you to compare your mortgage options, you’ll likely be considering a 15- versus 30-year mortgage. While the 30-year mortgage is most popular, a 15-year mortgage offers some big advantages — if you can afford one. Find out whether one of these loan terms, or an alternative loan type, will best suit your finances.
15- vs. 30-year mortgage: What’s the difference?
15-year mortgage
- Higher monthly payments
- Lower loan costs
- Quicker buildup of equity
- Tougher requirements
30-year mortgage
- More affordable payments
- Higher loan costs
- More flexibility
- Easier requirements
There are three main differences between 15- and 30-year mortgages:
- The number of payments you’ll make. You’ll repay your mortgage in half as many payments if you choose a 15-year versus 30-year mortgage. This allows you to build home equity more quickly.
- How expensive the monthly payments are. Your monthly payments will be higher with a 15-year loan because you’re paying back the loan in less time than a 30-year loan.
- Your total interest charges over the life of the loan. You’ll pay significantly less in interest over the life of a 15-year loan, both because you’re paying off the loan faster, and 15-year mortgages tend to have lower interest rates than 30-year mortgages.
Understanding loan term vs. average mortgage length
Although 30-year mortgages are by far the most common choice for homeowners in the U.S., most people won’t stay in their loan nearly that long. Homeowners typically refinance or sell their home within seven to 10 years.
15- vs. 30-year mortgage cost comparison
Here’s an example to illustrate the monthly payment and loan cost differences between 15- and 30-year mortgage rates.
Costs of a 15- vs. 30-year mortgage
| 15-year mortgage | 30-year mortgage | |
|---|---|---|
| Loan amount | $350,000 | $350,000 |
| Interest rate | 6.13% | 6.91% |
| Monthly payment (principal and interest) | $2,978.14 | $2,307.44 |
| Total interest | $186,064.69 | $480,679.12 |
| Total of all payments | $536,064.69 | $830,679.12 |
Takeaway: Going with the 15-year option would save you $294,614 in interest charges.
What are the current mortgage rates for 15- vs. 30-year mortgages?
The average 15-year mortgage rate is 7.12%, while the average 30-year mortgage rate is 6.34%. Current average rates are calculated using all conditional loan offers presented to consumers nationwide by LendingTree’s network partners over the past seven days for each combination of loan program, loan term and loan amount. Rates and other loan terms are subject to lender approval and not guaranteed. Not all consumers may qualify. See LendingTree’sTerms of Usefor more details.
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 these two loan types. LendingTree’s mortgage calculator below can estimate your payments and tell you how much principal and interest you’ll cover 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
15-year loan pros and cons
| Pros | 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 pay less in interest. Depending on your loan size, this could be a difference of tens, or even hundreds, 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 also translates to savings over your loan term. More equity, faster. With a 15-year mortgage, you’re paying down more of the principal more quickly. This means you’re building home equity faster, which you can tap down the line if needed. | Higher monthly payment. With the shorter loan term, you’ll be paying much more each month. In the example above, the 15-year option had payments 25% 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, a 15-year loan might not be your best choice. 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
| Pros | 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 debt-to-income (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 can 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 mean you’re building equity less quickly. This can also prolong the time you have to pay for private mortgage insurance. |
How to choose: 15- vs. 30-year mortgage
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 your home equity 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.
How to calculate how quickly you’ll build home equity
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, since your income needs to cover a higher payment. If you’re not looking to buy the most house you can afford, a 15-year loan 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 other financial goals, like boosting your emergency fund or retirement savings.
- 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.
- 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.
How can I pay down a 30-year loan faster?
You have several 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 chipping away at your balance more frequently.
- 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 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.
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 between eight 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, though 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 foreclosure.
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 “nonqualified” 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.
Interest-only loans
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 be sure you understand what you’re getting into — and that you have a reasonable plan for how you’ll get out.
Frequently asked questions
A mortgage term is the length of time it takes you to repay the loan. Typically, lenders offer terms of 15, 20 or 30 years, but other terms may also be available.
Yes, this choice isn’t just one you need to make when buying a new home. You can also refinance to a 15-year mortgage if you already have a 30-year loan — or vice versa. Changing your loan term is a common reason for refinancing, and is one way to raise or lower your monthly payment amount.
The mortgage term isn’t the only way to control your mortgage payment size. 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.
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 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.