When buying or refinancing a home, one of your biggest decisions is whether to choose a 15-year or 30-year mortgage. Whether you’re looking to sell a home in Los Angeles, California, or property in Austin, Texas, the loan term you choose can impact your monthly payments, interest costs, and long-term financial goals.
This Redfin article explains how 15-year and 30-year mortgages differ, including payment examples, and explains when each option makes the most sense.
What is the difference between a 15 year and 30 year mortgage?
The main difference between a 15-year mortgage and a 30-year mortgage is the length of time you have to repay the loan.
Features 15 year mortgage 30 year mortgage Loan term 15 years 30 years Monthly payments High Low Interest rate Low High Total interest paid Overall low Overall high Overall high Time to build equity Fast Slow
A 15-year mortgage is paid off over half the term, so your monthly payments will be higher, but you’ll save a lot on interest and build equity faster.
Comparison of monthly payments and interest
Even a slightly higher 30-year interest rate can have a significant impact on your total interest expense.
Example 1: $400,000 loan
Term Estimated Interest Rate Monthly Payment Total Interest Expense 15 years 5.25% $3,213 $178,000 30 years ~5.75% $2,334 $440,000
If you take out a 15-year mortgage, you’ll save about $260,000 in interest, but your monthly payments will be significantly higher.
Example 2: $250,000 loan
Term Estimated Interest Rate Monthly Payment Total Interest Expense 15 years 5.30% $2,011 $112,000 30 years 5.80% $1,467 $277,000
For this small loan amount, choosing a 15-year term instead of a 30-year term will save you about $165,000 in interest.
Financial images differ from person to person. Use our monthly mortgage calculator to compare real numbers based on home price, down payment, and interest rate.
Interest rates are for illustrative purposes only and may vary depending on lender and borrower qualifications.
When a 15-year mortgage becomes reasonable
A 15-year loan may be suitable for you if:
You want to build equity quickly You want to pay off your home quickly You have a steady income and can afford higher monthly payments You’re refinancing and can take advantage of a lower interest rate You prioritize long-term savings over monthly flexibility
This option is most popular among homeowners who can afford higher payments and want to save on interest, such as those who are refinancing, approaching retirement, or want to get mortgage forgiveness sooner.
When a 30-year mortgage becomes reasonable
Choose a 30-year loan if:
You want lower monthly payments You want more room in your budget for spending and investing You’re planning to buy a more expensive home You expect variable income or want more financial flexibility First-time buyers want more control over their payments
Thirty-year mortgages are common for first-time homebuyers and households that value low monthly payments and flexibility to accommodate other financial goals.
Can I prepay my 30 year mortgage?
Yes, many homeowners choose a 30-year mortgage and make additional payments where possible. This approach provides flexibility while helping you pay off your loan faster and save on interest.
How to pay off a 30-year loan early:
Pay additional principal each month Apply earned benefits or tax refunds to your mortgage Switch to biweekly payments Refinance to a shorter term later
>>Read: Can I pay off my mortgage early with extra payments?
Deciding between a 15-year mortgage and a 30-year mortgage?
Before choosing a loan term, ask yourself the following questions:
Do I see value in having lower payments overall or paying less interest? Is my income stable enough to make higher monthly payments? How long do I plan to stay at home? Do you want more cash flow flexibility for emergencies and investments? Are you still able to comfortably save for retirement, travel, or other goals?
If you want lower monthly payments and the most control over your budget, a 30-year mortgage is usually the best choice. If you’re focused on long-term savings and building wealth quickly, a 15-year mortgage may be worth the higher payments.
conclusion
Both 15-year and 30-year mortgages can be financially smart choices, but it all depends on your priorities.
If you want to save the most on interest and are comfortable with higher payments, choose a 15-year mortgage. If you want lower payments and more room in your budget, choose a 30-year mortgage.
Before you commit, consider comparing loan quotes from multiple lenders and crunching the numbers with a mortgage affordability calculator.
Frequently asked questions about 15-year and 30-year mortgages
1. Is a 15-year or 30-year mortgage better?
It depends on your financial situation. A 15-year mortgage will save you a lot of money in interest and help you build equity faster. A 30-year mortgage, on the other hand, offers lower monthly payments and more budget flexibility. If you can afford higher payments and want to pay off your home faster, a 15-year mortgage may make sense. If you want to lower your monthly payments or qualify for a larger home, a 30-year term may be better for you.
2. Do 15-year mortgages have lower interest rates?
Yes, 15-year mortgages typically have lower interest rates because the shorter the repayment period, the less risk there is for the lender. This means you will pay less interest overall compared to a 30-year loan.
3. How much does a 15-year mortgage increase each month?
A 15-year loan has monthly payments that are 30 to 60 percent higher than a 30-year loan. Use our mortgage calculator and enter your numbers to see exactly how much your monthly payments will vary based on your down payment, interest rate, and loan amount.
4. How long do most people take out a mortgage?
Most home buyers in the United States choose 30-year mortgages because they offer the lowest monthly payments and the most financial flexibility. But more buyers are considering 15-year loans to build equity faster, especially when refinancing.
5. Is a 15-year mortgage suitable for first-time homebuyers?
First-time buyers may also benefit from lower monthly payments on a 30-year mortgage. This gives you more room for savings, emergency funds, and home ownership costs.
6. Can I later convert from a 30 year mortgage to a 15 year mortgage?
Yes, many homeowners start out with a 30-year mortgage and later refinance to a 15-year mortgage when their income increases or they want to pay off their loan faster.
