15-Year vs. 30-Year Mortgages

Learn About Interest Rates and Monthly Payments for These Loans

The 30-year, fixed-rate mortgage is the most popular mortgage in the U.S. According to Freddie Mac, nearly 90% of American homeowners have a 30-year, fixed-rate loan. However, just because the 30-year mortgage is popular does not mean it is always the right choice for you!

Let’s talk about 15-year versus 30-year mortgages, and how they can affect the size of your monthly payment, as well as the amount of interest you’ll pay over the life of the loan.

What Does a “15-Year” or “30-Year” Mortgage Mean?

15-year and 30-year mortgages refer to the loan’s term—that is, the number of years you’ll have to pay back the money you’ve borrowed to finance your home. If you take out a 15-year loan, the loan must be repaid over a period of 15 years. If you have a 30-year loan, you’ll need to repay it over a period of 30 years. You’ll also need to pay all the interest you owe by the end of the loan’s term.

What Are the Benefits of a 15-Year Mortgage?

A 15-year mortgage has many benefits. 15-year mortgages typically have lower interest rates and help you save money on interest by paying off your mortgage faster. You can generally build your home’s equity faster and pay off your mortgage more quickly with a 15-year loan, too.

The downside of 15-year mortgages is that they usually come with a higher minimum monthly payment. You will be required to pay more each month with a 15-year mortgage than you will be required to pay with a 30-year mortgage for borrowing the same amount of money. (The amount of money you borrow is often called the “mortgage principal.”) Look at these two sample calculations:

As you can see in these examples, the 15-year mortgage might save you over $40,000 in interest payments but require you to pay more each month. Check out our 15- vs. 30-Year Mortgage Calculator to personalize your estimates for interest and monthly payments.

What Are the Benefits of a 30-Year Mortgage?

The primary benefit of a 30-year mortgage is the lower minimum monthly payment these loans require. As you can see in the example above, the 30-year mortgage requires you to pay a little over $900 less each month, compared to the 15-year mortgage. This can make buying a home more affordable and give you more flexibility in your monthly budget for other bills and expenses.

For this lower monthly payment, you will typically pay a higher interest rate and pay more money in interest over the life of the loan than you would with a 15-year mortgage.

Can You Make Extra Payments on a 30-Year Mortgage?

Yes. Most lenders will allow you to pay them more each month than the minimum required. This means that you can get a 30-year mortgage but pay it off as if it was a 15-year mortgage. The advantage of this is flexibility. You can pay $600 extra one month, $300 extra the next month, and nothing extra the third month.

Many homeowners like the peace of mind of knowing they have the choice of paying more each month or not, rather than being locked into always making the higher payment. A lower payment can leave more money in your budget for other bills, help you save for emergency expenses like an unexpected home repair, help you save for college or retirement, and more.

You will typically pay more money in interest by making extra payments on a 30-year mortgage than by getting a 15-year mortgage but those extra mortgage payments will still save you money in interest!

Can You Refinance a 30-Year Mortgage into a 15-Year Mortgage?

Yes. You can typically choose a 15-year mortgage term whenever you refinance. Homeowners often refinance from a 30-year to a 15-year loan when their incomes have gone up, and the higher minimum monthly payments are more affordable. You can usually make extra mortgage payments on 15-year mortgages, too.

Is a 15-Year or 30-Year Mortgage Right for You?

You’ll want to look at the big picture of your finances, including your mortgage payment, other bills, expenses, savings, and monthly income when you’re deciding between a 15-year and 30-year mortgage. In particular, think about whether a lower monthly payment or saving money in interest over time is more important to you right now.

Freedom Mortgage is not a financial advisor. The ideas outlined above are for informational purposes only and are not investment or financial advice. Consult a financial advisor before making important personal financial decisions, and consult a tax advisor for information regarding the deductibility of interest and charges.

Last reviewed and updated June 2024 by Freedom Mortgage