Housing · Worked example
15-year vs 30-year mortgage: payment and interest tradeoffs
A 15-year fixed mortgage generally requires a higher monthly principal-and-interest payment because the same balance is repaid in half the time. It can produce much lower lifetime interest because there are fewer payments and the offered rate is often lower. The size of either tradeoff depends on the actual balance and rates. In the hypothetical example below, a $400,000 loan at an assumed 5.9% for 15 years has an estimated monthly principal-and-interest payment of $3,353.86, versus $2,528.27 at an assumed 6.5% for 30 years. That is $825.58 more per month for the 15-year term. If each loan is kept for its full scheduled term with no extra payments, the estimate shows $306,484.04 less total interest for the 15-year loan. These rates are editable assumptions, not current offers.
How the model works
The calculator applies the standard fixed-rate amortization model separately to the same loan balance. Each payment is calculated from the entered annual percentage rate and the number of monthly payments: 180 for the 15-year loan and 360 for the 30-year loan. Estimated total interest is all scheduled principal-and-interest payments minus the original balance.
Term and rate both matter. Holding the rate constant would isolate the effect of repaying the balance sooner, while entering separate rates reflects two actual quotes more faithfully. The CFPB explains that shorter terms generally have higher monthly payments, typically lower rates, and lower total cost, but the exact difference depends on the specific loan terms and rates.
Compare payment capacity before lifetime savings
The interest-savings figure is not free money available today. It comes with a larger required payment every month. Compare the higher required principal-and-interest payment with a realistic cash-flow plan, including property taxes, homeowners insurance, mortgage insurance, association dues, maintenance, and other obligations that this calculator does not include.
A lower 30-year payment does not establish that the longer term is preferable, just as lower lifetime interest does not establish that the 15-year payment is manageable. The useful output is the size of the tradeoff under the same balance, not a universal winner.
How to use the result
Enter the same proposed loan amount and the 15-year and 30-year rates quoted for the same shopping period. Then compare the payment difference with the lifetime-interest difference. Because interest rates can change daily, do not combine an old quote with a new one and treat the result as a clean term comparison.
Use the calculator as a first-pass estimate, then compare official Loan Estimates. CFPB guidance says to review the interest rate, monthly principal and interest, mortgage insurance, total monthly payment, upfront loan costs, lender credits, and cash to close. If you may move or refinance before the loan ends, lifetime interest is not your likely holding-period cost; the CFPB describes using the In 5 years figures on page 3 of a Loan Estimate to compare interest and fees over a shorter horizon.
Hypothetical $400,000 fixed-rate term comparison
Hypothetical inputs: Loan amount: 400000; 15-year APR (%): 5.9; 30-year APR (%): 6.5.
- 15-year monthly payment: $3,353.86
- 30-year monthly payment: $2,528.27
- Additional monthly payment for 15-year: $825.58
- 15-year total interest: $203,693.91
- 30-year total interest: $510,177.95
- Estimated interest saved with 15-year: $306,484.04
Limitations and what to check
This is an estimate, not financial, lending, legal, or tax advice. The worked example uses hypothetical rates and is not a live quote. It assumes fixed rates, equal loan balances, on-time monthly payments, no extra principal, and each loan being held to its scheduled payoff. It excludes points, origination and closing costs, lender credits, property taxes, homeowners insurance, mortgage insurance, association dues, maintenance, refinancing, prepayment restrictions, tax effects, and the opportunity cost of the payment difference. Lifetime interest is not a holding-period cost if the loan is sold or refinanced early. Verify affordability, loan features, cash to close, and both term options with current Loan Estimates from lenders.
Sources
- Understand the different kinds of loans available — The CFPB explains that loan term affects monthly principal and interest, the interest rate, and lifetime interest; it compares a shorter 15-year term with a longer 30-year term and says exact differences depend on the offered terms and rates.
- Compare and negotiate your loan offers — The CFPB identifies the Loan Estimate fields to compare, notes that rates can change daily, and explains how the In 5 years figures can be used to calculate a five-year interest-and-fee borrowing cost.
- How do mortgage lenders calculate monthly payments — The CFPB states that a typical fixed-rate mortgage payment depends on the loan amount, loan term, and interest rate and is calculated to pay off the loan at the end of the full term.