15 vs 30-Year Mortgage: The Real Cost Difference
On a $320,000 loan at today's rates, choosing 30 years over 15 costs roughly a quarter of a million dollars in extra interest. But the monthly gap is real too — here are the exact numbers, and an honest look at who should pick which.
The exact numbers, side by side
Take a $320,000 loan — a $400,000 home with 20% down. At a 6.5% rate, here is what each term really costs:
| 30-year | 15-year (same 6.5%) | |
|---|---|---|
| Monthly P&I | $2,022.62 | $2,787.54 |
| Total interest paid | $408,142 | $181,758 |
| Total of all payments | $728,142 | $501,758 |
| Interest saved | — | $226,385 |
Read that middle row again. The 30-year borrower pays $408,142 in interest — more than the loan itself. The 15-year borrower pays $181,758. The price of the lower payment is about $226,385.
The rate discount nobody mentions
It gets better for the 15-year: lenders price them cheaper, typically 0.4–0.7 points below the 30-year rate. At 6.0% instead of 6.5%, the 15-year payment is $2,700.34 and lifetime interest drops to $166,062 — total savings versus the 30-year of about $242,081.
Why the difference is so extreme
Early mortgage payments are mostly interest. In month one of the 30-year loan above, about $1,733 of the $2,022.62 payment is interest and only ~$289 touches the principal. The 15-year payment attacks the balance from day one, so there is simply less balance sitting around accruing interest for less time. It's compound interest working against you — the same math that grows savings shrinks debts when you flip it.
The honest case for the 30-year
- Flexibility is worth money. The $765/month difference is committed on a 15-year loan. Lose income, and the higher payment is still due.
- Opportunity cost. Invested at a 7% average return, $765/month grows to roughly $242,000 in 15 years — in the same neighborhood as the interest saved. The mortgage saving is guaranteed, the market is not; that's the real trade.
- Qualification. The higher payment raises your debt-to-income ratio, shrinking how much house you can finance.
The hybrid strategy
Take the 30-year, then pay it like a 15. Send $2,787.54 instead of $2,022.62 and you'll retire the loan in about 15 years with nearly identical interest savings (minus the rate discount you didn't get). The required payment stays low — if life happens, you drop back with no penalty. Model exactly this with the extra-payments field in our mortgage calculator.