15-Year vs 30-Year Mortgage: Which Should You Choose?

When my wife and I bought our first house three years ago, our mortgage broker presented two options: a 15-year mortgage at 3.5% or a 30-year at 4.25%. The difference in monthly payment was stark—$2,410 versus $1,656. We had the income to afford either one, but that $750/month difference felt massive. 'Think of what we could do with an extra $750 a month,' my wife said. I countered with, 'Think of retiring with the house paid off and no mortgage hanging over us.'

We spent two weeks running numbers, losing sleep, and driving each other crazy. Eventually, we made a decision (I'll tell you which one later). But first, let's talk about what these two options actually mean for your money, because the differences go way beyond the monthly payment.

The Numbers That Actually Matter

Let's start with a real example. You're buying a $400,000 house with $80,000 down (20%), financing $320,000. Current rates are 6.5% for a 30-year and 5.875% for a 15-year (15-year rates are typically 0.5-0.75% lower).

Here's what those two mortgages look like:

30-Year Mortgage at 6.5%:

• Monthly payment: $2,023
• Total interest paid: $408,280
• Total paid over life of loan: $728,280
• Monthly payment as % of $8,000 income: 25.3%

15-Year Mortgage at 5.875%:

• Monthly payment: $2,682
• Total interest paid: $162,760
• Total paid over life of loan: $482,760
• Monthly payment as % of $8,000 income: 33.5%

Read that total interest difference again. The 30-year mortgage costs $245,520 more in interest. That's not a typo. You're literally paying an extra quarter-million dollars for the privilege of spreading payments over 30 years instead of 15.

Why Anyone Chooses a 30-Year Mortgage

Look at those numbers above and you might think, 'Who would ever choose the 30-year?' But there are actually some really good reasons, and they go beyond just the lower monthly payment.

Monthly Payment Flexibility

That $659/month difference between the two mortgages isn't nothing. It's groceries, daycare, a car payment, savings, or breathing room if someone loses a job. For many families, especially first-time buyers, that flexibility is worth more than saving on interest 15 years from now.

Investment Opportunity

Here's where it gets interesting. Let's say you take the 30-year mortgage and invest that $659/month difference in an index fund averaging 8% returns (historically reasonable for long-term stock market investing). After 15 years, you'd have about $229,000. After 30 years? Roughly $973,000.

Yes, you paid $245,000 more in mortgage interest, but you made nearly $1 million investing the difference. That's the argument for the 30-year: leverage cheap borrowed money to invest in higher-return assets.

Life Happens

With a 30-year mortgage, you can always pay extra to pay it off early. With a 15-year mortgage, you can't suddenly lower your payment if you lose your job or have a medical emergency. That downward flexibility matters.

Why Anyone Chooses a 15-Year Mortgage

Forced Discipline

Most people, if we're honest, won't invest that payment difference. We'll spend it. A 15-year mortgage forces you to 'invest' in home equity. You don't have to make any decisions or exercise any discipline—the higher payment automatically builds wealth.

Lower Interest Rate

Lenders reward shorter terms with lower rates. On a $320,000 loan, that 0.625% rate difference saves you about $55,000 in interest compared to a 30-year mortgage at the same rate. Combined with the shorter term, you save massive amounts.

Build Equity Faster

In year one of a 30-year mortgage at 6.5%, only about $1,285 of your monthly payment goes to principal. The rest is interest. With a 15-year mortgage, roughly $1,700 goes to principal from day one. You're building equity 30% faster immediately.

Freedom Sooner

There's something psychologically and financially powerful about owning your home outright at age 50 instead of 65. No mortgage payment in your 50s means you can:

• Massively increase retirement savings
• Take career risks you couldn't with a mortgage hanging over you
• Help kids with college without loans
• Retire early if you want
• Sleep better at night knowing the house is yours no matter what

The Hybrid Approach (What We Actually Did)

Remember our dilemma at the start? Here's what we did: we took the 30-year mortgage but paid it like a 15-year. We set our payment at $2,400/month instead of the required $1,656. This gave us flexibility—if we ever needed to drop back to the minimum payment, we could—while still building equity quickly.

Three years later, we've never dropped to the minimum payment. We've consistently paid $2,400/month, and we're on track to have the house paid off in 16 years instead of 30. We're saving most of that interest (not quite as much as a 15-year, but close) while maintaining the safety net of a lower required payment.

The catch? This requires discipline. Every month, we have to manually pay that extra amount. It's not automatic like a 15-year mortgage would be. But for us, that flexibility was worth it.

How to Actually Decide

Here's a framework that cuts through all the noise:

Choose a 15-year mortgage if:

• The payment is less than 30% of your gross income
• You have 3-6 months emergency fund saved
• You're already maxing out retirement accounts
• You have stable income and good job security
• You value forced discipline over flexibility
• You're 45+ and want the house paid off before retirement

Choose a 30-year mortgage if:

• The 15-year payment would be more than 35% of your gross income
• You're not maxing out 401(k) match or IRA contributions yet
• Your emergency fund is less than 3 months
• Your income is variable or your job is uncertain
• You have high-interest debt to pay off
• You're young enough that aggressive investing might beat the mortgage interest savings

The Bottom Line

There's no universally 'right' answer. A 30-year mortgage gives you flexibility and frees up cash for investing or dealing with life's surprises. A 15-year mortgage forces wealth-building and saves you massive amounts in interest. The hybrid approach—30-year mortgage with extra payments—gives you the best of both but requires discipline.

Run the actual numbers with your situation. Look at the real monthly payments. Can you truly afford the 15-year? Would you really invest the difference with a 30-year? Answer those honestly, and the decision becomes a lot clearer.