15-Year vs 30-Year Mortgage Calculator

The decision comes down to one comparison

A 30-year mortgage on the default house here costs $2,022.62 a month. A 15-year mortgage on the same loan costs $2,787.54. That is $764.93 more every month, and in exchange you pay $226,385 less interest over the life of the loan.

So which is better depends entirely on what that $764.93 would have earned if you kept it. Invest it every month for fifteen years at 7% and it compounds to $242,453. Meanwhile the 30-year loan still has $232,189 outstanding at that point, because you have barely touched the principal.

Set those against each other and the 30-year loan comes out $10,263 ahead. Not by much — but ahead.

Why the answer is just two numbers

Here is the thing that makes this decision much simpler than it looks. The return your investments need to beat is exactly your mortgage rate — no more, no less.

On the default figures the mortgage rate is 6.5%, and the return needed for the 30-year option to win comes out at 6.50%. Not approximately. Exactly.

This is not a coincidence or a rounding artefact. It is a property of how amortising loans work: an annuity of payment differences, compounded at the loan rate, grows to precisely the extra balance you still owe. Discount the two paths at the same rate and they are worth the same amount. The maths is indifferent; only the rate you can actually earn elsewhere decides it.

• Earn more than 6.5% — the 30-year loan plus investing wins.
• Earn less than 6.5% — the 15-year loan wins.
• Earn exactly 6.5% — they are identical, to the dollar.

At 7% the result is a $10,263 advantage for the longer loan. Drop the expected return to 6% and it flips to a $9,734 advantage for the shorter one. That is the whole decision, and it turns on a half-point.

Nothing else moves the answer

This is the part worth remembering, because it rules out most of what people agonise over. The 6.5% threshold does not change when you change the house, the term you compare, or how long you stay.

Try a more expensive house. At $250,000 the monthly difference is $478.08; at $800,000 it is $1,529.85 — three times as much money. The threshold is 6.50% in both cases. The stakes scale, the answer does not.

Try a different comparison. Ten years versus thirty gives a $1,610.92 monthly difference and $292,118 of interest saved. Twenty versus thirty gives $363.22 and $155,542. The threshold stays at 6.50% for all three.

Try selling early. At three years the longer loan is ahead by $228; at ten years by $3,581; at the full fifteen by $10,263. The amounts grow, but the break-even return is 6.50% at every one of those points.

So you can stop worrying about whether this works differently for your price range or your timeline. It does not. The only inputs that matter are the rate on the loan and the return you can earn.

How thin the margin really is

A $226,385 interest saving sounds enormous, and it is the number that gets quoted when people argue for the 15-year loan. But at a 7% investment return the entire advantage of choosing the 30-year loan is $10,263 — about 4.5% of that saving.

The reason the gap is so small is that the two options are nearly equivalent by construction. The 15-year loan saves interest by returning money early; the 30-year loan lets the same money compound at 7% instead of saving 6.5%. The difference between those two rates, applied over fifteen years, is a few thousand dollars.

This matters practically: if you are choosing on pure arithmetic, you are optimising over a rounding error. Which means the things outside the arithmetic — the ones described below — should probably decide it.

How the rate environment flips it

Because the threshold is your mortgage rate, the rate you are quoted decides which option is rational. Holding the 7% investment return fixed:

• At a 3% mortgage — the 30-year loan wins by $77,457.
• At 4% — by $59,481.
• At 5% — by $40,370.
• At 6% — by $20,439.
• At 6.5% — by $10,263.
• At 7% — they are identical.
• At 8% — the 15-year loan wins by $20,645.

The logic is straightforward once you see it: borrowing at 3% to invest at 7% is a large spread in your favour, so the longer loan is the better structure. Borrowing at 8% to invest at 7% means every month you delay repayment costs more than the money earns, so the shorter loan wins.

This is why the conventional wisdom shifted so sharply. When mortgages were near 3%, stretching the loan and investing the difference was clearly the better arithmetic. At 6.5% or above it is close to a coin flip, and above 7% it is simply wrong. The advice did not change — the rate did.

If you sell before either loan ends

Most people do. The median time in a US home is roughly eight to ten years, which is well short of both loans. The horizon field re-runs the comparison at that point, and the threshold stays at 6.50% — only the amount changes.

• Selling in 3 years — the 30-year option is ahead by $228.
• Selling in 5 years — by $703.
• Selling in 10 years — by $3,581.
• Holding the full 15 years — by $10,263.

A short hold is close to irrelevant to this decision. That surprises people who expect the break-even point to do most of the work here, but it follows from the same property as before: both the invested difference and the extra balance are small early on, and they stay in proportion.

What a short hold does change is the size of the consequence. If you are likely to move in three years, you are choosing between options worth $228 apart, and the decision should be made almost entirely on flexibility rather than returns.

What the maths cannot tell you

Because the two options are so close in pure financial terms, the deciding factors are usually the ones a calculator cannot price. Four of them dominate.

The 30-year option only works if you actually invest

The case for the longer loan assumes you invest $764.93 every single month for fifteen years without fail. The 15-year loan forces the same discipline — the extra money goes into the house whether you feel like it or not.

This is the single biggest gap between the model and reality. If there is a real chance the difference gets absorbed into lifestyle spending, the 15-year loan will beat it by far more than $10,263.

Guaranteed versus expected

The 6.5% you save by repaying early is risk-free, requires no decisions and is not taxed. The 7% you might earn is an expectation, not a guarantee. Over fifteen years you will get some bad years, and the ones nearest the end hurt most.

Beating 6.5% by half a point is not the comfortable margin it looks like on paper. Most people should require more than that before taking market risk with money they could use to retire debt.

What happens after year fifteen

The comparison here stops at the point the shorter loan ends. After that the positions diverge sharply: one household has no mortgage payment at all, the other has fourteen years left.

That is a real difference in security and flexibility that does not show up in a fifteen-year snapshot. If the prospect of being payment-free in fifteen years has value to you, it is worth more than $10,263.

A third option: take the 30-year loan and pay it faster

The choice is not permanently locked in. You can take the 30-year loan for its lower required payment and then make extra payments whenever you want, getting most of the 15-year benefit while keeping the flexibility to stop if money gets tight.

You will pay slightly more interest than a true 15-year loan, because the rate on a 30-year loan is usually a little higher. What you buy is an option: the same discipline, without the obligation. For many households that is the better structure than either pure choice — see the extra payments variant to model it.

What this calculator leaves out

The comparison is deliberately clean so the mechanism is visible. These are the simplifications most likely to matter.

• Taxes. The mortgage interest deduction is excluded, as is tax on investment gains. Compare an after-tax investment return against the figure shown.
• Investment returns are assumed steady. Real returns vary, and a downturn near the end of the period does the most damage.
• Property tax, insurance and HOA are excluded — they are identical for both loans on the same house.
• Rate differences between the two terms. Lenders usually quote 15-year loans at a lower rate than 30-year loans, which would shift the result toward the shorter term. This calculator uses one rate for both.
• Closing costs and any points paid, which may differ between the two options.
• Job stability, cash flow risk, and how much a fixed obligation matters to you personally.