Loan term
15-Year vs. 30-Year Mortgage
A 15-year mortgage usually costs less over the life of the loan, but the monthly payment is higher. A 30-year mortgage usually creates more breathing room, but the slower payoff means more lifetime interest.
Quick Take
- A shorter term usually means a higher monthly payment and lower total interest.
- A longer term usually means a lower monthly payment and slower equity growth.
- The best term depends on cash flow, emergency savings, and how long you expect to keep the loan.
The monthly-payment tradeoff
For the same loan amount and rate, a 15-year mortgage spreads repayment across 180 payments instead of 360. That shorter schedule is why the payment is much higher.
The lower 30-year payment can be useful if it protects emergency savings, retirement contributions, repair reserves, or family cash flow. Lower payment is not automatically worse if it keeps the household stable.
The lifetime-interest tradeoff
Because a 15-year loan pays principal faster, the balance falls sooner and the interest charge has less time to accumulate.
For example, a $350,000 fixed-rate loan at 6.5 percent is roughly $2,212 per month over 30 years and roughly $3,049 per month over 15 years. The 15-year payment is much higher, but the lifetime interest is dramatically lower if held to payoff.
A flexible middle path
Some borrowers choose a 30-year loan and make extra principal payments when cash flow allows. That can reduce interest while preserving the lower required payment.
The tradeoff is discipline. If the extra payment does not happen consistently, the loan behaves like the standard 30-year mortgage.
Questions to ask before choosing
Can you handle the higher payment after taxes, insurance, maintenance, childcare, medical costs, and retirement savings? Would the higher payment force you to carry credit-card debt after a repair?
If the answer is yes, a 15-year loan may be too tight even if the interest savings look attractive.
Run the numbers