15-Year vs 30-Year Mortgage: The Real Tradeoff
The headline trade
On a $400,000 loan, a 15-year term typically prices lower than a 30-year — here's the direct comparison at 6.5% (30-year) versus 5.75% (15-year):
| 30-year @ 6.5% | 15-year @ 5.75% | |
|---|---|---|
| Monthly payment | $2,528 | $3,322 |
| Total interest | $510,178 | $197,895 |
| Total cost | $910,178 | $597,895 |
The 15-year saves $312,283 in interest — but costs $793/month more.
What that $793/month actually means
A $793 monthly gap isn't a rounding error. The 15-year payment of $3,322 is about 31% higher than the 30-year payment of $2,528 — a real, recurring commitment that has to fit your budget every month for 15 years straight.
Total cost and monthly affordability are two different questions. The 15-year term wins decisively on total cost. Whether it wins on your monthly budget depends entirely on your income and other obligations — a strong case for total savings doesn't help if the higher payment doesn't fit.
The "invest the difference" question
A common argument for the 30-year term: take the lower payment, and invest the $793/month difference instead of sending it to your lender. At a 7% average annual return, does that strategy beat the 15-year's guaranteed interest savings?
The honest answer depends on when you check. At year 15 — the moment the 15-year loan is paid off — the 30-year payer's invested difference is worth about $252,935. But their mortgage balance still owes roughly $290,237. They're behind by about $37,302 at that checkpoint, still carrying real debt against a smaller pile of invested cash.
Run the clock to year 30 instead, and the picture flips. If the 15-year payer takes their freed-up payment — the full $3,322/month they no longer owe a lender — and invests it for years 15 through 30, their investment grows to roughly $1,058,976. The 30-year payer, who's been investing only the smaller $793/month difference for the full 30 years, ends up with about $973,534. The 15-year-plus-reinvest path finishes about $85,442 ahead.
Neither side has a clean, universal win. The 30-year-plus-invest strategy looks better at the 15-year mark; the 15-year-plus-reinvest strategy looks better at the 30-year mark. The real variable isn't which loan term is smarter — it's how long you're measuring.
Which one fits you
A few questions matter more than the headline interest savings:
Can your budget comfortably absorb the higher payment? The 15-year math only works if you can make the $3,322 payment without straining your finances or skipping retirement contributions to do it.
Do you carry other higher-interest debt? Credit cards or personal loans at double-digit rates should usually get paid down before optimizing your mortgage term either direction.
Will you actually invest the difference? The 30-year-plus-invest strategy only beats the alternative if the monthly gap genuinely goes into investments — not into a slightly bigger lifestyle.
How long you'll hold the home and the investments. As shown above, the answer that looks better changes between the 15-year and 30-year checkpoints — so your actual time horizon matters as much as the math itself.
Key takeaways
- On a $400k loan, 15-year (5.75%) saves $312,283 in interest vs 30-year (6.5%) but costs $793/month more.
- The 15-year payment is about 31% higher than the 30-year payment — a real budget commitment, not a rounding error.
- If you invest the monthly difference instead, you're behind by about $37,302 at year 15 compared to the 15-year payer's paid-off home.
- Reinvesting the freed-up payment after year 15 can put the 15-year strategy about $85,442 ahead by year 30.
- Neither strategy wins universally — the answer depends on your time horizon.
- The "invest the difference" strategy only works if you actually invest it consistently.
Compare your own terms
Run both loan terms side by side with your actual numbers.