15-year vs 30-year: the real trade-off
A shorter term costs more every month and far less overall. Here is the arithmetic on a real scenario, and the questions that decide which one is right for you.
A 15-year mortgage does two things at once: it forces a bigger payment and it removes half the years of interest. The first is a cash-flow problem, the second is a wealth question, and they pull in opposite directions.
The same house, both ways
On a $425,000 home with $85,000 down, taxes and insurance at TX averages:
| 30-year at 6.69% | 15-year at 5.96% | |
|---|---|---|
| Total monthly payment | $3,090 | $3,760 |
| Interest over the loan | $449K | $175.1K |
| Principal & interest only | $2,192 | $2,862 |
That is $670 more a month to save $273.9K in interest. Shorter terms also usually carry a lower rate, which is why the gap in interest is much larger than simply halving it.
Three questions that settle it
- Would the higher payment crowd out everything else? A 15-year mortgage you cannot comfortably carry is worse than a 30-year one you can.
- Do you want the option, or the obligation? A 30-year mortgage with extra payments gets most of the interest saving while letting you stop in a bad month. A 15-year term is a commitment you cannot unwind without refinancing.
- What else would the money do? If the difference would otherwise go into a matched retirement account, the mortgage is not automatically the better use.
Change the term below and the whole schedule reprices. The middle path — 30 years plus extra payments — shows up in the suggestion panel with its own numbers.