15-year vs 30-year at 7%: the math is different now than it was at 3%
The spread between 15-year and 30-year rates, and what the payment difference actually buys you in interest savings. Running the numbers at today's rate levels.
At 3% rates, the 15-year vs 30-year decision was largely academic — both were cheap. At 7%, it becomes a real trade-off between monthly cash flow and lifetime interest. The spread between the two terms has also narrowed compared to historical norms, which changes the math on which one is worth the higher payment.
The rate spread today
Historically, the 15-year fixed runs 0.5–0.75 percentage points below the 30-year. In recent weeks that spread has compressed to roughly 0.5 points. At a 30-year rate of 6.9%, expect to see 15-year offerings around 6.35–6.4%. A narrower spread makes the 15-year less compelling on a rate basis, but the shorter amortization still produces outsized interest savings.
Side-by-side on a $320,000 loan
30-year fixed
15-year fixed
The 15-year costs $650 more per month but saves $262,800 in total interest and retires the debt 15 years sooner. That extra $650/month represents a 31% increase over the 30-year payment — significant, but the return on that increase is extraordinary.
The break-even on the extra monthly payment
Another way to look at it: if you took the 30-year and invested the $650/month difference instead, what would it grow to? At 7% annual investment return over 15 years, $650/month compounds to roughly $207,000 — still $55,000 less than the $262,800 in interest savings. The 15-year mortgage wins the math even against a reasonable investment return assumption.
The 30-year wins only if you assume a higher investment return (above ~8.5%) or if you value the payment flexibility highly — which is a real consideration if your income is variable.
Who the 15-year actually works for
The higher payment disqualifies some buyers outright. On a $320,000 loan, $2,760/month in housing costs (before tax and insurance) requires roughly $9,900/month in gross income to stay inside the 28% front-end limit. The 30-year at $2,110 requires $7,535. That $2,365 income difference can be decisive.
The 15-year is the right choice when: you have stable, predictable income; you can comfortably qualify; you plan to hold the loan for most of its term; and you want the forced discipline of a higher paydown rate. It is the wrong choice if the higher payment leaves you without an emergency fund, or if it prevents you from contributing to tax-advantaged retirement accounts up to the match.
The extra-payment alternative
A common middle path: take the 30-year for the qualifying flexibility, then pay it like a 15-year whenever cash flow allows. You capture most of the interest savings without locking in the higher required payment. The cost is the rate spread — roughly 0.5 points extra on the 30-year — plus the behavioral risk that the optional extra payments actually get made.
The extra payment calculator on this site lets you model exactly how many months a consistent extra payment removes and what it saves in interest, so you can compare this hybrid approach against a true 15-year side by side.
Model both scenarios
The guide on this site runs 15-year vs 30-year with a live calculator preset to the scenario above — change the numbers to yours while you read.
Common questions
Does a 15-year mortgage always save more interest than a 30-year?
Yes — as long as you hold it to term. The 15-year saves interest in two ways simultaneously: a lower rate (typically 0.5–0.75% less than a 30-year) and a term half as long. The combination is dramatic. On a $320,000 loan at current rates the 15-year saves roughly $190,000 in total interest compared to the 30-year.
What if I take a 30-year and pay it like a 15-year?
You get most of the interest savings of a 15-year but keep the option to pay the lower amount if income drops. The cost is the rate spread — roughly 0.5–0.75% higher on the 30-year. On a $320,000 loan that gap costs about $100–$150/month in extra interest. Some borrowers consider that a fair price for the payment flexibility.
Is the 15-year better if I plan to refinance?
It depends on timing. If rates drop significantly within 2–3 years and you refinance to a new 30-year, the 15-year's interest savings largely disappear because you restart a long amortization. The 15-year makes most mathematical sense when you plan to hold the loan for most of its term.
How does the 15-year affect the debt-to-income ratio for qualifying?
Worse. The higher monthly payment of the 15-year increases your front-end DTI. At $320,000 and 6.35%, the 15-year payment of $2,760 vs the 30-year payment of $2,110 at 6.9% can push a borderline buyer over the 28% housing-cost limit. Lenders qualify on actual payment, not rate.