Two loans, three strategies
The headline comparison is stark — the 15-year typically saves well over half the total interest, thanks to half the years and a lower rate. But the fair comparison isn’t “15-year vs 30-year”; it’s “15-year vs 30-year plus what you do with the payment difference.” The line above the notes runs that scenario: the monthly gap invested at your chosen return for 30 years, compared against the 15-year path where payments end after year 15 and the freed-up money is invested for the remaining 15.
What usually decides it in practice isn’t math but behavior: the 15-year forces the wealth-building; the invest-the-difference strategy merely allows it. Be honest about which kind of person you are, and remember the middle path — take the 30, pay it like a 15 (model it in the payoff calculator) — buys flexibility at the cost of the rate discount.
Frequently asked questions
Why do 15-year mortgages have lower rates?
Lenders price risk over time: a shorter loan means fewer years of rate and default exposure, so 15-year rates typically run 0.5–0.75 percentage points below 30-year rates. You save twice — fewer years of interest, at a lower rate.
How much more is the payment on a 15-year loan?
Roughly 30–40% higher than the 30-year payment on the same amount, depending on rates — the principal must retire in half the time, though the lower rate softens the jump. Run your numbers above; the gap is the real decision variable.
What is the “invest the difference” argument?
Take the 30-year, invest the monthly payment gap in index funds, and historically you often end up ahead of the 15-year payoff — if you actually invest the difference every month for decades. The honest counterpoint: most people don’t. The 15-year is forced discipline; the 30-year-plus-investing is a strategy that only works if executed.
Is there a middle path?
Yes, and it’s underrated: take the 30-year for its lower obligation, then pay it like a 15 by adding extra principal each month. You replicate most of the fast payoff while keeping the right to drop back to the smaller payment if life happens. You give up the 15-year’s lower rate — that’s the price of the flexibility.
Who should clearly pick which?
Lean 15-year: stable high income, retirement savings already on track, and you value being debt-free above maximizing returns. Lean 30-year: tighter cash flow, underfunded retirement accounts (fill tax-advantaged space first), variable income, or the payment gap would prevent an emergency fund.