What Are The Financial Implications of 15 vs. 30-Year Mortgages?

Real estate is a business of decisions. For example, sellers may need to decide between the speed and ease of selling to a cash buyer versus maximizing profits by conducting a traditional sale through an agent. On the other hand, buyers face choices about the term of their mortgage, primarily between the typical 30-year mortgage and the shorter 15-year mortgage.

The 30-year option is the more popular choice, generally because it offers lower monthly payments by spreading the payback period over the longest time possible. Still, there are good reasons for some to consider the shorter term: a lower interest rate and a much lower total amount of interest paid by the end of the term. Let’s look at the defining features of both common types of mortgages and go over some pros and cons of each.

Overview: 15 or 30?

Other than the obvious difference in the length of the loan, the main distinction between the 15-year and the 30-year mortgage is the mortgage rate you’ll pay. Though rates and spreads vary, 15-year loans can often see interest rates around a full percentage point lower than 30-year ones.

Why does the shorter loan come with a lower rate? Look at it this way: loans are about risk. A lender is exposed to twice as much risk over a 30-year loan term, ranging from disasters like a house fire to job loss and delinquency. Since the 15-year mortgage comes with less risk and the lender can count on its principal being returned sooner, the interest rate is lower.

Of course, the shorter term will come with larger monthly payments, since you’re paying back the same sum in half the time. But you’ll also pay a lot less interest over the life of your mortgage. Let’s look at an example to illustrate the difference.

As of May 31, 2025, the average home value in the US, according to Zillow, was just under $368,000. When you plug that into a mortgage calculator with a typical down payment of 20% ($73,600), the difference between the two loans is pretty dramatic.

The 15-year loan comes with monthly payments of $2,927, compared to the lower 30-year monthly payments of $2,234. However, at the end of your 15-year loan term, you’ll have paid a total of $471,373 for your $368,000 home, while at the end of a 30-year loan term, you’ll have paid a whopping $693,268.

The best mortgage for you will depend on a lot of factors, including your job and income, your general life stability, and the local market. Let’s look at some other pros and cons of each loan type.

Pros and cons of a 15-year mortgage

Pros

You’ll build up equity at a rapid pace: With a 30-year mortgage, a huge percentage of your initial mortgage payments will go towards your interest, and not the principal. Because of how the loans are structured, buyers spend many years making relatively little progress paying down their principal. With a shorter loan, you’ll be paying down your principal in larger amounts more quickly, which means you’ll also be accumulating home equity a lot faster.

A shorter term: At risk of stating the obvious, 15 years is a lot less time than 30 years. A 30-year mortgage can feel like you’re committing to paying down that loan for the rest of your life. A 15-year mortgage is a comparatively brisk decade-and-a-half.

You’ll pay less in total: As demonstrated in the example above, because you’re paying less in interest, you could realistically save hundreds of thousands of dollars over the term of the loan.

Cons

Higher monthly payments: Payments on a 15-year mortgage are quite a bit higher than on a 30-year loan. You should have very secure employment and cash flow before committing to a 15-year mortgage.

Higher bar for qualification: Lenders generally expect that your mortgage payments won’t exceed a certain percentage of your total income, so income requirements for a 15-year mortgage can be correspondingly steeper than for a 30-year loan.

A lot of your monthly cash flow will be committed: There’s a potential opportunity cost to the higher monthly payments of a 15-year mortgage. If something else comes up — a once-in-a-lifetime investment opportunity or a financial emergency — your money is already committed to paying off your mortgage.

Pros and cons of a 30-year mortgage

Pros

Lower monthly payments: Because the payment is spread over such a long term, monthly costs on a 30-year mortgage are relatively low.

Easy qualification: Qualifying for a 30-year mortgage is much easier since income requirements for the lower monthly payments are fairly relaxed. Your application process may not involve as much documentation and investigation into your financial affairs as a 15-year mortgage might require.

Claims a smaller portion of your income: Because your payment will be more manageable, you’ll have more of your monthly income available for other expenses. This can give you some financial breathing room if you have other debts to pay off, are trying to build up an investment portfolio, or are simply trying to build your savings back up after putting down a sizable down payment.

Cons

Higher interest rate: Three decades is a lot of risk exposure for your lender, so you’ll have to pay a higher interest rate.

Long-term commitment: Committing to a 30-year mortgage means you’ll be paying off that loan for a huge chunk of your adult life. Making that commitment requires a lot of financial and life stability.

You’ll pay a lot more than you may realize: When you crunch the numbers, you’ll often end up paying more than double the purchase price of your home with a long-term mortgage.

Written by Billy Guteng. June 23, 2025

Billy is a content writer for Kukun. He was born in France, and has lived in multiple cities around the world ever since. He loves art, design and architecture as well as construction and real estate.