15-Year vs. 30-Year Mortgage: Here’s How to Choose

A 15-year mortgage will save you a fortune in interest. But a 30-year mortgage will keep your monthly payments manageable. That's the core trade-off, and it's a bigger deal than most buyers realize.

With a shorter term, you'll lock in a lower interest rate. You'll also pay far less in total interest over the life of the loan. The catch? Significantly higher monthly payments.

Landon Spitler, VP of Lending at Certainty Home Lending in San Luis Obispo, CA, has run the numbers, and they’re striking: about $27,000 more in principal payments over just the first two years of a 15-year mortgage compared to a 30-year loan.

That monthly squeeze is a big reason roughly 90% of U.S. homebuyers choose a 30-year mortgage, while only about 6% opt for a 15-year term.[1]

Spitler estimates that well under 1% of borrowers in his market are choosing a 15-year mortgage right now. "Compare that to 2020, when rates were at historic lows," he says. "At a 1.99% interest rate, the payments didn't look so bad on a 15-year fixed."

Comparing 15-year and 30-year mortgage side by side

When should you choose a 15-year mortgage?

Choosing a shorter mortgage can have certain advantages. For example, a 15-year mortgage might work if you:

• Are a mid-career professional at peak earning power, as the increased monthly payment probably won’t be a problem for you
• Have a deep emergency fund to fall back on (most financial advisors recommend three to six months of expenses saved)[2]
• Are approaching retirement, and want to be debt-free before you retire; The shorter term can allow you to pay off your home quickly

The key considerations here are whether you can comfortably sustain the higher payment— and whether the opportunity costs of not putting that money toward other investments are worth it to you.

Also, keep in mind that it can be slightly more difficult to qualify for a 15-year mortgage, since the higher monthly payments require a higher income, a lower debt-to-income ratio, and might even have stricter credit score requirements.

If you qualify, many mortgage professionals recommend a 15-year mortgage. But Spitler also says that the typical buyer who chooses a 15-year mortgage generally have a very high income.

“And then in addition to that, they're also buying well below their means in terms of a house. They can afford a $900,000 house, but they're actually buying a $300,000 house," he says.

“In my entire 23-year career, I don't know that I've ever had anyone choose a 15-year fixed that didn't also have 20% down payment. I suppose that having extra money, whether it be for down payment or having a very, very large rainy day fund, does come into play if they're choosing that 15-year.”

When should you choose a 30-year mortgage?

A 30-year mortgage costs you a lot more in the long run. But it also offers flexibility and security. A 30-year mortgage makes sense if:

• You're a first-time buyer stretching to get into the market. In high-cost areas especially, a 15-year payment can be a nonstarter. Spitler works on California's central coast, where the median home price is around $900,000. "At that price point, a 15-year payment would eat up so much of a buyer's income that there's just no room left," he says.
• You have an inconsistent income. The low, predictable payments are easy to handle. For example, this could apply to seasonal workers, freelancers, commission-based workers like salespeople or real estate agents, small business owners, or gig workers.
• You need to save up for retirement, or want to allocate your money into other investments, a lower mortgage payment frees up more of your cash.
• You want a safety net if your situation changes. One thing many buyers don't realize is that if you're locked into a 15-year mortgage and your financial situation changes (a job loss, a medical expense, a new baby), you can't simply switch to a 30-year payment.

The key consideration here is whether a 30-year mortgage fits your income more comfortably than a more expensive, shorter-term mortgage, or whether you prefer to put cash into investments you think will appreciate more than your home.

Spitler also points out that a 30-year mortgage can serve as a safety net if a homeowner goes through a period of financial adversity.

“If they were to have lost their job,” he says, “obviously it would be more suitable for them to have a 30-year fixed and have a monthly payment that's 35% lower than a 15-year fixed.

So how do you decide between a 15-year and 30-year mortgage?

If your circumstances don’t make it clear which option is better for you, there’s a general metric that might be able to help: the 28/36 rule.

This rule states that you shouldn’t pay more than 28% of your gross income towards housing, and your total debt payments shouldn't take up more than 36% of your gross income.[3]

Plugging your potential mortgage payments, plus any other debt obligations you have (credit card payments, student loans, car payments, etc.) into that rule should give you an idea if you’re ready to take on the more expensive mortgage, or if you should opt for the less expensive 30-year.

But Landon Spitler says buyers shouldn’t overlook more subjective concerns, either— like comfort.

"You got to have a real honest conversation with yourself," he says. "If I take on this higher mortgage payment, am I going to be able to comfortably pay my utilities, buy my necessities, and maybe even have extra money to travel and do things I enjoy?"

An alternative: the hybrid strategy

An interesting approach that’s gaining momentum in some quarters is taking on a 30-year mortgage but paying it off as if it were a 15-year mortgage.

This strategy has a lot to recommend it: if you stick to the accelerated payment schedule, you’ll pay much less, total, than you would have if you took the full thirty years to pay off the loan. But you also preserve valuable flexibility – if your income takes a temporary hit, you can revert to the minimum 30-year payment level until you recover.

For example, if you bought a $400,000 home with 20% down on a 30-year mortgage at today’s rate of 6.05%, your monthly payment would be about $2,260.

However, if you paid $800 extra per month, you’d pay off the entire mortgage in 15 years, and save about $209,000 in interest.

You could also refinance your 30-year mortgage into a 15-year mortgage down the road. While this option is less common in today's high-rate environment — only about 8% of refinancing borrowers shortened their loan term in early 2024, according to Freddie Mac.

Before you try the hybrid approach

One potential obstacle here is a mortgage prepayment penalty. It’s relatively rare, but some loans do charge you a financial penalty for paying off the loan early. If you’re thinking of trying an accelerated payoff, make sure your loan doesn’t contain a prepayment penalty clause.

Spitler loves this approach, noting that he’s seen it a lot on social media.

“I think it's a really happy medium between the extremes of doing a 30 year fixed and having the very, very slow principal reduction that comes with that and being locked into the 15 year fixed mortgage and having rapid principal reduction, but having no flexibility.”

But he also stresses that there are some drawbacks.

“What you don't get, obviously, in that method, is the benefit of roughly half a percent lower interest rate for the 15 year fixed,” Spitler says. Still, he thinks it’s worth it. “I would love if all of my clients got on that sort of payment schedule.”

However, Spitler understands just how tempting it can be to opt for the longer-term 30-year mortgage. Even though he could’ve easily qualified for the 15-year when he bought his house, he couldn’t quite bring himself to do it. “I could have done a 15-year fix,” he says. “But I personally have a 30-year fixed at 2.3%,”

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