Choosing a 15-year mortgage can save you a substantial amount of money over the long term. You’ll typically gain access to lower interest rates than you would with a 30-year home loan, and since you’re paying off the debt over a shorter period, you’ll also pay less in interest.
Keep in mind that 15-year mortgages are not without their potential drawbacks. Your monthly payments will be higher than if you’d financed for 30 years. This can put more strain on your budget and leave you with less money for your other financial goals. If you fall on hard times, higher monthly mortgage payments could also be more difficult to pay, increasing your chance of missing a mortgage payment and putting you at risk for late fees or foreclosure.
Key Takeaways
- With a 15-year mortgage, you’ll pay off your loan faster, get a lower interest rate, and spend less on overall interest than with a 30-year home loan.
- A 15-year mortgage will have higher monthly mortgage payments due to the accelerated repayment schedule.
- A 15-year mortgage can be used to purchase a home or refinance.
Pros of a 15-Year Mortgage
Compared with a 30-year mortgage, the biggest benefits of a 15-year mortgage include a faster payoff, access to better interest rates and a lower total housing cost over the life of the loan.
Faster Payoff
If you’re motivated by repaying your debt (and owning your house free and clear), this type of mortgage might be a good fit.
The condensed repayment schedule also reduces the cost of borrowing. By choosing a 15-year mortgage over a 30-year one, you’ll spend 15 fewer years paying interest and save a substantial sum in the process.
“The shorter the payment period, the lower the costs over time,” says Michael Kelczewski, a broker with Monument Sotheby's International Realty.
Lower Interest Rates: 15-Year vs. 30-Year Mortgages
Because 15-year mortgages are paid back faster than 30-year loans, lenders consider them less risky. As a result, they’ll typically offer lower interest rates on these shorter loans.
For example, according to Freddie Mac, the current average rate on a 15-year mortgage is around 5.7%, but it’s closer to 6.5% for 30-year loans. Let’s say you plan to borrow $400,000 for your home purchase. Based on these rates, here’s how much you would pay in principal and interest with a 15-year or 30-year mortgage.
| Monthly Payment | Total Interest | Total Cost of Loan | |
| 15-Year Mortgage | $3,311 | $195,969 | $595,969 |
| 30-Year Mortgage | $2,528 | $510,178 | $910,178 |
“Fifteen-year mortgages not only save a borrower in interest over time, but the note rate is typically lower than a 30-year,” says Kelczewski. “Basically, you're saving over time and directly through lower rates.”
Lower Total Housing Costs
By paying less interest, you’re significantly reducing your long-term housing expenses. In our previous example, the 15-year loan would be $314,200 cheaper over the life of the loan, thanks to the lower interest rate and the shorter repayment period.
Remember that the monthly payments on a 15-year mortgage are much higher than those with a 30-year loan.
Choosing a 15-year mortgage can reduce other housing-related costs, too. If you’re required to buy private mortgage insurance (PMI), your lender or servicer must automatically remove it when you’re halfway through your repayment term (or whenever you reach 22% equity). With a 15-year mortgage, that cancelation date comes much quicker than it does with a 30-year loan.
Potential for Earlier Retirement
A 15-year home loan can help you achieve financial freedom faster than you might with a 30-year mortgage, as long as you can afford the steeper monthly payments.
An earlier mortgage payoff means that you can redirect your income toward other financial goals, like saving for retirement. And if you pay off your home in full before you stop working, you won’t have to make any mortgage payments after you hit retirement.
Cons of a 15-Year Mortgage
Of course, 15-year mortgages aren’t the right choice for everyone. The potential drawbacks include higher monthly payments and less payment flexibility.
Higher Monthly Payments
With a 15-year mortgage, you have less time to repay what you’ve borrowed. Due to this shorter timeline, the monthly payments are higher than they would be with a 30-year loan for the same amount. In our $400,000 loan example, the monthly payments would be:
- $3,311 for a 15-year mortgage
- $2,528 for a 30-year mortgage
The higher payments on a 15-year mortgage can affect your loan size, too. If you choose this type of loan, you might not qualify for as much money as you would with a 30-year mortgage, which has lower monthly payments. As a result, you might have to shop for a lower-priced home or look in a more affordable area.
Less Flexibility
If you take out a 30-year mortgage, you can always make extra payments on your loan to pay it off faster. You’re completely in charge of when — and how often — you do this. Similarly, if you’re in a comfortable financial position and want to speed up your repayment timeline, you can refinance a 30-year mortgage to a 15-year one.
However, you’ll have less flexibility if you pick a 15-year mortgage term. If you’re stretching your budget to afford larger monthly payments, it will be more difficult to make additional payments toward the principal to pay your loan off sooner.
Potential for Missed Payments
Overextending yourself financially with a 15-year mortgage could land you in trouble. If you lose your job or cannot work, you could struggle to make higher monthly mortgage payments.
When you miss a mortgage payment, your lender will generally charge a late fee and report it to the major credit bureaus, which can negatively impact your credit score. If you don’t make up the missed payment or continue to skip payments, the lender will likely begin the foreclosure process.
Factors to Consider When Choosing a Mortgage
Trying to decide between a 15-year and a 30-year mortgage? You’ll want to consider your financial situation, long-term goals and current interest rates. Your real estate agent can help you determine your homebuying budget and connect you with a trusted lender.
Your Financial Situation
Your income, debt, credit score, and finances are the first things you should consider when selecting a mortgage. Together, these factors will determine which loans you qualify for and how much house you can afford.
Lenders typically have stricter criteria for 15-year mortgages, including higher income and lower debt-to-income ratio (DTI) requirements. “Borrowers seeking a 15-year mortgage usually are financially stable with sufficient reserves and growing incomes,” says Kelczewski.
If you qualify for a 15-year loan, consider how the steeper payments might impact your monthly budget. Generally, your monthly housing payment shouldn’t be more than 28% of your monthly income. After paying your mortgage, will you have enough money for bills, debt payments, savings and other expenses? If taking out a 15-year mortgage would force you to make major changes to your lifestyle, then a 30-year term might be a better fit.
Long-Term Goals
Financial priorities vary for everyone. You might want to become debt-free as soon as possible or be focused on saving for retirement, college or another purpose.
With a 15-year mortgage, you’ll get out of mortgage debt faster than you would with a 30-year loan. And once your home is fully paid off, you can work toward other financial goals. On the other hand, a 30-year mortgage leaves you with more monthly income, which you can set aside for retirement, education, emergencies or other expenses.
When choosing between the two, consider what’s most important to you. Consider when you plan to retire and how that will also impact your future housing needs. For example, when you stop working, you may feel more secure if you own your home free and clear. If you aren’t sure of the best situation, consider talking to a financial professional.
Interest Rate Trends
After you take out a 15-year or 30-year fixed-rate mortgage, the interest rate won’t change. However, the recent uncertainty with rates might make you question whether this is the right time to get a mortgage.
Interest rates have fluctuated wildly over the last several years. At the end of 2020, the average 15-year mortgage rate was 2.17%, while the average 30-year rate was 2.67%, according to Freddie Mac. By October 2023, these rates had reached 7.03% and 7.79%, respectively. Since then, they’ve dropped by about 1.5% each.
It’s up to you to decide whether you’re comfortable taking out a mortgage at these rates.
The Bottom Line: Is a 15-Year Mortgage Better?
If you can afford the higher monthly payments (and still have enough money left for your other financial goals), then a 15-year mortgage is worth considering. Not only does it provide a quicker path to fully owning your home, but it also saves you a significant amount of money in the long run.
If a 15-year mortgage would create too much financial strain, consider opting for a 30-year loan and making extra payments. A financial advisor can help you weigh the pros and cons to determine what’s best for your situation.
15-Year Mortgage: Frequently Asked Questions
What are the disadvantages of a 15-year mortgage? The main disadvantage of a 15-year mortgage is that it has higher monthly payments than a 30-year loan. This could put pressure on your budget and leave you with less money for other financial obligations.
Is it cheaper to pay a 30-year mortgage off in 15 years? Yes. By shortening your repayment timeline, you’ll save a substantial amount of money on interest.
Do you get a better rate on a 15-year mortgage? Yes, the rates on 15-year mortgages are usually quite a bit lower than 30-year mortgage rates.
Why would someone choose a 15-year or 30-year mortgage? A 15-year mortgage will help you pay off your home faster and save on interest. On the other hand, a 30-year mortgage offers lower monthly payments. With either loan, you can make extra payments when your budget allows.