When financing a home, the 30-year fixed-rate mortgage is often the go-to option because of its lower monthly payment. But for buyers who can comfortably afford a higher payment, the 15-year mortgage deserves a closer look and may lead to significantly greater financial rewards over time.
Let's compare two scenarios based on a $360,000 mortgage with current rates:
- 30-year mortgage at 6.58%
Principal and interest: $2,294.42/month
- 15-year mortgage at 5.69%
Principal and interest: $2,977.92/month
At first glance, the 15-year loan costs about $684 more per month. But when you look at where that money is going, and what it saves you, it starts to make a compelling case.
Interest Savings and Faster Equity Build-Up
The key difference lies in how much of your payment goes toward the principal balance. With the 15-year loan, you pay less interest over time and you pay it off faster.
After 10 years:
- On the 30-year loan, you'd still owe $305,804.
- On the 15-year loan, your balance would be just $155,189 - almost half.
That means you've paid down far more of the loan and built significantly more equity in your home, which increases your financial flexibility and net worth. Paying an extra $684 per month for 10 years adds up to $82,080, but the 15-year mortgage reduces the loan balance by $150,615 more than the 30-year option, resulting in a net equity gain of nearly $68,535.
Other Long-Term Advantages
- Lower total interest paid: Over the life of the loan, you'll save tens of thousands of dollars.
- Faster path to mortgage-free living: Paying off your home in 15 years frees up your budget sooner and reduces long-term financial stress.
- Equity growth: Greater equity gives you more options for future borrowing, renovations, or downsizing with more cash in hand.
Yes, the 15-year loan requires a higher monthly payment, but if it fits your budget, the long-term benefits are hard to ignore. You'll save substantially on interest, build equity faster, and own your home outright in half the time.
Before locking in a mortgage, run the numbers and talk to your lender. If you can manage the higher payment, the 15-year loan could be one of the best financial moves you make. We'd be happy to run an analysis for you or go to our 15-yr vs. 30-yr comparison.