30-Year vs. 15-Year Fixed Mortgage: Which One Actually Wins?
When you're shopping for a US home loan, the 30-year fixed gets the headlines because it gives you the lowest monthly payment. But the 15-year fixed often costs less than half the total interest. The right answer depends on cash flow, time horizon, and what you'd otherwise do with the difference. Let's run the numbers.
How the headline payment compares
On a $400,000 loan at 6.5% (a typical 2025–2026 conforming rate), a 30-year fixed runs about $2,528 a month in principal and interest. A 15-year at 5.75% — roughly the spread Freddie Mac has shown over the last decade — runs about $3,322. That's $794 more every month, but you're done in half the time.
Add property taxes (averaging 1.1% of home value annually, per Tax Foundation), homeowners insurance (about $1,500/yr nationally), and PMI if you put less than 20% down. Your full PITI payment is what matters for budget, not just principal and interest.
The total interest gap is the real story
Across the life of the loan, the same $400,000 borrowed costs about $510,400 in interest on the 30-year, but only $198,100 on the 15-year. That's $312,000 saved — more than the loan itself. Even after adjusting for inflation (assume 2.5%), the 15-year wins comfortably on present-value terms.
Note this only holds if you actually keep the loan to maturity. The median US homeowner sells or refinances within 8–10 years (per Federal Reserve data), so the practical difference for most buyers is closer to 5–7 years of higher payments versus a slower payoff.
When the 30-year is the smarter choice anyway
If you'd take the $794/month difference and put it into a 401(k) or Roth IRA earning historical S&P 500 returns (about 10% nominal, per Ibbotson SBBI data), you'd come out ahead of the 15-year savings on after-tax basis — assuming you actually invest the difference, which most households don't.
The 30-year also gives you flexibility: you can prepay to mimic a 15-year schedule when income is high, but fall back to the lower payment when life happens. That option value is real, especially for households with variable income or planning a job change in the next 5 years.
Frequently asked questions
What's the typical rate spread between 30-year and 15-year loans?
Freddie Mac PMMS has shown the 15-year averaging 0.5%–0.85% below the 30-year over the last 20 years. The exact spread varies week to week — check current Freddie Mac PMMS or your lender's rate sheet for today's number.
Does PMI go away on a 15-year loan faster?
Yes. PMI drops automatically when your loan-to-value ratio reaches 78% (per the Homeowners Protection Act). On a 15-year loan, you hit 78% LTV around year 5–6 versus year 10–11 on a 30-year, saving roughly $4,000–$8,000 in PMI over the life of the loan.
Should I refinance from a 30-year to a 15-year?
Generally yes if rates are lower than your current rate by 0.75% or more, you plan to stay 5+ years, and the higher payment fits your budget. Run both scenarios in the mortgage calculator to compare total cost net of closing costs (typically 2–3% of loan amount).