Same principal and rate, different term
Consider a $300,000 loan at 6.00% with monthly payments. A 30-year term produces a payment of about $1,798.65. A 15-year term produces a payment of about $2,531.57.
The 15-year payment is roughly $733 higher each month, but the debt is scheduled to disappear in half the time.
Total interest changes dramatically
| Term | Monthly payment | Total interest | Total payments |
|---|---|---|---|
| 30 years | $1,798.65 | $347,514.57 | 360 |
| 15 years | $2,531.57 | $155,682.69 | 180 |
In this simplified example, the 15-year schedule saves about $191,831.88 of interest compared with the 30-year schedule.
Balance reduction is faster on the shorter term
After five years, the estimated remaining balance is about $279,163 on the 30-year schedule but about $228,027 on the 15-year schedule. After ten years, the difference is even larger: approximately $251,057 versus $130,947.
This faster principal reduction can matter for equity, refinancing, and the amount required to pay off the loan.
The lower payment can still have value
A 30-year term can provide cash-flow flexibility. A borrower may value the lower required payment even if they plan to make optional extra principal payments. That flexibility has to be weighed against the risk that the extra payments will not actually be made.
When comparing terms, model both the required schedule and any realistic extra-payment strategy.
Compare more than the headline payment
- Monthly payment and budget margin
- Total scheduled interest
- Balance after 5, 10, and 15 years
- Expected holding period
- Ability to make optional extra principal
- Fees or rate differences between the two offers
A third comparison: 30 years with optional extra principal
The usual 15-versus-30-year comparison assumes the borrower follows each contractual schedule exactly. A useful third scenario is a 30-year loan with voluntary extra principal. That scenario keeps the lower required payment but can reduce interest if the borrower consistently pays more.
For a fair comparison, do not assume the extra payment will happen every month unless that is realistic. Model a conservative amount and preserve the original 30-year schedule as a fallback. Then compare the balance after five or ten years against the true 15-year schedule. The gap shows how much of the shorter-term benefit the voluntary strategy actually captures.
Also remember that real offers may not have the same rate. A 15-year mortgage can sometimes be offered at a different interest rate than a 30-year mortgage. Recalculate with the actual quoted rates and closing costs rather than relying on a same-rate classroom example when making a real decision.
Build the numbers instead of estimating them
Use the free online schedule calculator for a complete amortization table. If you need to edit individual payment dates, amounts, rates, or notes and save the revised loan, use Amortization Pro for Windows.