15 vs 30 Year Mortgage Calculator

• Puts the two loans side by side: monthly payment, total interest, interest saved and payoff time, with the two rates entered separately because the 15-year rate is usually lower.
• Tests the invest-the-difference strategy: the 30-year borrower invests the payment gap, and the result shows who is ahead after 15 and after 30 years.
• Adds PMI, property tax, insurance and HOA dues in Advanced so the monthly figures match what you would actually pay.
• Lets you lower the expected return or apply a tax drag, and shows the return at which the two routes tie.

How to use this calculator

Enter the home price and your down payment, then the interest rate on each loan. Quotes for the two terms usually differ, and the 15-year rate is normally lower, so ask your lender for both. Then choose the return you would expect on money you invest. That figure only drives the invest-the-difference comparison; the loan figures do not depend on it.

Open Advanced to add a tax drag on investment returns, a PMI rate for down payments under 20%, and property tax, home insurance and HOA dues. Those housing costs are the same on both loans, so they change the monthly totals but not the comparison between the routes.

How the comparison works

Each loan is an ordinary fixed-rate loan. The payment comes from the standard formula and every month splits into interest and principal:

Payment = Loan x i / (1 - (1 + i)^-n)      (i = annual rate / 12, n = number of months)
Total interest = Payment x n - Loan
Interest saved = Interest on 30-year - Interest on 15-year

The invest-the-difference test needs a fair setup, so both households spend the same amount every month. That budget equals the 15-year loan's payment. The 15-year borrower puts all of it into the loan for 15 years, then invests the whole amount for the next 15. The 30-year borrower pays the smaller 30-year payment and invests the rest of the budget for the full 30 years. At years 15 and 30 the calculator compares net position: investments minus any loan balance still owed.

Investment returns are compounded monthly from the annual figure you enter, after the optional tax drag. Contributions are made at the end of each month.

A worked example

Take a $400,000 home with 20% down, so the loan is $320,000. At 5.75% for 15 years the payment is $2,657 a month; at 6.5% for 30 years it is $2,023. The 15-year loan costs $635 more each month, but total interest is $158,316 against $408,142, so it saves $249,826.

Now invest that $635 gap in the 30-year route at 6% a year. After 15 years it has grown to $182,101, and the borrower still owes $232,189 on the loan, so the 30-year route is $50,088 behind at year 15. By year 30 the 15-year household, which has invested its full budget for the last 15 years, holds a net $762,415 against $618,518 for the 30-year household. In this example the 15-year loan comes out ahead by $143,896.

Why the investment return decides the answer

Every dollar of principal you repay early earns a guaranteed return equal to the loan's interest rate. Paying down a 6.5% loan is like earning 6.5% with no market risk. The 30-year route only wins if the invested money earns more than the loan costs, after tax, for long enough to make up for the larger interest bill.

In the default example the 30-year route needs about 8.03% a year to tie. At 10% it finishes ahead, with $1,309,276 against $1,058,790; at 4% the 15-year loan leads by $215,193. The tie point sits above the 30-year loan's rate because the 15-year loan also has the lower 5.75% rate working for it. A 25% tax drag on a taxable account lifts the tie point and cuts the 30-year route's finish to $474,158.

PMI, escrow and down payment

With a down payment under 20%, both loans normally carry private mortgage insurance until the balance falls to 80% of the home's original price, when you can ask to cancel it, and it ends automatically at 78%. The 15-year loan pays down faster, so PMI ends sooner and costs less. With 10% down in the example, PMI paid is $7,200 on the 15-year loan against $22,800 on the 30-year loan. Property tax, home insurance and HOA dues are the same on both and sit on top of the payment shown. Lenders usually collect them into an escrow account.

Also check whether you can actually afford the 15-year payment. Lenders judge it by your debt-to-income ratio, and a payment that is a third higher can push the loan out of reach even when the numbers look better.

Beyond the arithmetic

The 30-year loan gives flexibility. The lower required payment is a safety net if income drops, and you can still make extra payments whenever you like, which turns it into a faster loan without the commitment. The 15-year loan forces the discipline: money paid into the loan cannot be spent, but it also cannot be withdrawn easily. Home equity is illiquid and cannot cover an emergency unless you borrow against it.

The comparison also depends on behavior. The invest-the-difference calculation assumes the 30-year borrower invests every dollar of the gap every month for 30 years, without pausing or spending it. Many people do not, and that is the usual way the 30-year route falls short in real life.

Assumptions and limitations

• Fixed rates and a fixed home. No refinancing, selling or moving within 30 years. Most households do not keep a mortgage for 30 years, so check the year-15 figures as well.
• Constant return. The calculator uses a steady annual return. Real markets vary, and the order of returns affects the result.
• Tax drag is a single percentage. It reduces the return each year. It does not model capital gains timing, retirement-account rules or state tax.
• Mortgage interest deduction is ignored. It helps only if you itemize, and it favors the larger interest bill of the 30-year loan.
• PMI is a flat estimate that this calculator ends when the balance reaches 80% of the price (in practice you request cancellation at 80%, and it ends automatically at 78%); actual PMI depends on your credit and the insurer.
• Closing costs and points are not included. Compare them separately.

Common mistakes

Comparing the loans at the same rate. The 15-year loan usually has a lower rate, and ignoring that overstates the advantage of the 30-year loan.

Assuming a stock return is guaranteed. The loan's interest saving is certain. The investment return is not.

Forgetting that you must actually invest. The strategy only works if the difference is invested every month.

Judging by the payment alone. The payment tells you cash flow; total interest and net position tell you cost.

Ignoring PMI. A small down payment makes the slower-paying loan carry PMI for longer.

Frequently asked questions