November 30, 2023

Navigating Mortgages: 15-Year vs. 30-Year Options

In this blog, we dive into mortgages to help you make an informed decision for your finances. Whether you’re a first-time buyer or a seasoned investor, deciding between a 15-year and a 30-year mortgage is a big deal that can seriously impact your financial future.

Understanding the Basics:

Before we get into the details, let’s break down the main differences between a 15-year and a 30-year mortgage. A 15-year mortgage means higher monthly payments but less interest in the long run, while a 30-year mortgage offers lower monthly payments but ends up costing more in interest over time.

Choosing the Right Fit:

15-Year Mortgage:

  • Pros: Builds equity faster, less total interest and generally a lower rate, shorter loan term.
  • Cons: Higher monthly payments, might limit cash flow.

30-Year Mortgage:

  • Pros: Lower monthly payments, more cash for other investments.
  • Cons: Slower equity build-up, higher total interest and generally a higher rate, longer commitment.


Let’s run some numbers on a $1 million home with a 20% down payment. For a 15-year mortgage at 6.7%, you’re looking at around $6,969 per month, totaling about $548,517 in interest over 15 years.

On the flip side, a 30-year mortgage at 7.7% gives you a more manageable $5,839 monthly payment, but you end up shelling out about $986,674 in interest over 30 years.

Investing the Difference:

Now, here’s where it gets interesting. Imagine you take the extra cash from the lower 30-year monthly payments—let’s say $1,130—and invest it monthly for 15 years at an assumed 7% return. The result? An estimated $327,294 taxable return after 15 years which would narrow the total cost savings of interest above.

If we let that $327,294  grow for an additional 15 years (with no further contributions) at an assumed 7%, the future value totals a $903,014.47 taxable return at the end of year 30.

A lot of factors go into figuring out “which is the best financial choice”?

Factoring into Decision Making:

That potential future value represents the cost of going for the 15-year mortgage. While it means faster equity and less total interest, going for the 30-year option gives you flexibility to invest that difference elsewhere.

When deciding between a 15-year and a 30-year mortgage, consider your risk tolerance, investment goals, and overall financial strategy. Investing the monthly difference can open up alternatives for wealth accumulation and flexibility in your plans.

For example, maybe it’s worth delaying building equity in your house in exchange for a more robust 529 account for your kids’ education.

In the end, mortgage decisions should align with your goals. I always recommend working closely with a financial professional to help ensure you’re making a well-informed decision tailored to your unique circumstances.

40 and 50 year mortgages exist but they may beyond the scope.

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