15-year vs 30-year mortgage

The same loan at two terms

Start with $200,000.00 at 6% on both sides, which is how the form opens.The 15-year payment is $488.61 higher each month.Total interest is $231,677.04 on the 30-year schedule and $103,788.82 on the 15-year schedule.The 30-year borrower pays $431,677.04 if the loan runs to term. The 15-year borrower pays$303,788.82.

Nothing in those sentences says which term a household should sign. The higher 15-year payment buys a shorter schedule and, at the same rate, less interest. The lower 30-year payment leaves more cash each month and, at the same rate, keeps the balance outstanding longer. Cash on hand, how long you expect to keep the loan, and the rate each product actually offers all sit outside the formula.

Why the interest totals diverge

Interest each month is the remaining balance times the monthly rate. A 15-year loan pays the balance down faster, so later months accrue interest on a smaller amount, and there are fewer months. The CFPB's account of amortization is the same mechanism: early payments are mostly interest while the balance is high, and the principal share grows as the balance falls. Cutting the term moves that shift forward.

The CFPB's total interest percentage is a disclosure of the same idea in one ratio. Add the scheduled interest, divide by the amount borrowed, and you get a percentage that assumes every payment is made and the loan is kept for the full term. On the opening example the 30-year interest is$231,677.04 on $200,000.00, and the 15-year interest is$103,788.82. The TIP on a Loan Estimate also assumes the scheduled life of that specific offer, and for an adjustable-rate loan it uses the rates in the disclosure rather than a promise of the future.

The rates are often not the same

Fifteen-year and thirty-year fixed-rate mortgages are different products. Freddie Mac's Primary Mortgage Market Survey publishes a weekly national average for each. The survey describes those averages as coming from conventional conforming purchase applications on owner-occupied one-unit homes, not from a rate a particular borrower has been offered. This page does not copy the weekly average into the form, because a survey average is not your quote and it changes. Type the two note rates from the offers in front of you. If you leave both at 6%, you are isolating the term.

Use the note rate in each box. The APR on a Loan Estimate folds in certain upfront charges and is usually higher than the interest rate. It is a useful comparison of cost, and it is the wrong number to drop into a principal-and-interest formula when you already have the note rate.

Extra payments are not a 15-year contract

The extra-principal field applies the same optional amount to both schedules. That shows how voluntary principal changes the payoff of each loan. It does not rewrite the contract. On a 30-year note the contractual payment stays the lower one, and the extra payment can stop. On a 15-year note the higher payment is the one you agreed to make. Some notes add a prepayment penalty for paying off a large balance early. The CFPB says that fee does not normally apply to small extra principal payments, and that you should read the penalty before relying on that pattern.

Other terms belong in the comparison and are absent here: discount points, lender credits, closing costs, mortgage insurance, taxes, and insurance. A payment that looks lower can sit next to higher cash due at closing, or the reverse. The single-term calculator, with its own worked example, is on themortgage payment page.