How a 15-Year Mortgage Works
A 15-year mortgage is repaid over 180 months. Payments are higher than a 30-year loan because you’re paying principal back faster, but the total interest paid is typically far lower. Many 15-year loans also have slightly lower interest rates, which compounds the savings.
Key Benefits of a 15-Year Mortgage
Build Equity Faster
With a shorter term, a larger portion of each payment goes to principal from the start, helping you build equity quickly. That can improve your net worth and flexibility for selling or refinancing.
Pay Less Interest
You’ll typically secure a lower interest rate compared to a 30-year loan, and you’ll pay that interest for half the time—dramatically cutting total interest over the life of the loan.
15-Year vs. 30-Year: Side-by-Side
The calculator above includes a quick 30-year comparison (same inputs). You’ll see a higher monthly payment on the 15-year, but the total interest savings can be substantial—and you’ll own your home free and clear much sooner.
How to Get the Best 15-Year Rate
- Improve your credit profile (on-time payments, reduce balances).
- Compare multiple lenders for quotes the same day.
- Consider discount points if you’ll stay in the home long enough to break even.
- Target a reasonable loan-to-value (LTV) with your down payment.
Factors that Influence Your Payment
- Loan amount (home price minus down payment).
- Interest rate and loan term.
- Property taxes, homeowners insurance, and HOA dues.
- PMI (if down payment < 20%).
- Optional extra principal payments or bi-weekly cadence.
Is a 15-Year Loan Right for You?
If you can comfortably afford the higher monthly payment without stretching your budget or savings, a 15-year term can be a smart move. If cash flow is tight or you want more flexibility, consider a 30-year loan and make extra principal payments when possible.
Frequently Asked Questions
What is PMI?
Private Mortgage Insurance protects the lender when your down payment is under 20%. It’s typically removed once you reach 20–22% equity (LTV ≤ 80%).
How does my rate affect monthly payment?
A higher rate increases the interest portion of the payment. Shorter terms usually have lower rates, helping offset some of the higher principal per payment.
Can I pay off early?
Yes. Extra principal payments or bi-weekly cadence can shorten your payoff and reduce total interest. Check your loan’s prepayment policy.