15 vs 30-Year Mortgage: What If You Invested the Difference?
Example: Loan amount: 360000 $ · 15-year mortgage rate: 6.25 %/yr · 30-year mortgage rate: 6.75 %/yr · Expected investment return (if you invest the difference): 7 %/yr
| 30-yr + invest advantage over 15-yr at year 30 | $393,881 |
| Interest you save with 15-year | $284,973 |
| Investment portfolio at year 30 (30-yr path) | $678,854 |
| 15-year monthly payment | $3,087 |
| 30-year monthly payment | $2,335 |
Worked example
On a $360,000 loan: 15-yr at 6.25% costs $3,087/month and saves $234,000 in interest vs the 30-yr at 6.75% ($2,335/month). The $752 monthly difference invested at 7% for 15 years, then left to compound for another 15, grows to about $441,000. That exceeds the interest saving by roughly $207,000 — the 30-yr + invest path wins at a 7% return. Drop the assumed return to 5% and the 15-yr wins by about $18,000.
Frequently asked questions
Which mortgage term is right for me?
Varies by your investment discipline and risk tolerance. The 30-yr + invest path only wins if you actually invest the difference consistently — many people spend it instead. If you lack investment discipline or want forced savings via equity, the 15-yr is often the better behavioral choice.
Why are 15-year rates lower than 30-year rates?
Lenders take on less interest-rate risk with shorter terms, so they charge less. The rate gap is typically 0.5–0.75 percentage points, but varies by market conditions. Freddie Mac's PMMS survey tracks current averages weekly.
Does the 30-yr mortgage ever win?
Yes — when the investment return exceeds the mortgage rate (after tax), the 30-yr + invest path builds more wealth at the 30-year mark. Historically a diversified stock portfolio has returned 7–8% nominally, above the current mortgage rate in many cases, making the 30-yr math favorable.