15-Year vs 30-Year Mortgage: Which Should You Choose When Refinancing?
When refinancing, choosing between a 15-year and 30-year term is one of the most consequential financial decisions you'll make. The numbers are stark: on a $300,000 loan, the 15-year option typically saves between $100,000 and $150,000 in interest compared to 30 years — but the monthly payment is 35%–45% higher.
The Real Trade-Off: Cash Flow vs. Wealth Building
The 30-year mortgage's lower payment gives you flexibility — more monthly cash for investing, emergencies, or other goals. The 15-year forces equity building through higher payments, which functions as a form of forced savings. Neither is universally better. The right answer depends on your income stability, other investment opportunities, and how much you value eliminating debt.
A Concrete Example
On a $300,000 refinance at current rates (6.25% for 15 years, 6.75% for 30 years): the 15-year payment runs about $2,572/month vs $1,946 for 30 years — a $626/month difference. Over the life of the loans, the 15-year borrower pays roughly $163,000 in interest vs $400,000 for the 30-year borrower. That $237,000 gap is substantial. But if you invest that $626/month difference at 7% in an index fund for 30 years, you'd accumulate approximately $756,000 — more than the interest savings. This is the classic "invest the difference" argument for the 30-year.
Rate Spread Matters
Historically, 15-year rates run about 0.5%–0.75% lower than 30-year rates, which widens the interest savings gap beyond just the shorter term. Use our rate reduction guide to ensure you're getting the best possible rate before locking in either term.