15-Year vs 30-Year Mortgage: Save $385K in Interest
Compare mortgage terms with real Bergen County examples. Understand payment differences, interest savings, and equity acceleration.
| Feature | 15-Year Mortgage | 30-Year Mortgage |
|---|---|---|
| Current Interest Rate | 5.65% | 6.40% |
| Monthly Payment ($500K loan) | $4,122 | $3,131 |
| Total Interest Paid | $242,000 | $627,000 |
| Interest Savings | Save $385,000 | — |
| Equity After 5 Years | $138,000 (28%) | $38,000 (8%) |
| Mortgage-Free Date | 2040 (15 years) | 2055 (30 years) |
| Tax Deduction (First Year) | ~$28,000 | ~$32,000 |
| Best For | High income, wealth building | Budget flexibility, investment |
Real Bergen County Example: $500,000 Loan
15-Year Mortgage
Equity Buildup:
- • Year 5: $138,000 (28%)
- • Year 10: $316,000 (63%)
- • Year 15: $500,000 (100% - paid off)
30-Year Mortgage
Equity Buildup:
- • Year 5: $38,000 (8%)
- • Year 10: $89,000 (18%)
- • Year 15: $156,000 (31%)
The Bottom Line
Monthly Payment Difference
$991/mo
15-year is higher
Total Interest Savings
$385,000
With 15-year term
Years to Payoff
15 years
Faster with 15-year
Decision: If you can afford the extra $991/month, the 15-year mortgage saves massive interest and builds wealth faster. If budget is tight, 30-year provides flexibility.
Advantages & Disadvantages
15-Year Mortgage
Advantages
- • Save $385K interest vs 30-year
- • Lower rate (5.65% vs 6.40%)
- • Build equity 3.5x faster
- • Debt-free 15 years sooner
- • Forced savings discipline
- • Wealth building vs interest cost
Disadvantages
- • $991/mo higher payment
- • Less budget flexibility
- • Lower tax deduction (less interest)
- • Harder to qualify (higher DTI)
- • Less cash for investments
30-Year Mortgage
Advantages
- • $991/mo lower payment
- • Budget flexibility for emergencies
- • Easier qualification (lower DTI)
- • More cash for investments/retirement
- • Higher tax deduction (more interest)
- • Can pay extra without obligation
Disadvantages
- • Pay $385K more interest
- • Higher rate (6.40% vs 5.65%)
- • Slower equity buildup
- • Debt until 2055 (15 years longer)
- • Requires discipline to pay extra
Which Term Should You Choose?
Choose 15-Year If:
- ✓High household income (can afford +$1K/mo)
- ✓Late 40s-50s wanting mortgage-free retirement
- ✓Hate debt and prioritize wealth building
- ✓Stable income with emergency fund
- ✓Low other debt (cars, credit cards paid off)
- ✓Want to save $385K in interest
Choose 30-Year If:
- ✓Need lower payment to qualify or budget
- ✓Younger buyers (20s-30s) with time to pay
- ✓Want flexibility for kids, emergencies, life
- ✓Prefer investing extra cash vs paying down mortgage
- ✓Variable income (commission, self-employed)
- ✓Can pay extra when possible without obligation
Frequently Asked Questions
What is the main difference between 15-year and 30-year mortgages?
15-year mortgages have lower interest rates (5.65% vs 6.40%), higher monthly payments, and pay off faster with significant interest savings. 30-year mortgages offer lower monthly payments, more flexibility, and slower equity buildup. On a $500K loan: 15-year = $4,122/mo paying $242K interest; 30-year = $3,131/mo paying $627K interest—a $385K difference.
How much money do you save with a 15-year mortgage?
On a $500,000 loan: 15-year at 5.65% costs $242,000 in total interest; 30-year at 6.40% costs $627,000 in interest. You save $385,000 over the loan life with a 15-year term. However, monthly payment is $991 higher ($4,122 vs $3,131).
Who should choose a 15-year mortgage?
Choose 15-year if: (1) High income with budget room for +$1,000/mo payment, (2) Late 40s-50s wanting mortgage-free retirement, (3) Prioritize wealth building over flexibility, (4) Minimal debt and stable income. In Bergen County, this suits high earners in Ridgewood, Saddle River, or executives nearing retirement.
Can I pay off a 30-year mortgage in 15 years?
Yes, by making extra principal payments. On $500K at 6.40%: add $991/mo to reach 15-year payoff. However, you pay more interest (6.40% vs 5.65% on 15-year loan = $49K more). The 15-year rate advantage saves significantly. Use 30-year for flexibility, pay extra when possible, but won't match 15-year interest savings.
Calculate Your Exact Savings
Work with Jimmy Joseph MBA to compare 15-year vs 30-year mortgages for your Bergen County home purchase.
NMLS #1577754 | (718) 812-7798