Ask Clark: Should I take out a 15-year mortgage instead of a 30-year loan?

sticky note that says 'mortgage payment due'
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I love 15-year mortgages, yet no matter how much I sing their praises, I can’t really seem to get people excited about them!

People get scared off by the larger monthly payment that goes along with a 15-year loan without stopping to consider the benefits.

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Why I love 15-year mortgages vs. 30-year mortgages

A lot of times people who are perfect candidates for a 15-year loan still take out a 30 year-mortgage. That’s probably because people who are really careful with money tend to do a lot of “What if?” thinking.

What if something happens at my job? Now I’m stuck with this much larger monthly payment on 15-year loan versus a 30, what will I do?

But I’d encourage you to think about the positives of a 15-year mortgage instead of the possible drawbacks:

  1. You’re out of debt in half the time.
  2. You pay so much less interest over the years.
  3. The interest rate on a 15 tends to be one-half of an interest point lower to as much as a full interest point lower than a 30, depending on current market conditions.

Let’s take a look at that second point with an illustration of exactly how much less in interest you’ll pay with a 15-year loan versus a 30-year loan.

These numbers, courtesy of, assume that you put a 20% down payment on a $200,000 home to avoid paying private-mortgage insurance. So you’re effectively taking out a $160,000 loan:

Home value Down payment Interest rate Loan term Interest paid
$200,000 $40,000 5% 30 $149,209.25
$200,000 $40,000 5% 15 $67,748.56

The numbers are stunning; you pay less than half the interest over the life of the loan with a 15-year versus a 30-year mortgage!

In addition, a 15-year mortgage also helps you build up equity in your home so much quicker. You’re keeping money in your pocket instead of paying it to the bank.

A lot of times, I find that people who are great candidates for a 15-year mortgage already are doing so many other things right in their financial lives — they’re great savers, they’re building money for their retirement, they have money put aside for emergencies and all the rest. So you only compound the benefit to yourself if you’ll do a 15-year mortgage instead of 30.

If you’ve checked those other boxes — if you’re somebody who lives on a lot less than you make — then you should take this one additional leap and look at the 15-year loan when you’re looking for a mortgage.

This is especially true if you are 45 or older. Then I absolutely want you to look at a 15-year loan instead of a 30 when you’re buying a home. Once you hit retirement, it’s so much better if you can be mortgage-debt free and not having to worry about a house payment each and every month. It allows you to live on less in retirement.

I know it might mean you have to buy a little bit smaller home to be able to afford the monthly payment on a 15-year loan if you’re in your mid-40s or later, but the benefit to your wallet and your financial security will be extraordinary.

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Clark Howard About the author:
Clark Howard is a consumer expert whose goal is to help you keep more of the money you make. His national radio show and website show you ways to put more money in your pocket, with advice you can trust. More about Clark
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