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Key Takeaways
- 15-year mortgage rates are running about a full percentage point cheaper than 30-year loans, making it the clearest path to a mid-5% rate.
- But the tradeoff is steep: monthly payments will be hundreds of dollars higher with a 15-year term.
- Good fits for these shorter, lower-rate loans are higher, steady-income households with solid savings, refinancers whose financial picture has improved, and homeowners aiming to retire mortgage-free.
- For many first-time buyers and early-stage owners, a 15-year term is a stretch. Keeping total housing costs near 30% of income often points to a 30-year loan instead.
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15-Year Mortgages Are About 1% Cheaper Than 30-Year Loans
If you’ve been shopping for a mortgage this year, it’s frustrating that the 30-year average is still stuck in the mid-6% range. True, rates dipped this week to their lowest level since last October, but that only brought the flagship average down to 6.44%. And except for a two-day blip last fall, 30-year purchase rates haven’t spent extended time in the 5% range for three years.
But 15-year mortgages are telling a different story, falling to an 11-month low of 5.36% on Monday. That’s more than a full percentage point below the 30-year average, so if you’ve come across 15-year rates in your loan shopping, they likely caught your attention.
The reason 15-year mortgage rates are so much lower is that lenders (and the investors who buy mortgage-backed securities) get their money back much sooner. That leaves less time for things to go wrong, such as a borrower defaulting and inflation eating away at lender returns. With risk compressed into 15 years instead of 30, lenders are willing to offer a significantly lower rate.
It also helps that 15-year borrowers tend to be stronger candidates. They typically have higher incomes and more financial stability, which means they default less often. Lenders know this, and it gives them more room to price the loan aggressively.
20-Year Loans Save Some, but Not as Much
Yes, 20-year mortgages also run cheaper than 30-year loans, and today they average 5.97%. But 15-year loans offer a much bigger discount—making them the sweet spot if you can afford the higher payment.
The Catch: Monthly Payments Are Hundreds Higher
The tradeoff for locking in a much lower rate on a 15-year mortgage is simple: your monthly payment jumps dramatically compared with a 30-year loan. True, the interest rate you’re paying is much lower, but your principal must be paid off over 180 payments (15 years × 12 months), instead of 360 payments.
To show how big a difference this makes, we’ve run the numbers. After touching an 11-month low earlier this week, rates have ticked up slightly, so we’ll use the latest averages: 6.50% for a 30-year mortgage vs. 5.44% for 15 years. Here’s what that looks like at different loan amounts.
| Loan Amount | 30-Year @ 6.50% | 15-Year @ 5.44% | Monthly Difference | Annual Difference |
| $200,000 | $1,264 | $1,628 | $364 | $4,364 |
| $300,000 | $1,896 | $2,442 | $546 | $6,546 |
| $400,000 | $2,528 | $3,256 | $727 | $8,728 |
| $500,000 | $3,160 | $4,070 | $909 | $10,910 |
| $600,000 | $3,792 | $4,883 | $1,091 | $13,092 |
As you can see, even on a $200,000 loan, the 15-year payment runs more than $350 per month higher than on a 30-year mortgage. And for a $500,000 loan, you’re paying almost $11,000 more per year than a 30-year option would cost.
In the plus column, you’re knocking down principal faster and building equity more quickly—and in 15 years you’re done, while a 30-year borrower is only halfway there.
When a 15-Year Mortgage Makes Sense—and When It Doesn’t
So, who can make a 15-year mortgage work? Households with higher, steady incomes and strong cash flow are a good fit. With more room in the budget, a payment that’s hundreds of dollars higher won’t strain monthly finances. Financial stability helps, too—families with ample savings or other liquid assets can keep up with a 15-year payment even if income changes.
Refinancers are another strong fit. If you’ve had your mortgage for a while and your rate is high, refinancing to a lower-rate, shorter term can be worth considering—especially if your finances are stronger now than when you first borrowed. What didn’t fit your budget then may be doable today, even with the higher monthly payment.
Nearing retirement? A 15-year can be appealing if your goal is to enter retirement without a mortgage. For homeowners in their 50s or early 60s—especially those already deep into a 30-year—refinancing into a 15-year can align the payoff with a planned retirement date, provided it doesn’t crowd out essentials like emergency savings or healthcare costs.
On the flip side, a 15-year isn’t a match for everyone. For first-time buyers—or anyone early in their mortgage—a 15-year payment is often a heavy lift. If income is strong, it can work, but sanity-check the budget: a common rule of thumb is to keep total housing costs near 30% of household income. Remember, this includes your mortgage payment, property taxes, homeowners insurance, any homeowners association (HOA) dues, and—if your down payment is under 20%—private mortgage insurance (PMI). For many newer buyers, a 30-year loan keeps the monthly cost more manageable.
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The national and state averages cited above are provided as is via the Zillow Mortgage API, assuming a loan-to-value (LTV) ratio of 80% (i.e., a down payment of at least 20%) and an applicant credit score in the 680–739 range. The resulting rates represent what borrowers should expect when receiving quotes from lenders based on their qualifications, which may vary from advertised teaser rates. © Zillow, Inc., 2025. Use is subject to the Zillow Terms of Use.
