A longer mortgage term lowers the monthly payment and raises the total cost. On a $300,000 loan at the same 7.18% rate, a 30-year term costs about $694 a month less than a 15-year term but about $240,811 more in interest. The rest of this page shows where those numbers come from and how much of the difference shrinks if you sell, refinance or pay extra along the way.
Key takeaways
- At one rate, stretching a $300,000 loan from 15 to 30 years drops the payment from $2,726.76 to $2,032.30 and raises lifetime interest from $190,817 to $431,628 (illustrative, 7.18%).
- Of the roughly $259,150 interest gap between a 15-year loan at 6.57% and a 30-year loan at 7.18%, about $240,811 comes from the longer term and about $18,338 from the higher rate.
- After 5 years the 30-year borrower has repaid about 5.7% of the loan; the 15-year borrower has repaid about 22.3%.
- Paying an extra $592.58 a month on the 30-year loan retires it in about 16 years and 2 months, and keeps the option to drop back to the lower required payment.
- Under the CFPB's Qualified Mortgage definitions, a term longer than 30 years disqualifies the loan; FHA, VA and USDA loans follow their agencies' own definitions.
The cost of a longer mortgage term
A fixed-rate mortgage charges interest each month on the balance still owed. The payment is set so the balance reaches zero on the last day of the term. A longer term means a smaller payment, a slower fall in the balance, and more months of interest on a large balance. The Consumer Financial Protection Bureau (CFPB) describes the same trade: a shorter term usually means higher monthly payments and a lower total cost, and a 30-year term the reverse.
payment = P × i / (1 − (1 + i)^(−n))
i = annual rate / 12
n = years × 12
- P is the amount borrowed, $300,000 in every example here.
- i is the monthly interest rate.
- n is the number of monthly payments.
Illustrative example: the table holds the rate at 7.18% for every term. That is Freddie Mac's 30-year fixed average published November 5, 2026, taken from its Primary Mortgage Market Survey. Holding the rate constant isolates what the term alone does. Principal and interest only; taxes, insurance and any mortgage insurance are extra.
| Term | Monthly payment | Total interest | Total paid | Repaid after 5 years | Repaid after 10 years |
|---|---|---|---|---|---|
| 15 years | $2,726.76 | $190,817 | $490,817 | 22.3% | 54.3% |
| 20 years | $2,358.42 | $266,021 | $566,021 | 13.5% | 32.8% |
| 30 years | $2,032.30 | $431,628 | $731,628 | 5.7% | 13.8% |
| 40 years | $1,903.64 | $613,747 | $913,747 | 2.6% | 6.3% |
Each step buys less relief than the one before. Going from 15 to 20 years lowers the payment by $368.34 a month; from 20 to 30, by $326.12; from 30 to 40, by only $128.66. The interest added by that last step is $182,119. The curve flattens because on a long loan the payment is already close to interest-only, so adding years barely lowers it. All totals here are in nominal dollars and leave out what the borrower does with the lower payment, such as saving or investing the difference.
What the rate gap does to the math
Shorter terms usually come with lower rates, because the lender is exposed for less time. The CFPB's rate-exploration page says a shorter term generally brings a lower offered rate, and its loan-types page says the difference can reach a full percentage point, varying by lender. Freddie Mac's survey for November 5, 2026 showed 7.18% for a 30-year fixed loan and 6.57% for a 15-year fixed loan, a gap of 0.61 points. A year earlier the two averages were 6.22% and 5.50%, a gap of 0.72 points. Freddie Mac does not publish a 20-year average in this survey.
| Comparison | Payment | Total interest | Interest in first 5 years |
|---|---|---|---|
| 30 years at 7.18% | $2,032.30 | $431,628 | $104,870 |
| 15 years at 7.18% (same rate) | $2,726.76 | $190,817 | $96,586 |
| 15 years at 6.57% (survey rate) | $2,624.88 | $172,478 | $87,939 |
Two things stand out. First, the 15-year loan at the lower rate has a payment only $592.58 above the 30-year payment, not $694.46, so the rate gap softens the monthly squeeze by about $102. Second, almost all of the interest saving is the term: $240,811 of the $259,150 difference. The lower rate contributes about $18,338. A borrower who is quoted a 15-year rate that is not lower, or who has to pay points to get it, gets less than this.
The survey is an average, not a quote. Freddie Mac says its results come from loan applications submitted through its Loan Product Advisor, and that fees and points are not always provided and are not published, so a lender's Loan Estimate can differ.
Equity after 5 and 10 years
The last two columns of the first table show the share of the original $300,000 that has been repaid, assuming the home keeps its value and counting only scheduled payments. After 5 years that is about $17,068 on the 30-year loan against about $67,019 on the 15-year loan. After 10 years it is about $41,483 against about $162,881. Home price changes, the down payment and any extra payments add to or subtract from these figures; the table shows only what the amortization schedule does.
For someone who expects to sell within five to seven years, this is the number that matters more than lifetime interest. On the 30-year loan, the payoff at the sale is still about $282,932 after year 5 and $258,517 after year 10.
Prepaying a 30-year to mimic a 15
A 30-year borrower can add extra principal each month and finish early, while keeping the lower required payment as a fallback. The cost is that the rate stays at the 30-year level. Illustrative example, still $300,000:
- Paying the 15-year payment at the same rate: the 30-year loan at 7.18% plus $694.46 a month ends in 15 years with about $190,818 interest, the same as the true 15-year loan.
- Paying what a true 15-year loan at 6.57% would cost: $2,624.88 a month, which is $592.58 extra. The loan ends in 194 months (16 years, 2 months) with about $206,676 in interest. That is about $34,197 more than the real 15-year loan at 6.57%, and about $225,000 less than making only the required payments.
- A smaller habit: $100 extra a month ends the loan after 310 months (25 years, 10 months) and cuts total interest by roughly $72,500, to about $359,111.
The trade is flexibility for rate. The prepaying borrower can skip the extra in a tight year; the true 15-year borrower cannot, but pays less. The CFPB's page on prepayment penalties says some mortgages charge a fee for paying off all or part of the loan early, and that small extra principal payments over time normally do not trigger it.
Federal rules in 12 CFR 1026.43(g) allow a penalty on a covered loan only if other law permits it, its annual percentage rate cannot increase after closing, the loan is a Qualified Mortgage and it is not a higher-priced loan. Even then, the penalty cannot apply after the first three years and is capped at 2% of the amount prepaid in years one and two and 1% in year three, and a lender offering such a loan must also offer an alternative without a penalty. The loan's own terms are what count, so confirm before sending extra money.
What a 40-year term would change
The CFPB's Qualified Mortgage explainer lists loans with a term longer than 30 years among those that are not Qualified Mortgages. The rule itself, 12 CFR 1026.43(e)(2), requires a term of no more than 30 years for a general Qualified Mortgage, along with substantially equal payments, no negative amortization, interest-only or balloon features, and limits on points and fees. The same 30-year cap carries into the small-creditor, seasoned-loan and balloon-payment versions of the definition. Government-backed loans are handled differently: paragraph (e)(4) treats a loan as a Qualified Mortgage when HUD (for FHA), VA or USDA defines it as one under their own rules.
Falling outside the Qualified Mortgage category does not make a loan illegal. Under 1026.43(c) the lender must still make a reasonable, good-faith determination that the borrower can repay. Two practical differences follow from the same section. The lender does not get the Qualified Mortgage legal protection, and a loan that is not a Qualified Mortgage cannot carry a prepayment penalty under 1026.43(g).
The table shows what such a term would cost on the same loan: a payment $128.66 lower than on a 30-year loan, $182,119 more interest, and only 6.3% of the principal repaid after 10 years. Whether a given lender offers a 40-year product, and on what terms, was not verified for this article and varies by lender.
Frequently asked questions
Which number on a Loan Estimate shows total interest?
The Comparisons section includes the Total Interest Percentage (TIP), which the CFPB's Loan Estimate explainer says shows how much interest you will pay over the life of the loan. Under 12 CFR 1026.37(l) it is a percentage of the loan amount, not a dollar figure: about 144% for the 30-year example here and about 64% for the 15-year at the same rate. The same table has an "In 5 Years" line showing the principal you will have paid off after 60 months, which matches the equity comparison above.
Why is my quoted rate different from the Freddie Mac average?
The survey is a weekly national average of rates on conventional, conforming single-family purchase applications submitted through Freddie Mac's system, so it does not describe FHA, VA or jumbo pricing, and it does not publish fees or points. The CFPB notes that rates vary by lender, so your Loan Estimate reflects your credit, down payment, points and lender, not the average.
Does a 20-year term sit halfway between 15 and 30?
Not quite. On the payment it sits slightly closer to the 30-year loan: $2,358.42 is $368.34 below the 15-year payment and $326.12 above the 30-year one. On interest it sits much closer to the 15-year loan: $266,021 at 7.18%, which is $75,204 more than the 15-year figure and $165,607 less than the 30-year figure. Freddie Mac does not publish a 20-year average, so a real 20-year quote may differ in rate.
Do prepayment penalties apply if I add $100 a month?
Per the CFPB, a penalty usually applies to paying off all or a large part of the balance early, within a set window such as the first three or five years, and small extra payments over time normally do not trigger it. Not all mortgages have one, and the lender's terms control, so ask before relying on that. For loans covered by 1026.43, the federal limit described above means no penalty can apply after year three.
How much of the first 30-year payment is interest?
At 7.18% on $300,000, the first month's interest is $1,795.00 (the balance times the monthly rate of 0.5983%), so about $237.30 of the $2,032.30 payment reduces principal. On the 15-year loan at the same rate, the first payment sends about $931.76 to principal, which is why its balance falls so much faster.
Steps before you pick a term
- Get written Loan Estimates for the same loan type at different terms, ideally from at least three lenders, as the CFPB's shopping guide suggests.
- Record payment, Total Interest Percentage, points and any prepayment penalty for each offer.
- Split any rate gap from the term effect, as in the second table, to see what the shorter term really buys.
- Compute the balance at the year you expect to sell or refinance, and add taxes and insurance to the payment.
- If the 15-year payment is tight, ask whether a 30-year loan with planned extra payments suits you better.
This article is general education, not personal advice; figures are illustrative and a lender or housing counselor can run your actual numbers.
Sources
- Freddie Mac, Primary Mortgage Market Survey (November 5, 2026 release)
- CFPB, Understand the different kinds of loans available
- CFPB, Explore interest rates
- CFPB, What is a prepayment penalty?
- CFPB, What is a Qualified Mortgage?
- 12 CFR 1026.43, minimum standards for transactions secured by a dwelling (eCFR)
- 12 CFR 1026.37, content of the Loan Estimate (eCFR)
- CFPB, Loan Estimate explainer
- CFPB, Shopping for a mortgage
