The loan term — how long you take to repay — dramatically affects your monthly payment, interest costs, and how fast you build equity.
🔍 Let’s Compare:
$300,000 loan at 6% interest
| Loan Term | Monthly Payment | Total Interest Paid | Total Cost of Loan |
|---|---|---|---|
| 30 Years | ~$1,798 | ~$347,515 | ~$647,515 |
| 15 Years | ~$2,532 | ~$155,682 | ~$455,682 |
💥 That’s nearly $192,000 more interest for the 30-year loan!
📉 30-Year Loan: Slower Amortization
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Lower monthly payments, easier on the budget
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Pay mostly interest in early years
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Takes longer to build equity
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Total interest is much higher
📈 15-Year Loan: Faster Amortization
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Higher monthly payments
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Pay off principal much faster
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Build equity quickly
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Save a lot in interest
🔁 Payment Breakdown Example (Early Year):
| Loan Term | Month 1 Interest | Month 1 Principal |
|---|---|---|
| 30 Years | $1,500 | $298 |
| 15 Years | $1,500 | $1,032 |
Notice how with the 15-year loan, much more goes toward the principal right away.
✅ What’s Best for You?
| If You Want… | Consider… |
|---|---|
| Lower monthly payments | 30-year loan |
| To pay less interest overall | 15-year loan |
| To build equity faster | 15-year loan |
| More flexibility (can pay extra later) | 30-year, then prepay |
💡 Tip:
Even with a 30-year loan, you can pay it off like a 15-year by making extra principal payments — without being locked into the higher monthly cost.