30-Year vs. 15-Year Refinance: The Real Cost Difference on a $700,000 Loan

When homeowners refinance, most default to another 30-year loan. The lower monthly payment is comfortable, the logic is familiar, and lenders make it easy. But for homeowners who can carry a higher payment, the 15-year option deserves a hard look.

The interest savings are not modest. At current rates, refinancing a $700,000 balance to a 15-year mortgage instead of a 30-year saves $511,369 in total interest. The tradeoff is $1,428 more per month.

Whether that tradeoff makes sense depends on your goals, cash flow, and what else you would do with that $1,428.

Current Rates (February 2026)

Per Freddie Mac's Primary Mortgage Market Survey, week of February 26, 2026:

• 30-year fixed refinance: ~6.16% (including typical lender spread above survey rate)

• 15-year fixed refinance: 5.44%

The spread between a 30-year and 15-year is currently 0.72 percentage points -- roughly in line with historical norms of 0.50-0.75 points.

Side-by-Side: $700,000 Refinanced to 30-Year vs. 15-Year

Over $511,000 in interest savings is significant - more than 70% of the original loan balance. The 15-year borrower pays the same principal and hands the bank $511,369 less in financing costs.

Equity at Key Milestones

The 15-year loan builds equity dramatically faster. Here is where each loan's remaining balance stands at key checkpoints:

The 15-year borrower owns the home outright in 15 years. The 30-year borrower still owes $500,763. For homeowners approaching retirement - where eliminating a mortgage payment has significant value - this difference is concrete, not theoretical.

The "Invest the Difference" Strategy

The standard counterargument: take the 30-year, and invest the $1,428/month difference in the market at a higher return than your mortgage rate.

At 10% average annual return (the S&P 500's long-term historical average, with dividends reinvested), investing $1,428/month for 15 years produces approximately $591,943.

Compared to the $511,369 saved by taking the 15-year loan, investing the difference comes out ahead -- by about $80,574.

On paper, the 30-year + invest strategy wins. In practice, the picture is more complicated:

The 10% return is expected, not guaranteed. The 5.44% mortgage rate is fixed. For risk-averse borrowers or those near retirement, eliminating $511,369 in certain interest cost may outweigh uncertain investment upside.

Behavioral follow-through matters more than most projections account for. The 15-year mortgage enforces the accelerated savings automatically. The 30-year + invest strategy requires consistent discipline for 15 years -- and research consistently shows that discretionary savings get spent.

Tax treatment differs. Mortgage interest is potentially deductible if you itemize; investment gains are subject to capital gains tax. The after-tax comparison shifts based on individual circumstances.

Market timing risk is real. A major downturn in years 13-15 of the investment window -- as happened in 2008 and 2022 -- would significantly reduce the actual result compared to the 10% average projection.

A Third Option: Accelerated Payoff on a 30-Year

For homeowners who want flexibility but also want to reduce interest burden, there is a middle path: take the 30-year at 6.16%, but voluntarily make additional principal payments when cash flow allows.

This keeps $4,269 as the minimum obligation, preserving flexibility if income temporarily drops. When you pay the extra $1,428, you match the 15-year payoff trajectory. When you cannot, you are not in breach. The loan term stays 30 years legally, but the actual payoff timeline compresses as you make extra payments.

The limitation: this strategy requires discipline, and many borrowers do not maintain it consistently over time.

Who Should Choose the 15-Year

The 15-year tends to make more sense when your income is reliable and the higher payment is genuinely comfortable, when you are 10-20 years from retirement and want the mortgage eliminated before then, when you tend to spend rather than invest discretionary cash, or when you value the certainty of a guaranteed outcome over expected investment upside.

The 30-year tends to make more sense when monthly cash flow matters and you need the lower payment, when you have strong investment discipline and will actually deploy the difference consistently, when you are uncertain about your timeline, or when you are refinancing primarily to reduce payment pressure.

Run Your Scenario Before You Decide

Hauser's refinance calculator lets you model different refinance terms using your actual numbers - including monthly payment comparison, total interest, and break-even on closing costs - so you can make the decision with complete visibility.

Sources

• Freddie Mac Primary Mortgage Market Survey, week of February 26, 2026: 30-year fixed 5.98%; 15-year fixed 5.44%.

• Norada Real Estate, Refinancing Your Mortgage Now Could Save You Thousands Before Rates Rise, February 2026: https://www.noradarealestate.com/blog/refinancing-your-mortgage-now-could-save-you-thousands-before-rates-rise/

• The Mortgage Reports, When Is It Worth It to Refinance?, January 2026: https://themortgagereports.com/51755/should-i-refinance-for-quarter-percent-lower-refinance-rates

• Trade That Swing, Average Historical Stock Market Returns for S&P 500, December 2025: https://tradethatswing.com/average-historical-stock-market-returns-for-sp-500-5-year-up-to-150-year-averages/

• All calculations verified: monthly payment M = P x [r(1+r)^n] / [(1+r)^n - 1]; remaining balance = P x (1+r)^n_paid - PMT x [(1+r)^n_paid - 1] / r; investment FV = PMT x [((1+r)^n - 1) / r] where r = 10%/12, n = 180 months.