When you sign a 30-year mortgage, the purchase price is only the beginning. At today's interest rates, a $300,000 loan at 7% will cost you over $718,000 by the time you make your final payment — more than double the original loan amount. Most homebuyers focus on the monthly payment. Few actually sit down and calculate how much they pay in total. That number is the real cost of your mortgage.
Total Cost by Loan Amount and Rate
| Loan Amount | Rate | Monthly P&I | Total Interest | Total Cost |
|---|---|---|---|---|
| $200,000 | 6% | $1,199 | $231,700 | $431,700 |
| $200,000 | 7% | $1,331 | $279,100 | $479,100 |
| $300,000 | 6% | $1,799 | $347,600 | $647,600 |
| $300,000 | 7% | $1,996 | $418,600 | $718,600 |
| $400,000 | 7% | $2,661 | $557,500 | $957,500 |
| $500,000 | 7% | $3,327 | $696,800 | $1,196,800 |
Why You Pay Mostly Interest Early On
Mortgages are "front-loaded" with interest. Because your balance is highest at the beginning, the interest portion of each payment is also at its highest. In the early years of a 30-year mortgage, the majority of every payment goes to interest — not principal.
This is why selling a home in the first 5–7 years often yields little equity — most of what you paid was interest, not ownership. On a $300,000 loan at 7%, after 5 years of payments you still owe about $277,000. You have paid over $113,000 but reduced your balance by only $23,000.
15-Year vs. 30-Year Mortgage Comparison
A 15-year mortgage typically carries a lower interest rate (often 0.5–0.75% less) and cuts your total interest roughly in half. The tradeoff is a higher monthly payment.
| 30-Year at 7% | 15-Year at 6.25% | |
|---|---|---|
| Loan amount | $300,000 | $300,000 |
| Monthly payment (P&I) | $1,996 | $2,572 |
| Monthly difference | — | +$576/month |
| Total interest paid | $418,600 | $162,900 |
| Interest savings with 15-yr | $255,700 saved | |
| Equity after 10 years | ~$44,000 | ~$151,000 |
The 15-year mortgage saves $255,700 in interest but costs $576 more per month. Whether that tradeoff makes sense depends on your financial priorities. If you have high-interest debt, inadequate retirement savings, or an underfunded emergency fund, the 30-year with extra payments may give you more flexibility.
How Extra Payments Reduce Total Cost
You do not need to choose between 15 and 30 years. A 30-year mortgage with deliberate extra payments can achieve a similar result with built-in flexibility — you can stop extra payments in a difficult month.
| Extra Monthly Payment | Interest Saved | Payoff Time |
|---|---|---|
| $0 (standard) | — | 30 years |
| +$100/month | $48,800 | 25.5 years (4.5 years earlier) |
| +$200/month | $82,300 | 22.5 years (7.5 years earlier) |
| +1 extra payment/year | ~$77,000 | ~25 years (5 years earlier) |
| +$500/month | $136,000 | 18 years (12 years earlier) |
All figures are approximate for a $300,000 loan at 7%. The single most efficient prepayment strategy for most people: apply any windfalls (tax refunds, bonuses) directly to principal once or twice a year. Even one extra payment per year generates enormous savings.
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Should You Pay Off Your Mortgage Early or Invest?
This is one of the most common personal finance debates. The math depends on your mortgage rate vs. expected investment return:
- If your mortgage rate is below 5%: investing in equities has historically outperformed prepayment on a pure return basis.
- If your mortgage rate is 6–7%: the gap narrows significantly. After taxes and risk, prepayment and investing are roughly equivalent.
- If your mortgage rate is above 7%: paying down the mortgage becomes a compelling "guaranteed" return.
Most financial advisors suggest: max tax-advantaged accounts (401k match, Roth IRA) first, then apply extra money to the mortgage vs. taxable investing depending on your rate and risk tolerance.
Key Takeaways
- A $300,000 mortgage at 7% costs over $418,600 in interest alone — your total payment is $718,600 over 30 years.
- In the first 5 years, most of each payment goes to interest. After 5 years at 7%, you still owe $277,000 on a $300K loan.
- A 15-year mortgage at 6.25% saves ~$255,700 in interest vs. a 30-year at 7%, but costs $576 more per month.
- One extra payment per year on a $300K loan saves ~$77,000 and cuts the term by about 5 years.
- At rates above 7%, paying down the mortgage early often rivals or beats taxable investing on a risk-adjusted basis.
For a complete overview of how compound interest, retirement planning, inflation, savings, and FIRE all connect, see our Investing Basics guide.