Here’s a startling fact (and we have the math to prove it)
If you replace your current 30-year mortgage with a 15-year mortgage, you’ll save an average of around $111,000.
Let’s put it another way. If you keep your current 30-year mortgage, you’ll pay about $111,000 in interest you could have avoided. That money could go directly to your savings, your kid’s college fund or your retirement budget.
Make it real: see how much you could save with a 15-year mortgage >>
The chart below compares 30-year vs 15-year for different mortgage amounts. You can see the total interest cost. The savings from switching is in green.
So why doesn’t everyone have a 15-year mortgage?
Well, the fact is that more people should. But usually the reason folks don’t is because the monthly payments are higher. And they are – BUT – every extra dollar goes to paying off your mortgage – which is like a form of savings. Except, instead of earning 1% in your savings account, you’ll be avoiding paying $111,000 in interest!
So unless you can earn $111,000 in your savings account, refinancing to a 15-year mortgage is obviously the smarter move than putting that money into a savings account every month.