15 vs. 30-Year Mortgages: The Real Cost Difference

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What’s the most brilliant way to pay off your mortgage early? Simple: pay more towards your 30-year mortgage! We know what you’re thinking, “30-year mortgages are the gold standard! I can only cash flow my rental properties with a 30-year mortgage payment!” Listen, we hear you, but that 30-year mortgage could be costing you hundreds of thousands of dollars in interest and essentially eat away at all the cash flow you worked so hard to create. Is it always the wrong choice? NO! But there may be some better ways to pay off your mortgage faster!
Christian and David are back on this Mortgage Monday episode to talk about the massive interest savings you can get from tweaking your loan terms. 15-year fixed mortgages, 20-year fixed mortgages, and 30-year fixed mortgages: which is the best for building wealth? Today, we’re pitting them head-to-head-to-head to see which saves you the most on interest with today’s sky-high mortgage rates. Plus, even if you have a 30-year mortgage, there are still numerous ways to pay off your mortgage faster. We’re sharing all the mortgage “hacks” with you today!
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Check Out Another Mortgage Monday Video:
• Mortgage Monday
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What’s Better for Investors-a 15-Year or 30-Year Mortgage?
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Pros and Cons of Paying Down Your Mortgage:
www.biggerpockets.com/blog/pr...
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00:00 Save a TON on Your Mortgage!
01:06 Sponsor: DealMachine!
02:08 Shorter Loans Mean Bigger Payments
03:52 30 vs. 20 vs. 15-Year Mortgage
08:52 The "Hidden Cost" of Interest
10:52 Mortgage "Hacks" to Pay Off Faster
14:16 Pay Off a Low Rate Mortgage?

[@artur474]

Higher rates - more down, less years; Lower rate- less down, more years. Leveraging cheap money is the ideal scenario...

[@evandently9474]

Me, a Canadian, listening for pure interest in these 30 year mortgages.

[@valariethomas2334]

I was aware of how amortization works. But I'm glad you shared the information because a lot of people are not aware...Good stuff!!!

[@hansenmarc]

Mortgage interest is tax-deductible on a primary residence. It’s also deductible as a business expense on a rental property. How does that factor into the calculations?

[@aprilvancleve9463]

Great info! Thanks Mortgage Mondays!

[@poonekar]

If you didn't pay more of that principal sooner, what would you do with that money? If you would spend it, then obviously you are better off paying the asset off sooner. But if you were investing it elsewhere with a higher rate of return than the mortgage rate, then you are better off not paying that principal down.

[@martinbrisebois5013]

Absolutely! Thanks for this valuable info! We believe in that! All of this info provided today make a lot of sense financially. You are right David, why try to pay off your mortgage faster when the interest rates are so low since last mortgage renewal. That being said, our mortgage is coming up for renewal within the next year and with much higher interest mortgage rates, we will definitely go with those 2 strategies where we go to bi-weekly payments and add extra money to each payment so we can pay down our mortgage faster on a relatively shorter time. In the end, we are trying to shave off 10-15 years to our 25 year mortgage term. Thanks again for this excellent financial strategy when it comes to paying down your mortgage and save on the amount of interest $ you pay. That interest $ you pay to the bank never comes back

[@MichaelJordan-sp7pj]

Excellent podcast today, agree with everything !

[@valsomeone2180]

This doesn't include property taxes and home owners insurance though. So that's a huge difference when you have to factor these things in.

[@williamcurry6412]

They are using basic numbers to make this video. Of course escrow will make a big difference but that can widely vary for each person.

[@ericmendel8567]

15 year on primary 30 year on rentals

[@justinparham6450]

My thought is to just invest the extra cash I could potentially pay towards the principal. I Dollar cost avg in to index funds and just forget about it. If I get 10% return I can beat any additional interest I would’ve paid. Granted I understand I’m paying interest on 500k versus getting 10% on whatever o currently have invested but the more I invest the quicker I can turn the tables on that. I’m also investing the extra cash flow I’m getting by taking the lower payment. But hey maybe I’m doing it wrong however that’s my strategy now.

[@lubosimaboshe]

What if mortgage is 17%? how would you buy? awesome video

[@Soldandfundedbyaveteran]

Not taking into account the gained EQUITY and or increased rent over time on a 30 year fixed mortgage , isn’t this show about CASH FLOW lol ALSO the flexibility of being able to make an extra payment to pay it off faster on your OWN pace.

[@gloriadell3416]

What about the "time value" of money that I used to hear about? In other words, money now is worth more than money later. For instance, getting $1000 up front is better than $5/month for 200 months. Thoughts?

[@Grace23142]

It all comes down to math. Calculating the total loss of cashflow over a 15 year loan then a 30 year loan then comparing it to the extra interest that you would have to pay if you did a 30 year instead a 15 year. Not to mention, a loan's interest is not simple but exponential so usually the amount of money you lose cutting your losses now is less then the amount of money you would normally pay later. Although this is situational so just check the numbers first.

[@Jary3166]

It gets complicated once you factor in any taxes and additional fees. Even though you could make extra money today by paying down the loan slower, you’d likely incur taxes you’d need to deduct, and your tax rate is very personal to you. In that sense, any debt payment is guaranteed, non taxed, return.

[@eddiemalvin]

​@@Grace23142 Don't forget to reflect the impact of inflation in those calculations. Inflation lets you pay back debt with money worth less than when you purchased it. The longer the loan term, the cheaper the repayment.

[@vincentharris7168]

Doing this math without taxes and insurance is insane. Also I found that paying bi-weekly saves more also. And u can always put more to the principle with a 30yr.

[@betzandragarcia141]

To pay biweekly you have to make a full month payment before the payment is due in other to allow you make the schedule for biweekly payments

[@MAD-DUKE]

I want the 40 yr loan!

[@BrandonLubanski]

Making the same overall payment amount, just bi weekly rather than monthly. 2 weeks worth of interest per month on half of the payment...adds up over 30 years, costs you nothing extra, saves you money

[@JeffMacey]

Are the 5 years and 10 years going to be part 2? Unless you can just type the numbers

[@chadwatczak5731]

Don’t investors write off the interest on their loans? I keep hearing how you are losing all this money to interest? Why not write off the annual interest every year?

[@dennishowland7495]

David good

[@_Chev_Chelios]

How can you believe that you are capable of calculating the “real “cost difference between longer-term and shorter term mortgages? You don’t know what the inflation rates will be. You don’t know how much money will be printed. You don’t know what the economic situation will be like during that time period.

[@Grace23142]

That is a good concern you have and a tip to minimize risks in regards to interest rates is to put a higher down payment. Many huge investment firms do a 40/60 model, where 40% is paid down and only 60% of the project is borrowed. This minimizes loss from potentially higher interest rates.

[@Socalarborist]

I need a cash out refinance quote when I finish a quit claim deed. I’ll email Christian for some ideas.

[@mikeroberson123]

If someone has multiple rentals, say 10 on 30 year notes, would it be best to push for paying off only one property then using that additional cash flow for paying off the next, one at a time, or would it be best to pay a little extra on all of them? So best to pay an additional 100/property/mo or 1000/mo on a single property?

[@Grace23142]

Thats a great question. I would argue instead of focusing on just one property or all of them, I would choose a small portion of the properties where their notes have the highest interest rate. Paying off the loans with the higher interest rates will minimize your total losses more so because it decreases the amount of years it can multiply with that high rate.

[@kamizenkoriflyer]

If you can find an investment with higher returns than the mortgage interest you’re paying, I’d invest the money and keep the debt. You’ll pay much more in debt over time, but your invested money will produce much more in the same timeframe.

[@RichardOlsen-vk7ju]

I miss the post Pandemic Mortgage rates, those were good times ! The market correction has been massive and with the impending recession it seems like things are only going to get worse.

[@kr1sant]

I have a 0.851% rate. Yes Zero point eight, five one. I owe 89k and the house is valued at 370k. My mortgage payment is 317.54. This is my question. I am building an investment property and am about 30k short on finishing. Should i jeopardize my interest to borrow the money to complete the investment property or should in take to 30 from my 401k. The first house rents for 2k per month and the investment property will rent on section 8 for 2850 per month. The total build is costing me 232,400. The investment property appraisal would be around 400k.

[@charizmaw9013]

Keep your rate. Do a HELOC.

[@kr1sant]

@@charizmaw9013I don’t think I can do a HELOC on a VA loan. I think I have to do a cash out refinance via a conventional loan

[@bellaendale7174]

500K on interest on a 500K home ..wow..there goes your equity ..at best..wow

[@CousinCornbread]

I want a 50 yr loan. I heard there’s a scenario where the longer the better.

[@Grace23142]

Good on you. Getting a loan like that can make you save money (even more so then 30 year) if and only if your country gets crazy high inflation. I am talking about double digits crazy. Although as mentioned in the video you can always pay down your loan faster because interest is based on only the remaining principle balance for the year.

[@loctran3783]

First