Most people buying a home go with 30-year mortgages in order to produce the lowest monthly payment possible. But by doing so, they pay far more interest over the course of their loan than they have to. That has led many to consider an alternative to 30-year mortgages.
In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at the 15-year mortgage and how it can save you thousands. Dan notes that most people don't use 15-year mortgages because payments are higher than for 30-year mortgages. But contrary to what many think, the 15-year mortgage payment isn't twice as much as the 30-year, because 15-year mortgages involve paying far less interest over the course of the loan. Moreover, rates on 15-year mortgages are substantially lower than on 30-year mortgages, with US Bancorp (USB 0.68%), JPMorgan Chase (JPM 1.66%), and Bank of America (BAC 1.09%) charging seven-eighths of a percentage point less, while Wells Fargo (WFC 1.52%) offers three-quarters of a percentage point in savings. Dan concludes that if you can afford it, getting your loan paid off sooner is an easy choice for many homeowners right now.