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The Smart Mortgage Option Many People Ignore

By Dan Caplinger - Updated Feb 14, 2017 at 3:59PM

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Going beyond the obvious mortgage choices can be your best money move ever. Find out about an oft-neglected option that could save you thousands.

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.

Fool contributor Dan Caplinger owns warrants on JPMorgan Chase, Wells Fargo, and Bank of America. The Motley Fool recommends Bank of America and Wells Fargo. The Motley Fool owns shares of Bank of America, JPMorgan Chase, and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Bank of America Corporation Stock Quote
Bank of America Corporation
$36.30 (1.09%) $0.39
JPMorgan Chase & Co. Stock Quote
JPMorgan Chase & Co.
$122.13 (1.66%) $1.99
Wells Fargo & Company Stock Quote
Wells Fargo & Company
$45.94 (1.52%) $0.69
U.S. Bancorp Stock Quote
U.S. Bancorp
$48.77 (0.68%) $0.33

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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