Seven Biggest Money Mistakes: Your Mortgage

Examples of money savings on 15-year vs 30-year mortgages or making a $100 extra principal payment monthly. For simplicity, these examples do not factor in the tax savings of deductible interest expense, but keep in mind that paying one dollar in interest so you can deduct 25 cents from your taxes still costs you 75 cents. For a more detailed analysis of what you'd save, including the tax benefits, use an online mortgage calculator like those at www.bankrate.com.

Example #1: 30-Year $250,000 Mortgage vs 15-year $250,000 Mortgage

$250,000 mortgage at 7% for 30 years = $1,663 monthly payment
Total interest you pay over 30 years = $348,772
Total amount paid = $598,772 (interest plus principal)

$250,000 mortgage at 7% for 15 years = $2,247 monthly payment ($584/month more)
Total interest you pay over 15 years = $154,473
Interest savings on a 15-year versus 30-year mortgage = $194,299

Example #2: 30-year $250,000 Mortgage With $100 Per Month Extra Principal Payment

$250,000 mortgage at 7% for 30 years = $1,663 monthly payment
$100 extra per month reduces mortgage term by almost five years
Total interest you pay over 30 years = $291,992
Total amount paid = $541,992 (interest plus principal)
Interest savings on a 30-year mortgage with a $100 per month additional principal payment = $56,780

Example #3: 30-year $150,000 Mortgage vs 15-year $150,000 Mortgage

$150,000 mortgage at 7% for 30 years = $997 monthly payment
Total interest you pay over 30 years - $359,263
Total amount paid - $509,263 (interest plus principal)

$150,000 mortgage at 7% for 15 years = $1,348 monthly payment
Total interest you pay over 15 years = $242,683
Total amount paid = $392,683 (interest plus principal)
Interest savings on a 15-year versus 30-year mortgage = $116,580

Example #4: 30-year $150,000 Mortgage With $100 Per Month Extra Principal Payment

$150,000 mortgage at 7% for 30 years = $997 monthly payment
$100 extra per month reduces mortgage term by 7 years and 1 month
Total interest you pay over 30 years = $209,263
Total amount paid = $359,263 (interest and principal)
Interest savings on a 30-year mortgage with a $100 per month additional principal payment = $58,320

Where else will you ever be able to generate this much money towards building the wealth that you dream of?