Hi everyone. It’s Jamie, and I’m here with the Real 411. Rates are still amazing. And I thought this week we would talk about the difference only (5)five years of your loan term can make. And the amount of interest that you’ll pay over the life of your loan. So, I’d like to share my screen with you today. And give you some specific examples of how much interest you might pay on a (30) thirty-year loan versus a (25) twenty-five-year loan versus a (20) twenty-year loan and a (15) fifteen-year loan. Now I’m using a ($500,000) five hundred thousand dollars loan amount with an interest rate of three-point three seven five (3.375) just for comparison purposes. Assuming the same loan amount and interest rate on all four of these loan scenarios. On a (30) thirty-year loan, you’ll pay ($295,773) two hundred and ninety-five thousand seven hundred and seventy-three dollars in interest over the life of your loan. On a (25) twenty-five year loan, you’ll pay ($240,918) two hundred and forty thousand, nine hundred and eighteen dollars on the life of your loan. On a twenty (20) year loan, you’ll pay one hundred and eighty-eight thousand, two hundred and sixty-eight dollars ($188,268) in interest on the life of your loan. And last on a (15) fifteen-year loan, you’ll pay ($137,884) one hundred and thirty-seven eight hundred and eighty-four dollars in interest over the life of that loan.
Let’s break it down; for every five years, you reduce your loan term. You’re looking at over ($50,000) fifty thousand dollars in the difference in interest payment. So, as an example, if you shave your loan term down from (30 to 25 ) thirty to twenty-five years. You’re saving fifty-four thousand, eight hundred and fifty-five dollars ($54,855) in interest. And if you shave your (25) twenty-five-year loan down to (20) twenty, One hundred and seven thousand, five hundred and five dollars $107,505. Last, if you’re able to afford a (15) fifteen-year loan payment, you’re looking at a savings of ($157,889) one hundred and fifty-seven thousand, eight hundred and eighty-nine dollars of interest over the life of that loan.
That’s interest You would have paid had you amortized your loan over the full (30) thirty years but will not pay because you chose a shorter loan term. There are loan terms in increments of only one year. So if you’re thinking to yourself, well, I just did a thirty (30) year refinance (4) four years ago. And if I refinance again, I really don’t want to start the (30) thirty-year term over again. There are solutions for you. You can get a (26) twenty-six-year loan or a (27) twenty-seven-year loan. There are options out there if you’re able to afford payment to reduce your loan term and save on interest. It really makes sense to crunch the numbers and see if you can make it work.
Hope this information was helpful. And I thank you for listening. Have a fantastic week.