While the majority of homeowners gravitate towards the familiarity of a 30-year term mortgage, there exists a hidden gem in the financial landscape—the often overlooked, yet immensely advantageous 15-year mortgage. Regrettably, this secret is shrouded in obscurity, thanks in part to the adept strategy employed by banks, who conveniently omit or downplay the 15-year option. The reason is straightforward: the 15-year loan, while a boon for homeowners, yields less interest for banks, impacting their bottom line. In the business of maximizing profits, banks are naturally disinclined to champion what’s truly best for consumers.

Our mission is to thrust the secret of the 15-year mortgage into the spotlight, demystifying its allure through a straightforward presentation of the undeniable math. We firmly believe that informed consumers, armed with this knowledge, will consistently opt for the 15-year mortgage when presented with the facts.

The Irrefutable Mathematics

As the adage goes, math never lies. Consider a $350,000 mortgage as an illustrative example. A 15-year loan at a 4.999% interest rate (currently available) would translate to a staggering $382,950 less in interest payments to banks compared to a 30-year mortgage at 7.5% (the prevailing rate in recent years). This substantial savings materializes with a modest monthly increase of just $320 ($2,767 for the 15-year versus $2,447.25 for the 30-year). Beyond the financial advantage, the prospect of outright homeownership becomes an attainable reality. The choice seems clear—a no-brainer, indeed.

A Return of Investment Like No Other

In our illustrative scenario, committing an additional $320 monthly to the 15-year loan results in a staggering $382,950 in interest savings. Essentially, the investment of $57,600 over 180 months yields a remarkable return of $325,350, equating to an impressive 564% overall return. In any investment landscape, such returns are typically deemed phenomenal, if not outright implausible. To put it in perspective, consider if you were investing $320 per month in a 401K and achieving a 564% return over 15 years—approximately a 40% return per year. It’s a scenario most would readily embrace without a second thought.

The immediate short-term impact is equally noteworthy. By allocating an extra $320 per month, homeowners accelerate their principal repayment by an additional $995 every month, resulting in a return of $675 per month on the initial $320 investment. This remarkable opportunity to transform $320 into $997 monthly often goes unnoticed by many homeowners who could be on the path to owning their homes outright without realizing it.

Cost breakdown: 15 year mortgage

Here at JWH, we believe that when the consumer’s best interest is put first, the math works out for everyone involved in the long term.  It’s a win-win. Sure, there is less interest earned but our bet is more consumers will choose our attractive 15 year pricing once aware of the math.

We can demonstrate that the math behind our claim is irrefutable. The example below documents the fact that when compared to a 30 year mortgage at 7.5%, the 15 year mortgage at 4.999% has a payment that is only $320 more per month, but it has a principal portion of a whopping $1,255 vs the tiny amount of $259 on the 30 year.

• By paying $320 more per month, the consumer pays $1,255 “more” in principal every month. That means by paying an extra $320, the consumer gets the $320 back plus an additional $996.
• In other words, the $320 more per month has a return of $996. That is a 300% percent return on the money.
• The long term savings is even more impressive. $320 more per month that the consumer puts in x180 months (15 years) totals $57,600. What do they get in return? $382,950!

The apparent question arises: If the 15-year mortgage is indeed a no-brainer, why isn’t everyone embracing it? In the majority of cases, it boils down to a lack of consumer education about this option. While there may be a few instances where qualification or affordability pose challenges, these are exceptions rather than the rule, given the marginal difference in monthly payments.

One tactic employed to dissuade consumers is the misperception that the payment on a 15-year mortgage is substantially higher than that of a 30-year mortgage, when, in reality, the difference is marginal (as illustrated by our $320 example). What is significantly higher in the 15-year payment is the amount allocated to principal (an additional $996 in our example). Additionally, there is often a subtle omission of the fact that the 15-year mortgage boasts a significantly lower interest rate compared to the 30-year, usually falling between 1-2%.

Determining Your Potential Savings

We understand that various factors come into play when considering a 15-year mortgage, such as loan amount, payment differences, qualification, and more. We’d be delighted to assess your specific situation to determine if the 15-year mortgage aligns with your financial goals. Give us a call at 800-491-2288 or fill out the inquiry form below.

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