Interest Saving Comparison Between 15-Year and 30-Year Mortgages

How much interest expense would Wally save by choosing a 15-year mortgage instead of a 30-year mortgage?

Based on the data provided, Wally would save approximately $91,113 in interest expense by choosing a 15-year mortgage instead of a 30-year mortgage. But how is this calculated?

Calculating Interest Savings

To calculate the interest savings, we first need to determine the total interest paid for each mortgage term. For the 30-year mortgage, the total interest paid can be calculated using the formula:

Total Interest = Loan Amount - Down Payment - Principal

Loan Amount = $510,000 (after down payment)

Principal = Monthly Payment * Number of Payments - Loan Amount

After calculating the monthly payment and principal, we can calculate the total interest paid for the 30-year mortgage.

Similarly, we can calculate the monthly payment, principal, and total interest paid for the 15-year mortgage using the same formula, but with the number of payments as 180.

By subtracting the total interest paid for the 15-year mortgage from the total interest paid for the 30-year mortgage, we can determine the interest savings of approximately $91,113.