Re: Help me settle this 20 yr fixed vs 30 yr fixed mortgage debate
You are not figuring in the 6.125% per year interest that you are saving by paying down the principle each month. The way you figured it, you would just be applying the $41,760 extra payment at the end of year 20, not throughout the life of the loan.
IF you were to put the $174 every month into some sort of investment vehicle that was paying 6.125% return, and apply that at the end of year 20, you would surely have more than $41K. Paying the interst early will have the same net effect. This is why you should invest the money into something besides paying down your mortgage if you can beat the rate of the mortage as an average rate of return.
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