The theme this week on the One Minute Retirement Tip podcast is could you pass this basic financial literacy quiz? 

Today’s financial literacy quiz question is: A 15-year mortgage typically requires higher monthly payments than a 30-year mortgage but the total interest over the life of the loan will be less.

True or false? 

The answer is true. Even though the payments will usually be higher on the 15 year loan, it’s a much better deal than the 30 year mortgage over the long-term because you’ll pay A LOT less in interest. 

Each mortgage payment you make to the bank is a combination of principal repayments on the original loan amount and interest. With a 15-year mortgage you’ll be paying a lot more in principal with each payment and it will be a much cheaper loan over that 15 year time period. 

Plus, to have your house paid off in only 15 years is a great thing, especially if you are getting close to retirement. Not having a mortgage payment in retirement will free up your finances and give you more disposable income to spend on travel, hobbies, and enjoying your retirement.

If you don’t want to or can’t afford to lock yourself into a 15 year mortgage, then familiarize yourself with an amortization calculator. They are free online, easy to use, and it will show you how extra payments of $100, $500, or even $1000/month will shorten the life of your loan. 

You may be surprised how many years you can shave off the life of your mortgage loan just by consistently making extra payments. 

That’s it for today, Thanks for listening! 

My name is Ashley Micciche and this is the One Minute Retirement Tip. 

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance