Lower Interest Perception

Shorter loan periods give the perception that they save more interest.  While they do save interest, they also lose interest as well.

Most people choose would choose a shorter loan period due to the interest they think they will save by doing so. If saving loan interest were the only goal then paying cash for a house would be the best alternative.  By paying cash, we do save the loan interest we would have otherwise given to the bank.  The other side of the coin is that we no longer have our money invested so we are losing investment interest.  If we pay cash, we get no potential tax benefits from mortgage interest deductions.  Utilizing the deduction can help us recapture dollars, which would have been lost by paying cash. Lower interest paid may not equal faster wealth accumulation.

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