[quote=Hobie][quote=harvey]Don’t get confused by strategies involving paying early in the loan term vs. late in the loan term, etc. They are flawed.[/quote]

I’d like it if you expand on this.[/quote]

As he pointed out earlier, it has to do with a dollar today is not the same as a dollar 15 years from now. The issue is the total interest paid and the strategies don’t reflect that and use nominal dollars. A nominal dollar is just a dollar is a dollar.

To understand the flaw with that you need to consider inflation over the long term.

To see it, pretend you actually took your loan out in 2000. You could have done strategies then to pay off the loan early or late or something else. But to understand the flaw you need inflation. It’s tame now and was then too but back then gas was cheap. Beef was cheap. Homes were cheap. How cheap? Well gas in October 2000 was $1.82 a gallon. Today after falling precipitously from recent highs is just under $3 a gallon. Beef in 2000 had experienced a run up, ground beef was $1.70 a lb, today the usda reported average is $4.12/lb. and you know the story on home prices.

So that $50 back then would have bought 27 gallons of gas and today would buy 16 gallons. Similar with beef, the $50 prepaid would have bought 30 pounds of ground beef today will probably buy about 12 pounds