[quote=harvey]
– Person A took out a 30 year loan 15 years ago. The remaining balance is $100K and the rates is 5%

– Person B just refinanced with a 15 year loan. The balance is $100K and the rate is 5%

[…]

at this point in time they are exactly the same scenario.[/quote]

I think this misses several important differences. 1) where they are on amortization curve. The person with the 15 year loan is almost entirely paying interest at this point. The person 15 years into a 30 year loan in is paying roughly half interest, half principal. You can see where the curves cross pretty clearly in Karl’s Magic Mortgage Calculator linked previously. 2) the person with the 30 year loan has a lower monthly payment. The 30 year guy has the option of making a larger payment if he wants to, but the person with the 15 year loan does not have the option of making a smaller one.

Earlier in the thread:

[quote=joec]
Paying it off early at that point doesn’t help you lower your interest paid since the interest was front loaded and you already paid it.
[/quote]

Not true at all. Let’s go back to my hypothetical $300k / 5% / 30y loan. Making the normal $1610.46 monthly payment pays the loan off in 360 months. Over the life of the loan, the total interest paid is $279,767. The meager $50/month overpayment that shortens the loan by 23 months also has the effect of reducing the total interest paid by almost $22k. A $250 monthly overpayment will save you over $81k in interest. Play around in Excel and see for yourself.