April, it turns out, in addition to being Financial Literacy Month, was a big month for the finances at my house. My wife and I paid off our 15-year mortgage in April, a year before it was otherwise scheduled to be paid. We did that by paying at least $200 a month more than was due, sometimes a little more if we had some extra funds, and specifically directing that it be applied as additional principal. This raises the questions of whether to go for a 15-year, rather than a 30-year, mortgage, and whether you should you pay off your mortgage early.

Also, for the first time in a very long time, we received a small income tax refund. If you are a regular reader, you know that is something I generally advise against, preferring to use my money during the year, rather than letting the government use it. The refund was primarily because we gave more money than usual to charity, so we feel that it was a good thing in the end. This raises the question of what should you consider using your income tax refund for.

When it comes to a 15 or 30 year mortgage, first, I believe that, GENERALLY, as a consumer — not a business that can directly or indirectly pass on its interest costs to its customers — you should strive to pay as few interest dollars throughout your life as possible. That being the case, these numbers from Investopedia.com illustrate the significant interest savings with a 15-year mortgage, assuming that the interest rates for the 15-year mortgages have historically always been lower than a 30-year mortgage.

The interest you pay on a 15-year $300,000 mortgage at 3.25 percent mortgage is $70,441. That is $136,168 less than the $215,609 in interest you pay on a 30-year mortgage at 4 percent. The downside, financial challenge, and/or possible financial sacrifice required to enjoy that significant interest savings is that the monthly payment for the 15-year mortgage is $2,108,rather than $1.432, or $676 a month more.

So, in considering a 15-year mortgage, you first have to look at your current and projected budget in order to determine whether you can afford the higher payments. Like everything else, it depends upon an analysis of numerous factors, such as your personal needs, wants, wishes, luxuries and conveniences. Also consider whether you are carrying high interest debt that you would like to pay down or eliminate.  In addition, will you have, throughout the term of the mortgage, appropriate savings for emergencies, anticipated expenses, retirement, and to educate your children? Finally, are you taking advantage of any employer match, if you have a retirement plan at work, and are you maximizing retirement contributions, especially if that makes an income tax bracket difference?

In addition, you also need to consider, if you itemize, how the mortgage interest tax deduction can essentially reduce that mortgage interest saving, and whether it is possible for you, over that 30-year term, if you are “investment disciplined,” to invest the $676 monthly saving, and, after taxes, including capital gains taxes, have more net than the $136,168 in interest savings.

So in many ways, except for the tax and investment considerations, it is a math problem. In other ways it can be about what you are willing to do in order to achieve those potential interest savings. Things to consider are reducing the costs of some of those personal wants, wishes, luxuries and conveniences, either by eliminating some of them, or by finding ways to have or do them for cheaper.

By the way, if you are not sure that you can afford a 15-year mortgage for the entire term, or you know that you will be moving within 15 years, you can take that 30-year mortgage, but make the 15-year monthly payment as often as you budget allows it. It will retire the mortgage earlier and save you some of those interest dollars. Another way is like my wife and I did: Pay extra against the principal when you can by adding it to the monthly payment. Other things you hear a lot are to make one extra monthly mortgage payment per year, either by adding it to a monthly payment, or by increasing each monthly payment by one-twelfth, and by arranging with your bank, by a direct pay arrangement, to send your mortgage payment as early in the month as the mortgage company will accept and apply it.

I don’t care what anyone says, having no mortgage is A GREAT FEELING!

Next time, what to do with that income tax refund, Also, should you pay off your mortgage with an inheritance, a lump sum payment you receive, or your savings, which is in large part the same analysis as whether to take a 15- or 30-year mortgage if you know or believe that you can earn more by investing the money.

John Ninfo is a retired bankruptcy judge and the founder of the National CARE Financial Literacy Program. Find his previous columns at http://www.mpnnow.com/search?text=Ninfo