howiecamp wrote:

I know I'm sounding like a bonehead but why is it a downside that the rate is higher if the *total interest* I pay over the term of the loan can be the same or less?

Two ways to look at it to understand why it is a downside.

1) If you go with your plan and take a 30 and pay it like a 20, your *total interest* will be higher than if you just took the 20 from the beginning. Assuming a $100k loan:

Plan *total interest*

30 in 30 $71,869.51

30 in 20 $45,435.28

20 in 20 $42,293.20

Alternatively, look at the monthly payments. The monthly payment on a 20 year loan for $100k would be $592.89. However if you take out the 30 year loan, to pay it off in 20 years you would need to pay $605.98 ever month.

2) There is something called the "time value of money." A dollar today is worth more than a dollar one year from now. There are various explanations/reasons for it. If you have a dollar today you can buy something and start using it. A lot can happen between today and one year from now (or 2, 10, 20, 30 years from now): inflation can cause that dollar to be worth less (buy less stuff); the person or company that owes you the dollar could die or go out of business; you may have to pay interest if you need to make the purchase now; etc.

So, focusing on the *total interest* is somewhat misleading. A 30 year loan may pay more interest, but the payments come later, so