Many people focus on the interest rates and points of a loan till they can’t see straight. In truth, the term of the loan is just as critical if not more so.

The term of a home loan is simply the number of months you will be repaying it back. Most people refer to the term by years for easy, but it the 30 year mortgage is really 360 months in the view of lenders. If you take the time to think through your loan, you will soon come to realize the term can be tweaked to save you serious money on interest.

The traditional home loan has a term of 360 months or 30 years. Most people accept this term without blinking an eye, but think about that for a moment. You are committing to making monthly payments for 30 full years. It is like being the parent of the kid who never grows up and leaves the home. If you are 30 years old when you take out the loan, you are committing to paying it till you are 60!

To shorten the term of most loans, borrowers are often advised to consider terms of 180 months or 15 years. If you can choose this term, you will save a bundle on the total interest paid on the loan. You will also typically get a lower interest rate because the lender views the loan as less risky since repayment will be made in half the time of the 30 year loan option.

There is one problem with the 15 year mortgage. The monthly payments. Although you will typically be charged a lower interest rate, the reduced payment term will translate to higher monthly payments. The payments may be a few hundred bucks more or they may be significantly more. The answer depends on the value of your home. Regardless, this increase payment amount can be hard to swallow. Are you really sure you will always be able to pay it? Many are not.

If you are willing to show some discipline, you can get gain the advantage of the 15 year term without committing to higher payments. The trick is to obtain a 30 year loan for your home purchase. Next, calculate what the 15 year term repayment would have been on a month basis. When you send in your payment, send in the 15 year term amount. The money will be applied to principal and you will essentially be paying off your loan early.

It should be noted this strategy is not a favorite of lenders. They may complain about it, but there is nothing they can do to stop you from using it. The only things to watch out for are any pre-payment penalties. If you loan has them, you probably do not want to use the strategy until after the pre-payment term has ended.

Dan Lewis is with Great Western Mortgage - providing California cash out refinance programs.