Should I go 15 year or 30 Fixed rate mortgage?

It depends greatly on what you do with the difference in the 30-year versus 15-year payments. If you fritter this difference away, then you lose with the 30-yr, but if you have the discipline to invest the monthly difference in paying down high interest loans (e.g. credit cards), in employer matched or tax advantaged retirement plans, or even in index funds you project to be more wealthy thirty years from now if you plan to pay off the 30yr in 30years.

Pop_pop!_v2.1.1 wrote:

loqueelvientoajuarez wrote:

I presume you can pay for 15. Go 30. Each month save the difference. In case of a hardship later on you will have to pay your mortgage for a few years.

The problem here is interest on the loan overwhelms any notion of savings.

If OP would actually do the 30 and pay in 15, it would be safer. But, yeah, that pretty typically not how it goes. A 30-year paid over 30 years is a terrible choice.

meant to quote Pop_pop! in above post.

This is off topic, but if you are trying to figure out how much you can afford be sure to factor in upkeep. It's easy to spend $20,000 on a new roof, $10,000 on a boiler, the siding needs to be maintained, etc. Also, if you are switching from an apartment to a house make sure you leave yourself with enough cash to buy furniture and the random stuff you'll need like ladders, lawn mowers etc.

If you just are looking at the numbers aspect of the decision, then, historically, getting a 30 year mortgage and investing the additional amount a 15 year would cost is a slightly better investment strategy. If you look at the human behavior aspect, then 95% of us will be better off with the enforced discipline of a 15 year mortgage.

We bought a house at age 30 with a 15 year mortgage. I cannot express how psychologically gratifying it was to have that mortgage go away at age 45 and own the house free and clear. We were a couple of years away from kids starting college and were able to save and give them some solid financial help with their college expenses. After their college we have been able to significantly bump up our retirement savings ( My wife and I are self-employed and have to fund our retirement above Social Security).

The structure and psychological effects of paying off your mortgage in 15 years outweigh the benefits/risks of trying to do a 30 year mortgage and save/invest the difference.

not anyone famous wrote:

Dave Ramsey wrote:

And I've led more people out of debt than anyone else in America, and EVERY behavioral study that's ever been conducted confirms that you are more likely to get out of debt with this plan. Thank you very much.

Ok, you speak as if you are the real and famous Dave Ramsey. Is that correct? Your handle is registered as Dave Ramsey.

Are you the famous Dave Ramsey of financial advice fame? Please confirm.

If not, make sure to read the Terms and Conditions.

http://www.letsrun.com/forum/TOS.php

See point #5.

Dude, Dave Ramsey is not that uncommon of a name. There very well may be more than one!

Thanks for the responses. Anyone here have any experience in filing a request to an institution for them to remove the late payment in good will?

I've read online it has worked for some. I'm still in shock this has happened.

^^^ Agreed. My wife & I took out the shorter term loan and are looking forward to paying off our mortgage in a month and a half. Feels pretty good. We do have a little catching up to do in our retirement, but basically with that mortgage payment now available to invest, we have the means to do that.

My two cents is that whether you go with a 30 or 15 year mortgage, is don't overbuy when you pick your house. I think that temptation is greater with the longer-term loan.

I'm thinking of buying a house. I had one before but it wasn't much of an issue as I had roommates and what not.

1) What's the best way to figure out how much of a house I can afford? The online calculators I've seen are awful. None of them seem to factor in the fact the property taxes vary a lot by jurisdiction. If i buy in the county, it's half of what it is in the city. Also non of them seem to factor in how much I'll 'get back' by writing off my mortgage interest and property taxes. It's a ton.

I'd like to see a calculator that shows you the true cost of the house when you factor in the tax savings which are huge here in Maryland where there is 5% state tax and 3% city tax.

Also, non of them seem to have anything where I can put in my monthly expenses. How do they know how often I like to out to eat, etc. What about thinking about child-care expenses down the road?

So if you know of a great calculator, let me see it.

Post of the decade

It did make me laugh out loudly

hahahahaha wrote:

It did make me laugh out loudly

For the record, I didn't laugh.

Can I get a free T-shirt now?

Everyone has a different situation. I bought my house when I was 27 and decided on a 30 year, despite higher interest rates. I could have afforded a 15 year, but I thought in the long run I could make better use of the cash. I used the money to build a guest house, which I rent out for 2/3 of our mortgage. I saved for several years and purchased another house, which I am able to rent out for the mortgage+$250. If I work until mandatory retirement of 57, my first home will be paid for, and I'll have a few years on the second home. Works for me.

Use the online calculator to figure out payments. They should allow you to enter what % is the local property tax as well as estimated insurance (you can also call your car insurance agent for insurance estimates). This will give you a breakdown of principal, interest, taxes, insurance, etc.

Then go to turbo tax, which is free to use, you only pay to actually submit. Enter all your tax info as well as the house numbers for interest and tax.

Then look at your estimated tax liability/return. Then remove all the house info and look at your estimated tax return.

The difference is what you save from the house. Subtract one twelfth of that from your monthly estimated payments to get the true cost of the house payments.

Or it is simple to estimate: about a third of the home loan interest plus any property taxes is your approximate savings on your taxes if you don't make tons of money and are single.

Gobble gobble.

You have to look at if you can afford to lock yourself into to higher payment.

Is your income stable?

What life changes do you expect that may put a strain on your budget?

How long do you plan on being in the home?

Would you do better putting that money in the market rather than paying debt?

It all depends on the amount you are able to pay each month for your mortgage. If that amount can be broken down into 30 installments, I recommend you do it.

With these low interest rates go 30 year. 15 is dumb because you could use that capital to invest

30 year mortgage but pay it off at a 15 year rate. If you have a rough month financially, you can pay the 30 year monthly rate amount.

yogdenen wrote:

It all depends on the amount you are able to pay each month for your mortgage. If that amount can be broken down into 30 installments, I recommend you do it.

What prompted you to dig up a 5 year old thread and respond to it?

Cici the og wrote:

With these low interest rates go 30 year. 15 is dumb because you could use that capital to invest

Its not dumb, its a matter of risk tolerance.

I just took out a 15 year. I realize I will likely be leaving money on the table, and I am just fine with that. You don't know what will happen in the future, I like the idea that I will at very least have a place to live should something happen. Its a security thing.

We took a gamble right before covid and took out a 30 year loan on a house. covid comes along, my wife loses her job, and we had to pack up and move. We made money on the deal but could have just as easily lost. As Warren Buffett says: "Its only when the tide goes out do you realize who's been swimming naked." From now on I will at least swim with pants on.

If this was an investment property that I could just sell if something happened, I'd go 30 year for sure.