15 year or 30 year mortgage v.DaveRamsey - Page 2

aida2003 · #21 (**permalink**) 03-20-2008, 08:30 AM

We've got a 15-year mortgage and no regrets so far. We might consider paying it off earlier too.
It all comes to psychological/emotional feelings and we not fans of debt. Besides, not ALL interest deductible, it's only what above the standard deduction. I kind of don't believe that's worth saving 30 cents on taxes in order to have a 1-dollar debt.

We'd like to buy our next house with cash.

simpleyme · #22 (**permalink**) 03-20-2008, 08:56 AM

I do not think it makes a difference since most people move repeatedly or borrow against their homes,

everyone I know keeps refinancing so after 5 years they still owe for 30 years anyway

LuxLiving · #23 (**permalink**) 03-20-2008, 09:27 AM

MonkeyMama, here's someone who agrees with your philosophy of buying and holding a house...

"Three removes is as bad as a fire." ~Benjamin Franklin

disneysteve · #24 (**permalink**) 03-20-2008, 09:39 AM

Quote:

Originally Posted by simpleyme

I do not think it makes a difference since most people move repeatedly or borrow against their homes,

everyone I know keeps refinancing so after 5 years they still owe for 30 years anyway

That's a common mistake. People end up taking 50 years to pay off a 30-year loan. We started with a 30 but last time we refied we went to a 25. If we refi again, I'd go to a 15.

LivingAlmostLarge · #25 (**permalink**) 03-20-2008, 03:56 PM

Sometimes people have to move to afford a home. I bought condo, now a townhouse, next move into house. Will I get a 30 year fixed? Probably and I'll be the person who took 50 years to pay off 30 years. Of course since I bought at 22, I would have to finishby 52 to pay off a house. Where we live now average home price is $750k. Pretty hefty to pay that baby off asap.

But pipe dreams. Much like monkeymama, we're about the same age and have equity as well. So if we moved somewhere cheaper, we'd be in good shape. Basically anywhere that homes are less than $750k we'd have 20%.

jc3900 · #26 (**permalink**) 03-20-2008, 04:10 PM

I personally think it is a bad idea to have the mindset of go for the 30 and invest the rest. Yes, in a hypothetical situation if you do go for the 30 your investments will be higher. However, the thing that you have to remember is that debt is a SURE thing and investment returns are not. That is why I would say get out of the thing that chains you down first and then go invest. Even with that said, you can do what ever floats your boat.

maat55 · #27 (**permalink**) 03-20-2008, 04:11 PM

Here's a question for you. Would you take out a second mortgage on your home to invest with?

How many of you look for a house that you can afford on a 15 year note then get a 30 year note on it? Or do you buy more house?

How many of you stay in an home more than ten years when your starting out? Knowing that mortgages are heavy front ended on interest, do you really come out better on a 30?

project15 · #28 (**permalink**) 03-20-2008, 04:38 PM

jim_ohio, thanks for doing that math. I was wondering what those numbers would be as well.

I personally plan on staying in the house probably 7-10 years, but we'll of course be looking for something we can stay in all 30+ years if necessary.

After all the input, I think I'm going to go with my original plan of the 30 year fixed so that I can get a better house (which hopefully means better resale value and holds value better).

Spud · #29 (**permalink**) 03-20-2008, 04:44 PM

Quote:

Originally Posted by Like2Plan

Our first loan was a 30 year loan (this was back in the 1980's when the interest rates were terrible--we paid close to 10% interest). It was a no-brainer to go to a 15 yr note when the interest rates came down and we refinanced. The payments were lower AND we shortened the length of our loan. Our house is paid off now.

This is exactly where we are, except my husband bought in about '92. He bought with a 30, and then went to 15 when he was making more money and interest rates were down. He put a little extra on the payment every month, and paid the house off shortly before we were married.

Snave · #30 (**permalink**) 03-20-2008, 04:52 PM

It all depends on what you are comfortable with. Again, I have a 30 year mortgage and invest the rest. I agree that if you don't invest, or don't get the return, then it is not worth the risk. However, I am comfortable with that risk as I know I am consciense enough to invest the difference (that is probably why I visit sites like this). As well, I will accept the consequences if the money that I could have put down does not get the returns I expect. Likewise, I will enjoy the consequences if it does get the expected returns. The answer to teh question is, are you comfortable with the risk? If you say yes, then go with the 30. If not, go with something less. The only wrong answer is to go with something that is out of your reach.

Gruntina · #31 (**permalink**) 03-20-2008, 05:02 PM

I rather get a 30 year loan but pay as if it was a 15 year loan for the security of making all of my payments in the case I have a few bad months.

However, I think paying a 30 year loan on schedule is not always a good idea. Especially in the HCOL. Houses cost a lot more, the median in my area is 800,000K with the housing market the way it is now. 800K on a 30 year term schedule with interest is paying a lot of money in the long run vs. paying additional payments to principle with interest of the life of the shorter loan. If the house were 300k or less, maybe I would think differently.

LuxLiving · #32 (**permalink**) 03-20-2008, 05:43 PM

Quote:

Originally Posted by jc3900

I personally think it is a bad idea to have the mindset of go for the 30 and invest the rest. Yes, in a hypothetical situation if you do go for the 30 your investments will be higher. However, the thing that you have to remember is that debt is a SURE thing and investment returns are not. That is why I would say get out of the thing that chains you down first and then go invest. Even with that said, you can do what ever floats your boat.

jc3900 - I'm the one who was alluding to this strategy, so perhaps your post was addressed to me. I'd say that you are entirely correct EXCEPT it would depend on what one invested in at what risk? Yes? For a young person seeking lots of growth they might get a little too fast and loose w/the asset allocation. We on the other hand are getting to be old farts and would likely invest ours in mostly the more stable of investment options - hopefully enough to at least pass inflation. There are some investment returns that are 'sure things'. There are products out there that guarantee a certain amount of return. Sadly, they just aren't all that sexy or profitable!

disneysteve · #33 (**permalink**) 03-20-2008, 06:42 PM

Quote:

Originally Posted by maat55

How many of you stay in an home more than ten years when your starting out?

We bought our one and only home less than 2 years after getting married. That was 14 years ago this month. We have no intention of moving probably until we retire.

maat55 · #34 (**permalink**) 03-20-2008, 07:09 PM

Quote:

Originally Posted by disneysteve

We bought our one and only home less than 2 years after getting married. That was 14 years ago this month. We have no intention of moving probably until we retire.

IMO, many people move several times in their lifetime and usually have 30 notes. They never really build equity, other than appreciation. Also IMO, those who buy on 30 notes over their lifetime will eventually spend more money and end up with less house than those who buy on 15 year notes. The numbers speak for themselves. Generally, 15 year notes mean half the payments at a quarter more payment.

It boils down to what floats ones boat. I'll stick with the system that works for me. On an amoritization table, I win every time.

noppenbd · #35 (**permalink**) 03-21-2008, 07:36 AM

Quote:

Originally Posted by maat55

It boils down to what floats ones boat. I'll stick with the system that works for me. On an amoritization table, I win every time.

As a Dave Ramsey supporter, I have to disagree with this. I think Dave would admit that mathematically, if everything works out perfectly (meaning you actually do invest the difference of the payments, and you actually realize an 8% return) the 30 year mortage is generally a better deal. I believe his rationale for pushing the 15 year mortgage is that it forces you to buy less house than if you get a 30 year mortgage, because the banks qualify you based on the monthly payment.

That said, if you are in your 50s or 60s and getting close to retirement, and you have the cash flow to pay off the house early and still put some in your retirement, you should probably pay it off early. At that point, you should be more conservative anyway and the guaranteed return is more of a no-brainer.

I recently advised my mother to pay off some property with an inheritance she received. She had the money in CDs, making around 3-4%, versus a 6% mortgage.

LivingAlmostLarge · #36 (**permalink**) 03-21-2008, 08:06 AM

Maybe, but you haven't touched on the fact that sometimes housing is just unaffordable. That there is no other way to get into an $800k home (3bd/2bath) single family unless you buy and build equity like we did.

bjl584 · #37 (**permalink**) 03-21-2008, 08:16 AM

I have a 15 year mortgage. If I would have opted for a 30 year, my payment would have been a little less than $200 a month less than it is now. I know that I could have invested that money, but I already save and invest quite a bit of my income. In the end, I decided to compromise the extra money that I could have invested for the piece of mind of owning my home outright.

InDebtInDC · #38 (**permalink**) 03-21-2008, 08:17 AM

I also disagree. Inflation in 15+ years will tend to help diminish the value of the fixed payment.

Also, if your house gets destroyed, you risk losing more equity with a 15-year mortgage as compared to a 30-year.

My high school teacher in 1995 was paying $250 a month on her 30 year mortgage that she closed in the 70s. When she signed her loan, the payment was a signifcant portion of her salary. In 1995, her fixed payment amounted to less than 10% of her salary.

I also strongly agree with disneysteve on being flexible with payments on a 30-year and prepaying, as opposed to being fixed to a high payment under a 15-year.

Would you rather a) own your home and have no money, or b) be homeless but have several hundred thousand dollars?

Personally, I choose (b), although I think I would get robbed rather quickly with that much cash living under a bridge

simpleyme · #39 (**permalink**) 03-21-2008, 08:29 AM

Quote:

Originally Posted by InDebtInDC

I also disagree. Inflation in 15+ years will tend to help diminish the value of the fixed payment.

Also, if your house gets destroyed, you risk losing more equity with a 15-year mortgage as compared to a 30-year.

My high school teacher in 1995 was paying $250 a month on her 30 year mortgage that she closed in the 70s. When she signed her loan, the payment was a significant portion of her salary. In 1995, her fixed payment amounted to less than 10% of her salary.

I also strongly agree with disneysteve on being flexible with payments on a 30-year and prepaying, as opposed to being fixed to a high payment under a 15-year.

Would you rather a) own your home and have no money, or b) be homeless but have several hundred thousand dollars?

Personally, I choose (b), although I think I would get robbed rather quickly with that much cash living under a bridge

why would you lose more money if your home was destroyed I have insurance ,if my home is destroyed I own the land outright and am insured for the cost to rebuild?

our first house payment was 277 a super high amount at the time, within a few years all our neighbors were paying 400 dollars a month in rent
so time does seem to be on your side to "lower" your payments if you keep a long for the long haul

LuxLiving · #40 (**permalink**) 03-21-2008, 08:31 AM

InDebtInDC - you bring up a good point.

IMHO, everyone should have REPLACEMENT COST insurance rider on their homeowner's policy.

The equity build up that is based on not only the difference between what one owes to the mortgage-holder and your original purchase price, but that bit of equity (gravy/profit) that is held in that fickle 'real estate marketplace'.

Some people have recently seen their $500,000 home turn into a million dollar home 'in theory', but only profited if they sold before the bubble turned wonky.

I'd rather have the resulting $$ difference someplace outside the house if I was counting a million on my networth. Yes they can appreciate, but many of this younger generation haven't lived thru times when houses depreciate and quite rapidly. They may be getting ready to live through it, so as a little older and hopefully wiser person I wouldn't put all my eggs into the housing basket these days.

Emotionally I'd like to pay off my house and be done w/it. Financially, it seems irresponsible to do so.

Except for right now, when my current 15 year mortgage interest rate is a 6.75 and my interest bearing accounts w/a chunk of change sitting in them are only paying 3.15 at best. I would rather invest in the mortgage TODAY. But only if I have some other dollars sitting around to be used in case of emergency later.

Times fluctuate and therefore our financial practices should be as flexible as we can get them. I vote for a 30 these days, and I'm a gal who has had 3-15 year ones and only one 30 in the past. From here on out it'll likely be 30 year ones if I ever buy again.