What are your thoughts on 15 vs. 30 year mortgages?

[ARCHIVED THREAD] - What are your thoughts on 15 vs. 30 year mortgages? (Page 1 of 2)

Posted: 3/18/2006 2:53:02 PM EDT

First, the obvious.

A 15 year mortgage has lower interest rates and therefore much less total interest paid, but with higher monthly payments to fit into your budget.

A 30 year mortgage has a little higher interest rate, causing much more interest to be paid. Lower monthly payments to fit into your budget.

Therefore, a 30 year mortgage will allow you to buy a more expensive house to fit into your monthly budget.

As far as building equity, the 15 year will allow you to build it up faster, assuming housing prices stay flat.

However, over time, housing prices do trend up. Certain areas of the country have experienced unbelievable appreciation over recent years which puts them at risk of the "bubble bursting" but for the sake of arguement let's assume an area where the risk of a housing market crash is not as high.

A $100,000 house appreciating at 10% in a year gains $10,000, but a $200,000 house at the same rate of appreciation gains $20,000. Simple enough.

Furthermore, I get the impression (with no data to back up my impression...it's just an impression) that more expensive homes TEND to appreciate at a faster rate...so perhaps the $200,000 house in my example might go up 13%.

I realize that there are A LOT of variables for diffent housing markets both in terms of geographic area as well as different price brackets which could affect appreciation, so I am speaking more in terms of broad generalities.

It seems to me that you are better off going with the 30 year mortgage. Nicer house to fit your monthly budget. Greater appreciation offsets the higher interest payments.

I am currently in a 15 year mortgage...but odds are good I will have to relocate within a year. Just thinking ahead.

Thank you for your time.

Posted: 3/18/2006 2:56:22 PM EDT

[#1]

I've always heard if you can afford a 15 year, you should do it.

Posted: 3/18/2006 2:57:25 PM EDT

[#2]

My thought is to get a 30 year and pay it off sooner if you want.

I have a 5.6% interest rate on my 30 year mortgage. I am NOT going to pay it off any sooner than I have to. That is damn cheap money, and with the tax deduction I can invest my money and get a higher return rather then putting it into my home to sit. That said, I have $50K in equity in my home right now...

Edit: As far as real estate appreciation is concerned, the house is going to appreciate (or depreciate) at the same rate with either a 15 year or 30 year mortgage.

Personally I don't want to have all my investment in real estate equity. Diversify, diversify, diversify.

Posted: 3/18/2006 3:00:27 PM EDT

[#3]

Quoted:
I've always heard if you can afford a 15 year, you should do it.

Pretty much. Financially speaking it is the best way to go. However your home is your home and if going with the 30 year means you can afford the house of your dreams then I'd say go for it.

Posted: 3/18/2006 3:01:18 PM EDT

[#4]

just my feeble theory. we locked in at 30 but pay as much xtra as possible. then it's a 15 or 20 year payoff as the lower the amount outstanding, the lower the interest, more on balance.

Posted: 3/18/2006 3:02:35 PM EDT

[#5]

That's a point I forgot to bring up in my post that attracts me to 30 yrs as well. While 30 year rates are (obviously) higher, they are still cheap! You want to keep that cheap money as long as possible.

Quoted:
My thought is to get a 30 year and pay it off sooner if you want.

I have a 5.6% interest rate on my 30 year mortgage. I am NOT going to pay it off any sooner than I have to. That is damn cheap money, and with the tax deduction I can invest my money and get a higher return rather then putting it into my home to sit. That said, I have $50K in equity in my home right now...

Posted: 3/18/2006 3:03:05 PM EDT

[#6]

you can get a better rate fot the 15 year mort thus making the actual payments not that different. So get the house that you can easily afford not the one that will strap you and then go for the 15. After 6 or 7 years you'll be usd to the payment and you can refinance for 5 years at an even better rate and get it paid off even quicker. All this being said you can go 30 and invest the "extra" money in the market and probably do better......

Posted: 3/18/2006 3:06:12 PM EDT

[#7]

Quoted:
That's a point I forgot to bring up in my post that attracts me to 30 yrs as well. While 30 year rates are (obviously) higher, they are still cheap! You want to keep that cheap money as long as possible.

Quoted:
My thought is to get a 30 year and pay it off sooner if you want.

I have a 5.6% interest rate on my 30 year mortgage. I am NOT going to pay it off any sooner than I have to. That is damn cheap money, and with the tax deduction I can invest my money and get a higher return rather then putting it into my home to sit. That said, I have $50K in equity in my home right now...

If you fall behind on your 15 year mortgage because you can't make the higher payment, the bank takes your house and sells it as quickly as possible to get THEIR money back. They won't care about what equity you have into it...

Posted: 3/18/2006 3:09:35 PM EDT

[#8]

that's why the 30 works.....you can fall back and not co to foreclosure. pay as much off as possible, dont forget the equity thing. and that works for loans of the second mortgage type.

Posted: 3/18/2006 3:13:12 PM EDT

[#9]

Yes, but my intention is that my mortgage payments will be about "x" whether it's either a 15 or 30 year mortgage. If it is a 15 year mortgage, it will be a less expensive house than I would have if I decide to go with a 30 year loan.

My decision on which loan to go for will determine which price bracket of house I look at. I am, of course, taking into account taxes and insurance costs as well for my monthly budget.

Quoted:

If you fall behind on your 15 year mortgage because you can't make the higher payment, the bank takes your house and sells it as quickly as possible to get THEIR money back. They won't care about what equity you have into it...

Posted: 3/18/2006 3:22:37 PM EDT

[#10]

Quoted:
Yes, but my intention is that my mortgage payments will be about "x" whether it's either a 15 or 30 year mortgage. If it is a 15 year mortgage, it will be a less expensive house than I would have if I decide to go with a 30 year loan.

My decision on which loan to go for will determine which price bracket of house I look at. I am, of course, taking into account taxes and insurance costs as well for my monthly budget.

Quoted:

If you fall behind on your 15 year mortgage because you can't make the higher payment, the bank takes your house and sells it as quickly as possible to get THEIR money back. They won't care about what equity you have into it...

The 30 year mortgage give you more flexibility with the cost of a slightly higher interest rate.

You can always get the 30 year and buy some points...

Posted: 3/18/2006 3:24:02 PM EDT

[#11]

I bought a house with 20% down (no pmi), and owed around 140$k. well before the end of this year i will be under 100k owed, and after that point if i only make required payments the house will be paid off in around 18 years altogether. That said, i am slowely accumulating cc debt at between 8-13%. For me this still makes sense, because i am no where near my credit limit on my cards, and I know if things get bad i could always refi and clear out my credit card debt since i have over 200k in equity. I know it would make more sense financially to pay only minimums on my house and pay off the credit cards, but sometimes that is harder to do than it sounds.

so with that background, i would say it depends on your whole financial picture. do you have other significant debts? do you have enough for 20% down? what is your job security/ income level? dependents? other large monthly bills?

Posted: 3/18/2006 3:26:00 PM EDT

[#12]

whatever you do, i would always have 20% down. PMI is to big a waste of money.

Posted: 3/18/2006 3:26:09 PM EDT

[#13]

Quoted:
I have a 5.6% interest rate on my 30 year mortgage. I am NOT going to pay it off any sooner than I have to. That is damn cheap money, and with the tax deduction I can invest my money and get a higher return rather then putting it into my home to sit. That said, I have $50K in equity in my home right now...

I've got the same situation with more equity in my house. I choose to keep more money in the bank instead of pay off the low interest loan. However, I have less than 50% Loan To Value in my home right now and I like that. The advantage of the 30 is that you under commit based on your income and you can always overpay. Should something go bad, you can't underpay and keep your house. I like knowing that if I lost my job tomorrow, I would be able to keep my family housed and fed for well over a year. I'd rather have that peace of mind than pay off my loan sooner.

With regards to building equity, the increase in the value of my home over the last 2.5 years has been substantially higher than the amount of principle I have paid down. I live in Phoenix, AZ which is one of the fastest growing areas in the country. My experience may not be comparable with yours. Assuming housing prices stay flat is a big assumption. If I bought a house in my neighborhood with the appreciation rate I've seen over the last 2 years, I would not be surprised if the value dropped by a good percentage in the next few years. I've lived in Silicon Valley and Phoenix, so I don't have experience with markets where the housing markets are flat. They're either going up or going down in my experience. This may not match the housing market in your area, keep this in mind.

I prefer to keep the extra money invested elsewhere, but some would choose to pay more on their house and I certainly do not discourage that. You have to choose what is right for you. I plan for the worst and hope for the best. Do what is right for you and your family.

If you chose the 30 over the 15, you would pay a higher interest rate. This means that even if you make the same payments as you would on the 15, it will take a little longer to pay off. For me, this is an acceptable tradeoff in my financial situation. (I'm a contractor and I only work as long as I continue to provide more benefit to the company than I cost them.) I don't know your situation nor would I make a recommendation if I did.

Posted: 3/18/2006 3:26:41 PM EDT

[#14]

There are pros and cons to each mortagage. Bottom line is the faster you have a paid off ahouse the better off you will be. You have to have a place to live. If you have no mortagage payment you have a lot more money to invest or work less and enjoy. A lot of older guys I know reach retirement with no paid off house and not enough equity in one to buy a smaller, empty nester house for cash if they sell the big house. Don't drink the Kool Aid about how much house you can afford. Get you a paid off house.

Posted: 3/18/2006 3:31:55 PM EDT

[#15]

Quoted:
There are pros and cons to each mortagage. Bottom line is the faster you have a paid off ahouse the better off you will be. You have to have a place to live. If you have no mortagage payment you have a lot more money to invest or work less and enjoy. A lot of older guys I know reach retirement with no paid off house and not enough equity in one to buy a smaller, empty nester house for cash if they sell the big house. Don't drink the Kool Aid about how much house you can afford. Get you a paid off house.

+1

Posted: 3/18/2006 3:32:28 PM EDT

[#16]

I had a 30yr mortgage and after 5 years refinanced to a 15yr that was a no cost deal (no back end either or add on) that was 1 pt lower. It saved me $44,000 in interest compared to what I had left in my previous 30yr loan and my monthly payment didn't change.

Posted: 3/18/2006 3:35:31 PM EDT

[#17]

Quoted:
I bought a house with 20% down (no pmi), and owed around 140$k. well before the end of this year i will be under 100k owed, and after that point if i only make required payments the house will be paid off in around 18 years altogether. That said, i am slowely accumulating cc debt at between 8-13%. For me this still makes sense, because i am no where near my credit limit on my cards, and I know if things get bad i could always refi and clear out my credit card debt since i have over 200k in equity. I know it would make more sense financially to pay only minimums on my house and pay off the credit cards, but sometimes that is harder to do than it sounds.

so with that background, i would say it depends on your whole financial picture. do you have other significant debts? do you have enough for 20% down? what is your job security/ income level? dependents? other large monthly bills?

I would take a 30 year loan and pay extra principal whenever you can. The 15 has a higher (obviously) monthly payment... Get the lower monthly for the 30 year that you can pay extra on each month, instead of getting some tricked out SUV with the extra cash flow...

I have neighbors who got the biggest darn thing they can afford the monthly payments on, have a few cheap-ass furniture pieces in it, but a BMW and Hummer parked in the driveway. Crazy (and no, home prices will not continue to go up 15-20% a year, sorry, the easy money has already been made in real-estate)

People a lot smarter than me are already loading up on the 'next big thing'

Posted: 3/18/2006 3:36:28 PM EDT

[#18]

I will be closing on our new house in maybe 3 weeks.
The 15 year interest rate is what - 5.25%, and the 30 is about 5.5?

I put 20% down, saving that obscene PMI. I can afford 15 years, but we elected to put that 550 dollar difference into a mutual fund. THAT will build up a lot faster than your tax deductible 5% money will.

WHen you do sell, that 400 bucks a month difference in equity building should be overshadowed by your increased property value, and the cash on hand in a mutual fund is real "money in the bank."

Bottom line: Paying off you house early is the worst investment advice out there. A paid off mortage loses a tax deduction and offers no financial flexibiity or cash flow.

Posted: 3/18/2006 3:39:06 PM EDT

[#19]

People, please don't blindly throw all your equity into a house. Investment diversity is the best thing you can do. Put your money where you can get the highest return on investment, which may or may not be home equity. To blindly throw money into real estate could very well be a big mistake if (when) the bubble pops.

Posted: 3/18/2006 3:39:09 PM EDT

[#20]

pay off the house get out from the interest and buy all the mutuals ya want.

Posted: 3/18/2006 3:40:18 PM EDT

[#21]

Quoted:
I will be closing on our new house in maybe 3 weeks.
The 15 year interest rate is what - 5.25%, and the 30 is about 5.5?

I put 20% down, saving that obscene PMI. I can afford 15 years, but we elected to put that 550 dollar difference into a mutual fund. THAT will build up a lot faster than your tax deductible 5% money will.

WHen you do sell, that 400 bucks a month difference in equity building should be overshadowed by your increased property value, and the cash on hand in a mutual fund is real "money in the bank."

Bottom line: Paying off you house early is the worst investment advice out there. A paid off mortage loses a tax deduction and offers no financial flexibiity or cash flow.

Yeah! Someone gets it!!!!

Posted: 3/18/2006 3:41:15 PM EDT

[#22]

Quoted:
I will be closing on our new house in maybe 3 weeks.
The 15 year interest rate is what - 5.25%, and the 30 is about 5.5?

I put 20% down, saving that obscene PMI. I can afford 15 years, but we elected to put that 550 dollar difference into a mutual fund. THAT will build up a lot faster than your tax deductible 5% money will.

WHen you do sell, that 400 bucks a month difference in equity building should be overshadowed by your increased property value, and the cash on hand in a mutual fund is real "money in the bank."

Bottom line: Paying off you house early is the worst investment advice out there. A paid off mortage loses a tax deduction and offers no financial flexibiity or cash flow.

So the money I don't pay in a mortgage every month just evaporates? I don't have increased cash flow to plow into a Roth IRA, 401(k)?

I would advise every one on this forum to talk to a compatent financial advisor before listening to financial advise from me or anyone else on this forum. (Vanguard rules BTW

)

Posted: 3/18/2006 3:41:37 PM EDT

[#23]

Quoted:
pay off the house get out from the interest and buy all the mutuals ya want.

If you are paying 6% interest on a mortgage and can deduct it, and can get 8% return on mutual funds, which is the better investment???

Posted: 3/18/2006 3:44:40 PM EDT

[#24]

I just refinanced recently with a 15, because I want the house paid off before I retire.

Posted: 3/18/2006 3:44:43 PM EDT

[#25]

Real estate has the quickest and highest returns as of now. I bought my first house for 187k 11 months ago, it appraises now for 342k now. Find a Roth that can do that!!

As a Loan Officer and Realtor I would suggest to do the 30 year, and just increase your monthly payments when you have surplus, but if you have a tight month you can fall back to the lower payment without worries.

Posted: 3/18/2006 3:47:06 PM EDT

[#26]

Quoted:
Real estate has the quickest and highest returns as of now. I bought my first house for 187k 11 months ago, it appraises now for 342k now. Find a Roth that can do that!!

As a Loan Officer and Realtor I would suggest to do the 30 year, and just increase your monthly payments when you have surplus, but if you have a tight month you can fall back to the lower payment without worries.

Unrealized gains don't count until the money is in the bank.

ETA: I have made some good money on real-estate in the last ten years, but the party is soon over, and anyone still thinking the sky is the limit are the ones who were buying Internet stocks in 2000 at unbelievable prices too... Easy money just doesn't keep raining down people, get used to it. This is a very strange time with so much easy credit sloshing around, 10 years ago most bragging about real-estate gains now would not even qualify for a mortgage back then.

Posted: 3/18/2006 3:47:17 PM EDT

[#27]

Quoted:
Quoted:
pay off the house get out from the interest and buy all the mutuals ya want.

If you are paying 6% interest on a mortgage and can deduct it, and can get 8% return on mutual funds, which is the better investment???

I see your point but dont forget you still have the house.

Posted: 3/18/2006 3:52:48 PM EDT

[#28]

Get a financial calculator: time value of money. You can also easily determine which portion of each payment is interest and repayment of principal. The first payments are almost entirely interest. Typically, the shorter mortgage is better. However, if you can earn a higher rate of return investing that money else where the 30 could be better. A simple discounted cash flows analysis could help you figure that out.

Posted: 3/18/2006 3:55:20 PM EDT

[#29]

Quoted:
Quoted:
Quoted:
pay off the house get out from the interest and buy all the mutuals ya want.

If you are paying 6% interest on a mortgage and can deduct it, and can get 8% return on mutual funds, which is the better investment???

I see your point but dont forget you still have the house.

You still have the house whether you have a 15 yr or 30 year mortgage.

Also, the house will appreciate (or depreciate) whether you have a 15 yr or 30 yr or interest only mortgage.

Posted: 3/18/2006 3:55:26 PM EDT

[#30]

Put mine on 15. Two years to go. Dure glad it's not 17 to go.

Posted: 3/18/2006 3:56:18 PM EDT

[#31]

Quoted:
Get a financial calculator: time value of money. You can also easily determine which portion of each payment is interest and repayment of principal. The first payments are almost entirely interest. Typically, the shorter mortgage is better. However, if you can earn a higher rate of return investing that money else where the 30 could be better. A simple discounted cash flows analysis could help you figure that out.

Yes, good advice, get an amortization schedule for your loan, you will see how liitle money goes towards principal early in the loan.

Posted: 3/18/2006 3:59:20 PM EDT

[#32]

Quoted:
Quoted:
Quoted:
Quoted:
pay off the house get out from the interest and buy all the mutuals ya want.

If you are paying 6% interest on a mortgage and can deduct it, and can get 8% return on mutual funds, which is the better investment???

I see your point but dont forget you still have the house.

You still have the house whether you have a 15 yr or 30 year mortgage.

Also, the house will appreciate (or depreciate) whether you have a 15 yr or 30 yr or interest only mortgage.

3 years from now I predict a huge glut of foreclosure property from the interest only mortgages... What are these people thinking?

Oh well, I will get to cherry-pick some good properties at a nice discount..

Posted: 3/18/2006 4:06:43 PM EDT

[#33]

If you manage your finanaces well, get a 30 year and make addtional monthly payments toward principle. That way you're not locked into a higher monthly payment. Now, you can payoff the loan on your own timetable and the additional savings on the monthly payment can be put into some kind of investment that hopefully will offset the addtional money you're paying into interest (which shouldn't be that much more if you're paying off the principle fairly quick).

Posted: 3/18/2006 4:10:30 PM EDT

[#34]

Quoted:
Quoted:
Quoted:
Quoted:
Quoted:
pay off the house get out from the interest and buy all the mutuals ya want.

If you are paying 6% interest on a mortgage and can deduct it, and can get 8% return on mutual funds, which is the better investment???

I see your point but dont forget you still have the house.

You still have the house whether you have a 15 yr or 30 year mortgage.

Also, the house will appreciate (or depreciate) whether you have a 15 yr or 30 yr or interest only mortgage.

3 years from now I predict a huge glut of foreclosure property from the interest only mortgages... What are these people thinking?

Oh well, I will get to cherry-pick some good properties at a nice discount..

Good properties that will keep depreciating?

Posted: 3/18/2006 4:14:13 PM EDT

[#35]

Quoted:
Quoted:
Quoted:
Quoted:
Quoted:
Quoted:
pay off the house get out from the interest and buy all the mutuals ya want.

If you are paying 6% interest on a mortgage and can deduct it, and can get 8% return on mutual funds, which is the better investment???

I see your point but dont forget you still have the house.

You still have the house whether you have a 15 yr or 30 year mortgage.

Also, the house will appreciate (or depreciate) whether you have a 15 yr or 30 yr or interest only mortgage.

3 years from now I predict a huge glut of foreclosure property from the interest only mortgages... What are these people thinking?

Oh well, I will get to cherry-pick some good properties at a nice discount..

Good properties that will keep depreciating?

3 years from 3/18/2006 lets bring this topic back up...

Posted: 3/18/2006 4:18:53 PM EDT

[#36]

Quoted:
Quoted:
Quoted:
Quoted:
Quoted:
Quoted:
Quoted:
pay off the house get out from the interest and buy all the mutuals ya want.

If you are paying 6% interest on a mortgage and can deduct it, and can get 8% return on mutual funds, which is the better investment???

I see your point but dont forget you still have the house.

You still have the house whether you have a 15 yr or 30 year mortgage.

Also, the house will appreciate (or depreciate) whether you have a 15 yr or 30 yr or interest only mortgage.

3 years from now I predict a huge glut of foreclosure property from the interest only mortgages... What are these people thinking?

Oh well, I will get to cherry-pick some good properties at a nice discount..

Good properties that will keep depreciating?

3 years from 3/18/2006 lets bring this topic back up...

Go ahead. You should try following along with the thread.

My point was that putting all your money into home equity is not a good idea. And if you are depending on appreciation of your home you may be out of luck. If real estate is going to appreciate a ton, you are going to make a bunch when you sell whether you have a 15, 30 yr or interest only mortgage. But real estate isn't going to keep appreciating forever, and may just keep going down and down and down...

Posted: 3/18/2006 4:20:29 PM EDT

[#37]

Long story:

I bought my house in 1991 on a 30 year fixed 9.0% mortgage. At that, it was a stretch to make payments the first year or two.

In 2001 I refinanced, figuring that interest rates could not possibly go lower. I took some equity out, replaced the roof, replaced the heater and evaporative cooler with a roof-top mount package AC/Heat unit, added a covered back porch to my house (10'x40') and painted the exterior. That refinance was for 20 years at 7.0%. My payments went up just a touch, but over ten years my income had gone up a bunch.

Interest rates continued down.

In 2003 I refinanced again. 15 years at 4.375%. Payments stayed the same. (This one I shouldn't have done, because...)

2005 I refinanced again, took out a LOT of equity, put a block wall around my back yard, remodeled my kitchen & bathrooms, new carpet, new tile, new paint (inside). Now I'm on a 5.25% mortgage for 20 years again. I owe about double what I originally paid for the house, it's worth well over three times what I originally paid for it, and my payments are right at double what I was paying in 2001.

And my original intent was to live in it for five years, sell it, and get something bigger.

Life is what happens to you while you're making other plans.

Posted: 3/18/2006 4:28:32 PM EDT

[#38]

I have had 15 and 30 yrs mortgages.
i do know that after 5 years of payments.
A. 15 yr mortgage you are 1/3 of the way done
B. 30 yr mortgage you have barely paid off any of the principal.

i will never have a 30 yr mortgage again.

Posted: 3/18/2006 4:33:12 PM EDT

[#39]

Quoted:
I have had 15 and 30 yrs mortgages.
i do know that after 5 years of payments.
A. 15 yr mortgage you are 1/3 of the way done
B. 30 yr mortgage you have barely paid off any of the principal.

i will never have a 30 yr mortgage again.

I think it's something like this. pay ONE extra payment on a 30 per year and you will pay it off in about 17 years. the key is the extra payment.

Posted: 3/18/2006 4:37:25 PM EDT

[#40]

Quoted:
I have had 15 and 30 yrs mortgages.
i do know that after 5 years of payments.
A. 15 yr mortgage you are 1/3 of the way done
B. 30 yr mortgage you have barely paid off any of the principal.

i will never have a 30 yr mortgage again.

Yep, good job.
I am 41, my house is paid off, and I like putting 25k a year away for my retirement, and not paying it all in interest 'cause real-estate can only go up...

Posted: 3/18/2006 4:44:16 PM EDT

[#41]

On a 30 year mortgage expect to pay at least as much as you borrowed over what a 20 year mortgage is. Find a simple mortgage calculator and see exactly how much total you wil be paying for your house.

I am glad one person here reported such a huge capital gain, but in my part of the country it is nowhere near as good. I have lived in my current house for 20 years. I purchased it new. It's 1940 square feet, 4 bedroom colonial on a treed lot near the end of a cul-de-sac. Got it now for $88,000 in 1985. Today it is worth about $150,000. That's an annual appreciation rate under 4%. And that's after adding a $32,000 sunroom a few years ago. . If I had taken out a 30 year mortgage, it would have been a financial bloodbath. And this street is a real estate hotbed. Houses are only on the market a few days before being sold.

Get the shortest mortgage you can if you plan to stay in the house for any length of time. Equity is good. Debt is slavery. A long mortgage in an area where prices rises are minimal is not a good deal. A mortgage lender is not on your side in these deals. They are in it to make money and as much as they can. Not a bad thing, It is just the way things are.

Posted: 3/18/2006 4:44:48 PM EDT

[#42]

If you are paying 6% interest on a mortgage and can deduct it, and can get 8% return on mutual funds, which is the better investment???

Maybe. But I note that the bank thinks the best use of their money is to loan it to you at 6%.

Posted: 3/18/2006 4:46:13 PM EDT

[#43]

Quoted:
Quoted:
Quoted:
Quoted:
Quoted:
pay off the house get out from the interest and buy all the mutuals ya want.

If you are paying 6% interest on a mortgage and can deduct it, and can get 8% return on mutual funds, which is the better investment???

I see your point but dont forget you still have the house.

You still have the house whether you have a 15 yr or 30 year mortgage.

Also, the house will appreciate (or depreciate) whether you have a 15 yr or 30 yr or interest only mortgage.

3 years from now I predict a huge glut of foreclosure property from the interest only mortgages... What are these people thinking?

Oh well, I will get to cherry-pick some good properties at a nice discount..

unless you are an industry insider all gains from this type of default will already be had by the banks and primary realators

Posted: 3/18/2006 4:47:10 PM EDT

[#44]

I got both.

I bought a 30 year mortage with low payments in case the SHTF like I lost my job. But I'm actually paying it off at a 10 year rate making an extra $600 a month payment and adding double payments occassionally. There is no pre-payment issue with my mortage and the extra money cuts the principle down which drives the lenght of the mortage down. In four years I've paid off almost 30% of the principle.

Read "Rich Dad, Poor Dad" for a different perspective of living high on other people's money for as long as possible. Personally it makes me feel better to own my house and "lose" the tax deduction where I lose 72% of the interest paid to the government and get back 28% for my pocket ... I want the 72% in my pocket and I'll give the 28% to the government thanks.

ETA: I also have maxed out my IRA and put in five times the amount my employer will match in my 401K, plus have six months cash in the bank, and have a few months worth in the mutual funds.

Posted: 3/18/2006 4:47:28 PM EDT

[#45]

The factor missing out of many assessments of where you should put your money is risk. If you have ever been through a recession and everybody is trying to sell you their cars, four wheelers, jet skis, rifles, and you name it, you will appreciate a paid off house to go to where you can cook dinner and lay down and go to sleep while your kids rest easy in the other room. When you can't make your house note and are looking at being in the street you will see why a paid off house is a good thing. Try cashing in your 401K or IRAs when you really need the money and see what happens. Why didn't financial guys tell you to load up on machine guns in 1985? No one has a crystal ball. Have a place for you and your kids to sleep.

Posted: 3/18/2006 4:55:18 PM EDT

[#46]

Quoted:
Put mine on 15. Two years to go. Dure glad it's not 17 to go.

Big +1. I'm in the exact same boat. I've always looked at it like this - how much is this house going to cost me when I'm done? Paying somebody else interest is pissing money away, tax deduction or no tax deduction.

Posted: 3/18/2006 4:56:38 PM EDT

[#47]

-quote
3 years from now I predict a huge glut of foreclosure property from the interest only mortgages... What are these people thinking?

Oh well, I will get to cherry-pick some good properties at a nice discount..
unless you are an industry insider all gains from this type of default will already be had by the banks and primary realators

-unquote

And those industry insiders do not like rivals. My brother and I tried to buy a forclosure house at way undermarket value. His future at the bank date from the day he got squashed like a bug on that deal.

Good one - diversity of investments. What is going to happen when your 150,000 dollar house becomes worth 50,000 in two years, or your 90,000 condo is worth 12,000? Dont say it can't happen. It did right here in 1987.

Posted: 3/18/2006 4:59:03 PM EDT

[#48]

No, my dad and I picked up a bank foreclosure in a great neighborhood on 5 lots (one big house and lots of land)

The bank had it for two years in foreclosure, kids had trashed the place breaking in and partying in it, got it for 200k in '91, a developer this year bought it for (insert obscene amount of cash) to tear it down after we got the place presentable again, and he is building 5 800k homes on each lot.

I am waiting for the property flippers to show up and try to make a quick buck on the homes (it can only go up, right?)

Posted: 3/18/2006 5:04:55 PM EDT

[#49]

3 years from now I predict a huge glut of foreclosure property from the interest only mortgages

Good properties that will keep depreciating?

Take a look at what's happening in Phoenix and the California Central Valley right now. 40% of the houses in Phoenix were bought by investors or as 2nd homes last year, and 25% of the buyers were from California. Right now the for-sale inventory in Maricopa and Pinal counties is around 40,000 units, up about 2X since last August.

The investors can't meet their mortgages on what they can rent their houses for, if they're rented at all. They're in negative cash flow and hoping for more appreciation to stay above water. Even if prices stay flat they'll be under intense pressure to sell six months or a year from now. I think there will be a stampede for the exits.

Posted: 3/18/2006 5:06:31 PM EDT

[#50]

If your gonna relo in a year, it doesn;t matter much. Even the little difference in interest rate doesn't matter much. You can always add prinicple if you want to pay it off quicker. BTW, did you know by making a payment every 2 weeks instead of once a month, you can payoff a 30 year mortgage in 22 years. Just ask your bank to set it up for you (nominal fee like $200 I think).

Wahtever you do, get a FIXED mortgage. Interest rates are about to skyrocket because of our piss-poor national spending record and twin deficits.

[ARCHIVED THREAD] - What are your thoughts on 15 vs. 30 year mortgages? (Page 1 of 2)

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