Mortgage at 30 years vs at 15 years

uutxs said:   Can you comfortably afford the 15 year payments?
If you went with a 30 yr mortgage, what would you do with the extra cash (because of the lower monthly payment)?

The mortgage at 15 years takes 31% of my budget. The 30 year mortgage would take 23% of my budget. With the money left over with the 30 years old mortgage I would probably use half of it (house improvements) and save/invest the other half.

15 year.

I like 30 year mortgages for the safety cushion and usually just make 15 year payments.

Depends on where you are with your retirement, emergency savings, etc.

Just looking at the numbers: Comparing the 2 options after 15 years:
-On the 30 year mortgage, you will owe $56k, but will have paid ~$41.3k less.

Return on money saved - (Cost)
0% - ($14,624.77)
1% - ($11,384.70)
2% - ($7,803.71)
3% - ($3,841.51)
4% - $547.26
5% - $5,413.67

Not likely you will stay in the same exact residence until reaching 61. At today's low rates, might as well do the 30 years since this gives more flexibility and you can have more stuff AND emergency savings now.

I know this is a really stupid question but I am brilliant in other areas

I have a 30 year fixed rate 5.65%. 84 of 360 payment made.
It is an investment property so rates are usually higher than a primary residence loan.
Been paying an extra $500 per month which will get my mortgage paid off in 10 years (11/22).
Is it worth the expense of refinancing down to a 10 year fixed at 3.75 or so rate and having closing costs etc rolled into loan or will my extra $500 monthly payments due me just as well in paying off the loan early and more economically.

Again, sorry if this is a stupid question, but I'm mathematically challenged even though I ROCK in other skills (nope, no pics)

lorymills1 said:   I know this is a really stupid question but I am brilliant in other areas

I have a 30 year fixed rate 5.65%. 84 of 360 payment made.
It is an investment property so rates are usually higher than a primary residence loan.
Been paying an extra $500 per month which will get my mortgage paid off in 10 years (11/22).
Is it worth the expense of refinancing down to a 10 year fixed at 3.75 or so rate and having closing costs etc rolled into loan or will my extra $500 monthly payments due me just as well in paying off the loan early and more economically.

Again, sorry if this is a stupid question, but I'm mathematically challenged even though I ROCK in other skills (nope, no pics)First, why do you find it necessary to tell us you have skillz not just once, but twice. Second, is your financial security/ROI such that you will always be able to make the higher payments? I don't think this question is a math problem. It's a prediction problem.

BEEFjerKAY said:   enc0re said:   As a rule of thumb I always recommend that people have their mortgage paid off before they plan to retire.One of the single worst pieces of financial advice. Ever.I respectively disagree for most people. I would take it one step farther and suggest "most" people should strive to have no mortgage by 55.

It is all well and good for financially savy people to consiously take the longer term at a 3/8% - 5/8% premium. You can make a strong case especially in todays interest rate environment. However, you assume the discipline to invest the differnce in payment. My experience is that 80%-90% don't, in fact take on additional debt HELOCs, credit cards, etc...

I can't begin to tell you the number of people in their 60s, 70, and even 80s still with mortgages they can't afford. Several of them lost their homes to forclosure. Some because they lost their jobs in the last five years. With the rampant age discrimination that exists in the job market, many ended up with significantly lower paid jobs or were forced to retire early.

The single biggest differnce I see between those in retirement making it, and those not is whether or not they are still paying on a mortgage. A theoretically benefit for the finacially astute, is often a mistake for the practical realities of many people's lives.

money2011 said:   I like 30 year mortgages for the safety cushion and usually just make 15 year payments.

This. 30 years will give you more time to pay for the mortgage but if you're able to pay the 30 year mortgage within 15 years, I think it is still good.

That $5k assumes no tax benefit and that the funds are not put to use in any economically productive fashion. It also assumes interest rates do not move back up.
Factor in even just two of those three factors ... and that $5k quickly evaporates.

Face it folks, paying off all of your debt when interest rates are at their lowest points in history is not likely to be your optimal investment choice.

Or more to the point, it's not what wealthier private investors and corporations are doing.

BEEFjerKAY said:   That $5k assumes no tax benefit and that the funds are not put to use in any economically productive fashion. It also assumes interest rates do not move back up.
Factor in even just two of those three factors ... and that $5k quickly evaporates.

Face it folks, paying off all of your debt when interest rates are at their lowest points in history is not likely to be your optimal investment choice.

Or more to the point, it's not what wealthier private investors and corporations are doing.

Sometimes I forget that the folks on here aren't like most people and may actually have some financial discipline. Most people I know would just blow the extra cash.

OK doveroftke
using your link.... and....
assuming worst case scenario of $5,000 closing costs added to $106,000 principal, monthly payment on a 10yr loan at 3.5% (P&I only) =
$1,097.63 monthly payment
current loan of 30 yrs at 5.65% $672.29 P&I plus $500 per month additional principal for 10yr payoff =
$1,172.29 monthly payment
I could save $75 per month and possibly more if I use my skills to get a lower interest rate or lower closing costs
may give it a whirl.... thanks

BEEFjerKAY said:   enc0re said:   As a rule of thumb I always recommend that people have their mortgage paid off before they plan to retire.

One of the single worst pieces of financial advice. Ever.

Things can change in an evolving economy to make that one of the absolute best pieces of advice. With the trends in automation, it may be prudent for many folks (those not making the innovations) to pay off their mortgages sooner, rather than later. Folks are already getting to the point where they have 2-3 different careers within their working years... that reduces the opportunity to maximize your income when you start fresh. If innovation picks up, you could find that number increasing dramatically... 6-8+ careers within working years. If that is the case, that constant retooling will lower your wages if you happen to be stuck in that cycle. Will it happen to everyone? Certainly not, but it will happen to enough folks that it will be problematic.

BEEFjerKAY said:   death put.

Ouch, beefjerkay...that's a terrible way to put it.

By tomorrow's standards, the rates on both are pathetically low. It all hinges on what return you really think you can get on the payment differential. Still, I like the idea of having cheap money as long as possible. That's why I chose the 30 year in my situation - I believed worst case I'd be indifferent when I ran the numbers.