Comments on: 15 Year Mortgages Are 30 Year Mortgage With Extra Payments!

By: Sid

Sid — Mon, 03 Oct 2011 03:28:54 +0000

Kyle: Awesome reasoning – totally make sense. I went with a 15 year fixed with an interest rate of 3.25%. I had a 4.625% 30 year to begin with. Moving to 15 year was really a safe bet for me even if I really am not “planning” to sell my home after 4-5 years. But who knows what life brings? But, I now know with more sureity that I will be done with the mortgage commitment in 15 years and will be in a much better shape to help my son pay his college. If I had the “choice” of paying the extra amount into a 30 year, I would never do it as I always have 10 other things that I want to spend on! So, it really depends on your goals, your lifestyle and how you really manage your finances. I know that it is the right choice for me. No matter which one you choose, please make every effort to have atleast 6 months emergency funds stacked up – no excuses on that please.

By: ranch111

ranch111 — Sun, 05 Sep 2010 01:41:45 +0000

Not anymore, Einstein. A 15 yr beats a 30 yr currently. 3.75% vs 4.25%. Plus, any extra you put down on a 15 accelerates the payoff even faster.

By: de

de — Sun, 01 Aug 2010 21:07:56 +0000

btw. has any one read anything by dave ramsey.
can’t deny his real world logic, facts, and numbers.

go luvtoteach. you won’t be sorry!

also, if you lose your job, or is an emergancy or whatever. you wont have the money to pay either payment! so i’d rather have a little more principle under my belt.haha
just a thought.

By: de

de — Sun, 01 Aug 2010 21:03:56 +0000

i’m with artist.
also

how many ppl actually pay off their 30 yr in 15?

almost everyone (other than foreclosure) pay of their 15 yr in 15. and i’m willing to bet the foreclosure rates on 15 years aren’t much higher because these people’s life goals are to be debt free. its not your house you can’t afford its all those damn credit cards….

i’m willing to bet “professionals” who encourage 30 yrs are making a profit off of it.

such as…
the real easte agent who can get you to buy a more expensive house if you take a 30 yr. what is in it for them for you to pay of your home quicker.

By: marc

marc — Sun, 30 Aug 2009 13:21:26 +0000

way to go, luvtoteachag. keeping it simple and real will serve you well. Nothing hypothetical about your numbers. And the realization that making optional payments is probably not going to happen often enough shows that you factor in more that numbers and hopeful thinking. It’s always about the real world.

By: Luv2teachag

Luv2teachag — Tue, 14 Jul 2009 19:10:14 +0000

I just recently bought my first home. I locked into a 15yr- 4.5%!!!! Whoooo, Hoooooo!!! tHE difference in payments between a 15 yr vs a 30 yr (5.5%) were only about 300.00!!! I HAVE TO pay the higher payment this way! Which is great for me because if I had the 30yr loan I definitely would not make higher payments all the time. Its a built in disipline program for me GO FOR THE 15 YR!!!!

By: jim

jim — Fri, 16 Jan 2009 16:03:13 +0000

Ozzy, I would try this calculator:
http://dinkytown.net/java/MortgageRefinance.html

However, I can tell you almost immediately that you’ll be paying less interest overall because you went from a 30 year to a 15 year loan. If you can afford the increased payment, it sounds like a smart move.

By: Ozzy

Ozzy — Fri, 16 Jan 2009 15:49:02 +0000

I have a 103,200 loan on a 30-yr 6.5% fixed, my current balance is 101,300. I pay 660/mo. Is it wise (as an investor, not someone worried about emergencies) to refi to a 15-yr 4.8%, my new payment would be about $840/mo. assuming refi costs of 5k are added to the loan and I plan to stay at least 3 more years in my house. I/m assuming taxes and insurance stay the same, don’t they?

By: jim

jim — Sat, 03 Jan 2009 21:09:54 +0000

1. Yes, you might; or you might have lost 40% as the market did in 2008.
2. This is the same for 15 or 30 years and you have to buy another house to take advantage of this.
3. Also true, but the 30 year gives you flexibility.

By: artist

artist — Sat, 03 Jan 2009 14:57:09 +0000

Some thoughts not mentioned:

You *might* earn a higher yield in the markets by investing, rather than paying down your loan on shorter terms (15 yr).

However, 1. you will pay taxes on your market returns…

and

2. When you sell your house the profits (up to fed limits, 250k or 500k) are NOT taxed.

and…

3. you will be mortgage free in 15 vs 30yrs. Talk about “freeing up cash”.

Dumb…dumb…dumb?

By: Steve

Steve — Thu, 31 Jan 2008 20:35:03 +0000

My current loan of 200,000 is at 6.25 for 30. I was goingto refinance to a 20 year at 5.25. I was also thinking about tying in a HELOC of 30,000. My house is valued at 375,000. Any advice? Should I just pay more for 20 years, or remortgage?
Thanks

By: SCM

SCM — Thu, 31 Jan 2008 03:15:52 +0000

I am so impressed about the knowledge you all have about this topic! I am in the medical field so that means..I am not good at this at all. Anyway, I need help from you! I contacted a mortgage company and today they gave me a rate of 5.125% for 15 yr-loan. I currently have a rate of 5.75% (30 yrs), (and I have 25 more yrs left). I have a possibility of buying a different house in maybe 2 yrs. So based on your discussions above, I have made some analysis that it’s not worth to refinance IF I feel I will not stay in this house for long term, is my analysis correct? What is your advice. Thank you all for your help!

By: Kyle

Kyle — Tue, 29 Jan 2008 16:37:23 +0000

One of the other things that people tend to ignore is the way that home equity fits into an overall investment portfolio. I would argue that having home equity is like owning a bond or other stable investment asset. The return you’re getting from it is roughly equal to the rate on the mortgage. So if you have an extra $200,000 in home equity, it is “earning” 5% by reducing the amount of interest you have to pay. The nice thing is that return is risk-free, and can give you piece of mind, especially if you ever get to the point of having it paid off.

Paying down a mortgage aggressively makes sense if you already have some significant investments in other markets that you would expect to earn a higher return (i.e. the stock market). If your home equity makes up about 20-30% or less of your net worth, then paying additional equity by having a shorter term mortgage makes sense. If your home equity is 50% or more of your net worth, then you might be better off with the lower payment and investing the additional capital in an S&P 500 index fund, a Russell 3000 index fund, and/or a broad-based international index fund.

In this way, you are building a balanced portfolio between home equity and market-based investments.

Waffler, I would think long and hard before I paid a bunch of money in refinancing fees to willingly take a 1% higher interest rate. A 15 year fixed at 4.375% is a great deal. Also, you said the net assets were about the same in 360 months. That assumes that you stay in the house for 30 more years. I suspect that if you only stay in the house for 10 or 15 more years, staying in the 15 year mortgage makes a lot more sense. And you may be fairly confident that you’re in the house for the long haul, but a lot can happen over that period of time. Good luck with your decision.

By: The Waffler

The Waffler — Tue, 29 Jan 2008 02:00:17 +0000

a couple of other items:

I also got hit with the AMT last year for the first time ever, so even additional interest might not be fully deductible going forward. My tax assumption is probably aggressive, as Mutual funds could be more tax efficient. I suppose I should probably build some what if’s and see what happens as the tax rate changes.

By: The Waffler

The Waffler — Tue, 29 Jan 2008 01:50:39 +0000

This was a fun read. Shockingly enough depsite having advanced education in finance and accounting, I continue to waffle.. Save interest on the 15 yr/decrease cash flow or increase cash flow / pay out more in interest. I’ve been in my 15 yr @4.375% for almost 5 years now. I’ve been toying with the idea of refinancing to a 30 year @ 5.375%ish as this will reduce our payment by about 33%. I’ve run the numbers and shockingly enough we’re at a point where the net asset value in 360 months is about equal. I assumed 8% * 33% tax rate.

I’d love to have that lower payment, but there’s also something comforting knowing that it’ll be paid off in about 10 more years. I’ll be 45 at that time and my oldest will be starting to drive, so I’m sure there will be other bills that will need this money.