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Buying Homes: Get a 15 Year Fixed Mortgage

Have you ever known anyone that has found themselves with piles of debt, and yelled “WooHoo! Hey Honey, We’re doing great! We have huge piles of debt!” Of course not. No one is excited about being in debt. If you asked every American if they would like to be in debt or like to be debt free, 99 out of 100 would easily tell you that they would like to be out of debt. Generally a person’s home is their largest payment, and their largest debt item. Wouldn’t it be great to own a home free and clear? Your grass will feel different, trust me! So why not buy the mortgage that will enable you to have your home paid for the quickest?

When purchasing our next home, make sure you get the mortgage which will help you pay it off as soon as possible. At this point, many people will say they cannot afford a fifteen year fixed, time for some math. Assume you are going to buy a $100,000 at 7% interest. Your payment would be a total of $719.06 a month on 15 year fixed rate loan. If you were to fall back on an easier to pay 30 year loan, your payment would jump down to $532.24 a month. We come up with a difference of 186.82. If this breaks your budget, you probably couldn’t have afforded the home in the first place. You can pay your home off early by fifteen years, that’s over 5400 days, if you just make a slightly larger payment!

Some will say, but what about the tax deduction? Isn’t it smart to keep my mortgage because I get a tax deduction? No. If you have a $100,000 mortgage at 7%, you are sending the bank $7000 in interest so that you can avoid paying about $2000 in taxes, that doesn’t make a whole lot of sense.

And then there are is the 1% who think they are smarter than everyone else and want to use debt in their favor. They will not pay their house off early because they think they can get a better rate of return somewhere else, such as in a mutual fund. Let me ask you a question, Would you borrow money on your home so you can invest it in a mutual fund? Most likely, you would not. Now you are thinking with your heart, and not your head.

Don’t play fancy games to try to get ahead, there’s no magic pill. Be wise, no one has ever felt bad about paying off their house. Get a conservative 15 year fixed mortgage, and just pay on it consistently.