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Old 03-27-2015, 06:58 AM
 
16,493 posts, read 17,525,712 times
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I would do a 30 and treat it as a 15.
Or
If you have roomates I would budget a portion of that rent income to be used to pay down principal. In lean times you have a lower payment. If you're rolling hard bucks up you can either pay extra or sock it away for retirement. If you really wanted to you can budget to do it all. Few bucks here to pay principal few bucks invested in a fund few bucks in savings and a few bucks to have some fun. Nothing wrong with spreading it around a bit.
This is what I do. Save some pay some off and play some.

It's really what works for you financially. If a 15 is too burdensome then go for a 30.

Quote:
Originally Posted by Spaten_Drinker View Post
I disagree. Why payoff tax-deductible debt with a low interest rate when you can INVEST that extra money or use it to maintain your 6-month liviing expense cushion in case of emergency?
Op doesn't have to go nuts. But she can swing a extra payment a year why the hell not. How much is she not paying long term by not paying interest to the bank if she makes one extra payment a year?

Last edited by Electrician4you; 03-27-2015 at 07:06 AM..
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Old 03-27-2015, 07:18 AM
 
Location: Annandale, VA
5,098 posts, read 4,123,743 times
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Quote:
Originally Posted by MrRational View Post
With what? Having maximum flexibility?
Paying off cheap tax-deductible debt early.
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Old 03-27-2015, 07:25 AM
 
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Take the 30 and pay a little more each month toward the principal or just double up each monthly payment if you can handle it !!!
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Old 03-27-2015, 10:31 AM
 
Location: New York
2,251 posts, read 4,161,942 times
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Quote:
Originally Posted by Spaten_Drinker View Post
Paying off cheap tax-deductible debt early.
Yes - tax-deductible debt.

This week helped one of my client's do their 1040 tax returns for 2012 and 2013. Thought they owed money after being laid off and collecting unemployment for almost 10 months.

Found mortgage interest statements for both years, applied as tax deduction on their Schedule A. Now they getting a refund.


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Old 03-27-2015, 10:36 AM
 
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Yeah. I've been running the numbers, and if I make comparable payments, the added interest costs of the 30 year are easily worth the lower risk of running into trouble in the case of a financial crisis along the way. It only gets really expensive if I let it run the full 30 year term.
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Old 03-27-2015, 11:22 AM
 
Location: Denver CO
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fwiw, I agree with getting the 30 and paying it off more quickly. That's what I decided to do with my recent home purchase. Paying extra when I can, but if I have a month with more expenses, I have the flexibility.
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Old 03-27-2015, 11:39 AM
 
Location: Aiken, South Carolina, US of A
1,752 posts, read 3,622,157 times
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Gsilver,
Go with the 15. Pay it off sooner.
If you end up getting married, or your life changes, you can either keep the house
and rent all the rooms out, or rent out as a family home, or sell it.
If you sell it, you will have more to put down on another property.
Don't be in debt, even for a home, longer than you have to. You seem self disciplined anyway,
so you will have no problem with a 15 year.
Rent the rooms out. Don't change you mind, let others pay your 15 year mortgage for you.
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Old 03-27-2015, 12:43 PM
 
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Well, first off, 0.75% isn't huge when you consider everything. You're not going to be rich or poor because of that small difference in an already low rate. If you run the amortization schedules for the same balance and payment period, you'll probably find the rate difference comes out to less than $100/month. Would it be nice to pay $100 less? Sure, but it's not likely to be a life altering amount.

But, that $100 comes at the cost of flexibility. It could easily ruin you financially if you commit to a 15 year mortgage and having something unexpected come up. You know, the kind of unexpected thing like not finding tenants for a long time, or even worse, having a tenant who damages the place beyond what the security deposit covers and now you have to make a lot of repairs before you can rent it again.

If you want to pay off on the aggressive time frame that comes with a 15 year mortgage, then you always have the option of the extra payments, but I would sign up for the 30 and consider the 0.75% higher rate my "flexibility insurance." Given your plan to rent out a large portion of the house, I'd definitely go with the lower required monthly payment.

All landlords should strive for the lowest fixed payments possible and try to keep a sufficient cash reserve. It's much more important as a landlord than it would be if you were buying a single occupancy place that you would own yourself. If anything, just charge another $25/month to your tenants.
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Old 03-27-2015, 04:09 PM
 
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Or do an ARM so you can accelerate the principal payment for the first several years. If you think you can pay off in 15 years, this will minimize the total interests while allowing much more flexibility.
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Old 03-27-2015, 05:24 PM
 
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Hmm... The ARM could be pretty risky. I'm kind of surprised that interest rates have stayed as low as they are for as long as they have. Good for the initial term, but the possibility of a 6-7% interest rate at the end could eat up any gain, especially if some of the initial plans fall through.
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