Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
The APR is never that great between a 15 year and 30 year mortgage. Right now, one can get a 4.2% APR, 30 year fixed mortgage or a 4.0% APR, 15 year fixed mortgage. They are not separated by an entire point and a quarter (1.25%).
They were. I explicitly said in my post "back in the dark ages." By the way ... dark ages = 2003
Quote:
Originally Posted by DellNec
$150k loan @ 4.2% APR - 30 year = $733 month - $8,796 year
$150k loan @ 4.0% APR - 15 year = $1,109 month - $13,308 year
The difference of a 15 vs 30 year mortgage is $4,512 a year in payments. That can be a make it or break it difference in getting foreclosed on.
According to your previous post, that 15 year payment should be $1466. Not anymore? OK.
30 x $8796 = $263,800 (Interest paid = $113,800)
15 x $13308 = $199,716 (Interest paid = $49,620)
I'd be more interested in saving 64K. My post was about interest, but I see you ignore things in this forum also ... so no more posting. I'm done.
I'd be more interested in saving 64K. My post was about interest, but I see you ignore things in this forum also ... so no more posting. I'm done.
That was my point, with the 30 year loan, you would save money on the side and pay off the loan in 10-15 years. What the 30 year loan gives you is a bigger cushion in case you lose your job so your not stuck with a high monthly payment of the 15 year loan. Plus nobody takes 30 years to pay off a 30 year loan. Most people move out of a home within 4-7 years, the remaining people usually move out within 10-15 years, then the small percentage that remain over 15 years in a home can have the 30 year loan paid off at that point if they saved.
Ramsey tells people to take the higher monthly payments of the 15 year loan but there are higher risks associated with that philosophy. As I said repeatedly, it is not as black and white as he makes it seem. That 15 year rule does not fit everyone's circumstance.
Ramsey is a pompous Christain Right wing loon. We deliberately turn the monitor down at the radio station I work at during his show and only listen when our radio station is taking a break. Numerous time I have moaned and groaned at his nonsense. The owner yells down the hall to shut up but I do it anyway.
HE owns the radio station and you work there for...what....$10 a hour? Maybe you should listen instead of moaning and groaning and someday YOU might own a radio station (or some other kind of business), instead of being an "employee" you're whole life. ya think.
The problem with that is that most new cars offer a 0% APR or a very low 2.9% APR. The money lost to 2.9% interest is almost non-existent. ($15k @ 2.9% for 4 years = $900 in interest) Most new cars come with 5 year/60k mile warranties, used cars usually have no warranty or maybe a 1 year/12k mile warranty. Used cars could have been abused or poorly maintained, which in the long run will cost you more money for repairs.
In my life I bought new cars and drove them for 200,000+ miles before I sold them. Very reliable and I got my moneys worth. I also bought used cars, which ended up being problematic and I had to sell them. I lost a lot more money on the used cars and I paid cash for them. I learned my lesson with buying used cars and have since only bought new cars and with 0% APR. It proved to be the better financial decision.
I don't think it is as black and white as Dave makes it seem.
You make some good points. I do agree Dave is a little too black and white. I don't have a problem with people buying new cars, but I do think a new car is more of a luxury than a true necesity for most people. Therefore, they should be able to pay cash for it. Take the 0% loan if you want, but you should still have the cash on hand to be able to pay for it in full. Just my opinion.
Be aware not everyone has had bad experiences buying used cars as you have. Sometimes people have one bad experience trying something and they assume that will always be the case. I had a bad experience buying my first used car. I didn't really do the necessary research. I bought my second used car and it was 4 years old and in decent shape. 11 years later I still have the car and it has given me few problems.
a $120k mortgage @ 4.2% APR for 15 years = $900 month payment
a $120k mortgage @ 4.2% APR for 30 years = $586 month payment
Monthly rent for that same type of home would = $1,200 month
For some buying and owning the home is the better option than renting a home. It would take 15 years to save enough money to buy the home with cash. During those 15 years you are renting. In those 15 years, how much did that home price rise due to inflation? Within that 15 years of renting, that person contributed ZERO dollars to equity because they were renting. If they originally bought that home with that $120k mortgage, after 15 years, the home would already be paid off.
I just don't think it is as black and white as it seems.
In your example, the person can not afford either the rent or the mortgage.
You are not including property taxes, insurance and maintenance costs in your example. And those costs factored in will easily take the payment a lot higher.
And how many people making $30K a year have $30K to put down on a mortgage? Some, but not most.
Last edited by mysticaltyger; 12-19-2011 at 11:24 AM..
We really needed a new car and purchased one used in 1998. We had just gotten out of debt a a year earlier and our 2nd car had some mechanical problems not worth fixing. The car we bought was a 1997 Camry with about 15K miles on it. We will have had the car 14 years this coming April and put over 165,000 miles on it by then. We bought it for about $15,000. It's still going strong, gets about 30-35 MPG, it's a great commuter car.
Since then we sold a 2nd car and purchased a new truck, financed just 10,000 of it and paid it off in under 2 years. We intend to drive it until it just doesn't go anymore. Maybe we would have been better off buying a year old model, but we were never "upside down". Given the entire picture, we felt comfortable buying new.
Yes, I realize we are fortunate.
The key with buying used is to buy it not TOO used. Get it from a dealer or private party that can provide maintenance records. I wouldn't go anymore than 2-3 years old with low mileage (12K a year or less).
With the used market today, buying new might make sense. But I would put at least 75% down on it and pay it off as fast as you can. Or, if you can take advantage of the 0% financing then maybe it would make some sense to just pay it off while you collect a little interest. But personally, I just hate sending out that payment every month - it would eat at me until I had the title in my hand.
I think some of his advice works and the principles he espouses about debt are good but in the real world not everything is black and white..
True. But as others have said, some people need the black and white approach. Probably more of us than who'd care to admit it.
Quote:
Originally Posted by DellNec
I don't agree with his cash for buying a car philosophy or the mortgage one. If you take a 15 year note vs. a 30 year note, you end up paying higher monthly payment amounts, if you lose your job then you can sink quicker with a 15-year note. Most people DO NOT keep a home for 30 years, the average time span people stay in a particular home is around 5-7 years, they then sell it and move on..
The cash for car thing? Heck yeah, I agree with him on that almost 100% (yes, we live in a gray world...there are exceptions...but not many). The 15 year mortgage thing...I can see your point on that one. Sometimes it's better to pay for some flexibility. My parents had a 30 year mortgage for the flexibility, but they paid it off in less than 15 years. Unfortunately, a lot of people don't pay off their mortgages early and instead they get 2nd mortgagtes.
As far as not keeping the home long...that is a problem unto itself. The more often you buy/sell, the more costs you incur. I realize today's world is an unstable one, but for folks who expect to move every 5 to 7 years, they may be better off renting.
Quote:
Originally Posted by DellNec
There is also a "religious" twist to the show. Which always made me wonder. When TRUE peace comes from God, then any "financial peace" here on earth is temporal and can be lost at any moment. So in reality there is no such thing as true "financial peace" because we are fallible people living in a fallible world. We can be debt free one day and then in debt the next when hit with life's calamities.
I see your point but you are being awfully black and white yourself here. It's certainly true nothing in this world is truly secure. But most humans make the situation a lot more insecure than it needs to be and create a lot of unnecessay suffering for themselves and their loved ones in the process.
Last edited by mysticaltyger; 12-19-2011 at 11:28 AM..
I agree with saving money but there comes a point where it can become just as bad as those who spend. I personally know of people who would would never go on vacation, never buy any electronics, keep the heat at 65F in the winter, walk around in the dark to save electricity, eat rice and cheap food, they died stingy and miserable with hundreds of thousands of dollars in their bank account. They never experienced life and the joys it can offer. They were modern-day Scrooges and curmudgeons because saving money was the only thing they lived for.
I know that people like this must exist, but I wonder where they are. I have never met any of them. In any case, they are far outnumbered by overspenders.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
