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What are people's thoughts about the 15 year mortgage vs. 30 year mortgage. I feel a 30 year mortgage is the biggest scam in the world. First, you are crippled by the mortgage for 30 years just to have lower payments. At, least in 15 years you could be debt free.
Also, how much should I borrow. I want to borrow no more than $100K. I feel mortgage people are just loan shoarks in disguise. Why should I give someone all my money.
When rates are 2.75% (like I got recently when I refi for a 15 year loan), it would take a strong argument not to take a larger mortgage and invest what otherwise would have been used as a higher down payment.
If you take the longer mortgage with a lower interest rate you can still pay additional principle and have it paid off in 15 years. We took out a 20 year loan and should have it paid off in 13 years with our extra payments. The big difference is if you have some emergency bills or expenses come up you can just pay the minimum of the 30 year mortgage and be okay. Once the crisis is over ramp up the payments again.
^^^ this! I had 30 years mortgage but made double payments most of the times. I paid off the house in 13 years.
Lower mortgage gives you the flexibility of paying less if you have hard times ( sickness, unemployment etc.)
There's the investment strategy. With mortgage rates so low, and [currently] being tax deductible, you can pay the minimum towards your mortgage and use the rest of your money to profit in the market.
I totally agree, take the 30 and accelerate payments if you can and if you don't have a better use for the money.
Hubby and I bought a house with a 30 year loan because at the time we had a credit card bill, a car payment, and 2 student loans. Before those were all paid off in full, hubby lost his job and was out of work for a full year. We went most of our savings, but did get by. I can't say how glad we were not to have done the 15 year loan. If we had had the higher payments of the 15 year loan, then we would have had less in savings in the first place, and by the end of the year, we would have been living off of credit cards. As it was, within a year of him going back to work, we finished paying off the car, the credit card, and the student loans and were debt free besides the mortgage. Our current goal is to have it paid off in 7 years, which will be 13 years ahead of schedule.
Life happens, but if you plan some cushion in, you can often make it through unscathed.
For your other question though, yes, people buy houses with cash quite often.
I moved from a 30 to a 20 and shaved a 1.25% off my rate. I could have shaved 1% by staying with a 30. In hindsight maybe I should have stayed at 30 and just made bigger payments.
One thing to consider is that you'll get a better interest rate with the 15 year mortgage than the 30 year mortgage so even if you paid the 30 year mortgage off in 15 years you would still pay more overall.
That being said, with interest rates being as low as they have the last few years the difference would be negligible so it would be hard to justify going with the 15 year note over the 30 year note for reasons that have already been stated.
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