Our decision on the 15 vs 30 year mortgage debate!

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Our decision on the 15 vs 30 year mortgage debate!

Whelp, after weeks of going back and forth on this one we’ve finally come to a conclusion!

And much to my surprise, we’re going with the 30 year mortgage!!

Didn’t see that one coming! Haha…

But after pouring over hundreds of comments and finally having “the talk” with the wife, it just seemed to make the most sense at the end while giving us the ultimate flexibility. Particularly with the # of kids in our household and my declining desire to hustle as the years pass 😉

With that said though, it sure doesn’t change my desire to pay off the house AS SOON AS POSSIBLE! So the plan will still very much be to pay it down in 15 years or less if we’re lucky, I just have to now be okay with ponying up the extra $$$ every month for having the luxury of this freedom, haha…

WHY DID I EVEN RUN THOSE STUPID NUMBERS LAST WEEK!!!

I gotta say though – y’all really came through with the advice, and the amount of opinions that were sent over were equally as strong as they were varied. I must have heard over 15 different ways to mortgage a house, with some of y’all having it down to a science! 🙂

Here’s what the overall breakdown looked like for all who’s interested:

  • Those in favor of 30 year mortgages: 55%
  • Those in favor of 15 year mortgages: 35%
  • Those in favor of some sort of ARM concoction: 6%
  • Those in favor of other random year’d mortgages (like 7 and 20): 4%

(Interestingly, The 7 year term was the 3rd most popular brought up! Maybe because it’s a lucky number?!)

And then here were a majority of all the pros sent over for having a more extended mortgage like a 20 or 30:

  • Less monthly payments which = more flexibility
  • The option to still pay down as much of the mortgage as you’d like to cut down costs/time
  • The ability to use the difference of $$$ saved for other wealth-building goals like investing in the market (the biggest recommendation sent in), or for leveraging other real estate/business opportunities
  • The ability to hedge inflation and “short the dollar”, as my friend Brad is fond of sayingw (same guy who shared yesterday’s rental property/college tuition hack with us ;))

    Not to get too technical, but the Federal Reserve openly targets a 2% annual inflation target for the dollar. In 30 years a dollar won’t be worth pi$$. Think of your grandpa’s stories of about going the movies for 5 cents. Hell, my elementary school lunch used to be 25 cents and it was a huge deal when they increased it to 75 cents. My daughter’s public school lunch is $3 now…haha.

    I’m trying to buy as much land/real estate and real tangible assets on the longest fixed term/note possible because I will be paying my fixed loans back with funny money in 30 years. My $2,000 mortgage payment today which will be the same in the year 2049 (slightly more with tax increases, etc.) will be the cost of a school lunch by then.

And then of course the #1 con to going with longer term mortgages is all the extra money you pay up due to higher interest rates and time! Which again as we showed last week was not tiny!

The idea of having a bulk of your money tied up in your home was another oft-cited con, rather than investing it into more income-generating assets. In fact, out of all articles passed to me over the past couple of weeks, this one here was the most popular and covered just that (among other things):

11 Great Reasons to Carry a Big, Long Mortgage

Now personally I LIKE having some money poured into the house as we are not diversified at ALL, assets wise (almost all of our money is in the market!), but I can see where this isn’t optimal for those who want to maximize every dollar.

And apparently I’m not as much of a maximizer as I thought! 😉

At any rate, huge thanks again for all your emails and messages y’all sent over, and I’ll continue to keep you posted as we carry on here… Though until we actually FIND A HOUSE none of this really matters, does it? Haha…

I’d like to leave you with some of my favorite comments that I tagged in hopes it helps you in your future home buying journey too…

Never only one answer to this stuff, but the more opinions you hear the closer it usually gets you to finalizing your own! So thanks again for always sharing your thoughts with us! 👍👍

j. money signature

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I had a 15 year and was loving how fast it was going down. Then came the cancer diagnosis and stopped working. I quickly refi-ed to 30 yrs (from 3.33% to 3.75%) while i still qualified. Accelerated payments will have it paid off in 15-20yrs or sooner.
 

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MONEY TODAY IS WORTH MORE THAN MONEY TOMORROW. This is the one that convinced me. Mortgage payments that were modest but sizable 30 years ago are laughably tiny today. Inflation is a beast.

It means in the years to come if I’m not doing any stupid refinancing (and I am not) and our professional lives remain stable (income doesn’t even have to rise) we can swing the payment and it gets easier to manage to the point of being negligible.

While it gives a lot of people juice to say “I own my home outright” you can’t eat your walls even if they drive up NW so meh…

-Bailey

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Hi J$

I would recommend the 30 year term simply because you do not know what is around the corner.

Two years into my first home loan I was made redundant and nearly lost my house (2011). Two and a half years later (mid 2013), when I was just starting to feel that I was back on my feet, I was diagnosed with an aggressive B cell lymphoma. Again, I almost lost my house while battling cancer and unable to work with the physical consequences of chemo. Three years later (2016), in remission, and in a job I was loving, I was diagnosed with a cardiac issue as a consequence of the chemo that meant I was not longer able to drive. While that crimped my lifestyle, I was no longer able to manage my house and downsized in a buyers market, just able to clear the mortgage and put down 20% on a new place.

Please seriously consider the longer term mortgage, and if you have the capacity, pay it off faster. It is a safety net that you don’t you will need until you do.
 

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Hi J Money,

If you go for 15 years, you would be in the mindset of paying it off as early as possible. Meaning that it would be priority no# 1. Owning your own house would be such a relief, knowing that no matter what happens to your investments (or your job), you always have a roof over your head. If you have it set at 30 years, the loan may suddenly drop to priority no#2 or no#3.

The Working At Home Man

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Everyone has a strong opinion on this and mine surely doesn’t matter as much as yours or your wife’s, but we had the same discussions and ended up with a solid compromise.

I wanted 15, wife wanted 30 for “just in case.” We ended up with what I consider a win for both sides. My salary is high enough and savings high enough we were never going to run in to problems if work suddenly ended, but wanted to make sure we still invested heavily. Safety is number one for my wife and investing is number one for me.

We went with 30 just in case for my wife’s sanity which is more important than paying off a house early since the marriage is more important than 2×4’s and drywall. Then I took the first principle payment and doubled it the first year but then the second year tripled it because an extra $300 in savings wasn’t going to do much since everything else was maxed out.

So instead of the basic $1,000 payment for 30 years, it was $1,333 the first year and $1,667 onward. We had it on auto-pay so I couldn’t decide month to month to cheat. House paid off in less than 10 years (luckily ran in to 10 awesome years at work and with the market) and all retirement accounts fully funded as well. We all win!

– Lance

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I commented on the post but wanted to share one approach I’ve taken w/ our 30……. I have an iCal reminder every Friday to pay $50 towards the principal. Every Friday I knock out $50 principal, it’s painless, and will make a big impact in the long haul.

@DavidDamron

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Jay, here’s my best advice (free and worth every penny). 😀 I’d take the 30-year mortgage in your position. Your income fluctuates, which makes life less certain, and you have three kids, which makes life less certain…

Also, I would get an umbrella policy for a million dollars–your approximate net worth. For two or three hundred dollars a year, you get the peace of mind that if something happens on your property or with your car and someone sues you, that policy stands between the courts and your actual hard-earned money to hopefully absorb whatever damages are awarded.

– Jessy

[EDITOR’S NOTE: I’ve Got 99 Problems but a *Million Dollar Umbrella Insurance Policy* Ain’t One 😉]

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Everyone claims they’ll pay a 30 yr down like a 15 but they never follow through, most never even make an extra payment. Lack of financial discipline is a HUGE issue in America & the 30 yr is an excuse to keep poor spending habits. Ive seen it for 10+ yrs as a financial planner.

@rhck3

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I use the direct deposit benefit at my company to make a recurring weekly payment against my mortgage. Since it’s automated, I don’t have to think about it & really don’t miss the money. I figure by doing this, I will be able to shave off 2.5 – 3 years on my mortgage.

-MK

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15 for personal residence and 30 for investment property.

@CapturingCents

 

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