# Home Mortgage - 15 or 30 yr ?



## winger (Aug 22, 2012)

I personally know alot of people who have taken out 30 yr loans even though IF they really stretched things, can support a 15 year loan.  The general  thought seems is 30 years give more payment flexibility.  For example, if a 30 year loan requires a $1300/mo payment, during the holidays, you just pay the 'normal' $1300/mo.  Other times of the year, you can do the $1300/mo + any other amount towards principle only (like $700/mo).  On the other hand, if he would have taken out a 15 year loan, the monthly would be a fixed $2000/mo.  I have suspicion that more than a handful of the people I know who go this route end up spending the intended extra payments on other things (vacations, electronics, home upgrades, extracurricular activities for kids, gifts for friends and family, etc.  LOL one even spend $5000 buying a pony for his daughter - which they sold at a loss less than one year later).

Retirement speaking, I do not see myself working 30 more years - but I do see myself potentially staying in my next home through retirement.

My personal preference is go with the 15 yr - however, since we are a one-income only family, it seems it is riskier going with the higher per month payment (with the 15yr).  On the other hand, if we went with the 30 yr and made extra payments each month (say, total payment = 15 yr), it looks like we will be stretching out the payments a few more years.

Rates I saw today were:
3.00 15 yr
3.625 30 yr

For argument sake, if anyone wants to crunch numbers, let's assume a loan $300k.

Any thoughts or financial gurus out there on TUG ?


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## am1 (Aug 22, 2012)

15yr is better.  Its just a matter if you can afford it.  .006% on 300k is a lot


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## Elan (Aug 22, 2012)

I'd go with the 30 year.  Why?  Because rates are at historical lows.  If inflation hits double digits, then you're going to want to be doing something else with any disposable income besides putting it toward your 4% mortgage.  Also, as you mentioned, you can give yourself some flexibility with a lower req'd monthly, and yet still pay down early if/when it makes sense to do so.  As you also pointed out, you have to have the discipline to make the extra payment.  Thus, for me -- auto pay.   

  I refi'd to a 15 year in Nov 2009.  I have been paying my mortgage down with extra payments (auto bank deduction) pretty rapidly.  I have about 7 years left at my current payment rate.  Having said that, I'm seriously considering refi'ing the balance to a 30 year loan.  If I do so, I will cut the req'd principle/interest payment by about 60%, which would be nice in case of job loss, yet I still have the option to pay off in 7ish years at essentially the same current payment.  Furthermore, the rate difference between 15 and 30 year mortgages is pretty negligible right now.

  I'd definitely go 30, with the understanding that one pay extra when it makes sense to do so.


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## Talent312 (Aug 22, 2012)

We refi'ed in March to a 10yr. mortgage. Why so short?
I want the house paid off by the time I retire.
Our Credit Union offered 3.125% and paid all the closing costs.

Our thinking: Payments stay the same, but our income increases
over time (hopeully), making the higher payments easier to bear.


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## glypnirsgirl (Aug 22, 2012)

I think that the main criteria is when you want to stop paying. We are in the process of re-financing (appraiser coming tomorrow). We debated this for weeks. We finally decided to go with the 15 year mortgage. The PITI on the 15 year note are the same amount as the PI on our current note. We normally have to come out of pocket for an additional $5K for taxes and insurance. 

We have been paying our current mortgage while putting 4 kids through college. It has been a year since the last one graduated. Things are getting easier, not harder for us for now. 

I want to be done with this. I am planning on adding the old tax and insurance money onto the note. And paying this off in 8 years. I don't want a mortgage going into retirement. If I were younger, I would decide differently. 

Because from an economic standpoint, Elan is correct, It would be nice to have a 4% (or less) mortgage when you can earn more than that on your savings.


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## MuranoJo (Aug 22, 2012)

If you're truly disciplined and do the automatic payments as Elan suggests, I'd say go with the 30 year, if you have quite some time before retirement  + it will give you payment flexibility in case of emergencies.

However, unless you get on an auto-pay system and stay there, it will be so easy to get distracted.  

I'll expose our situation as a case in point.  We agreed years ago that instead of refi'g to 15-year, we'd refi to 30 year and plop the difference into an interest-earning account and just take the investment and pay off the mortage plus have leftovers in 15 years.  (This was back when the math worked--the return did not materialize.)  

Regrets now that I head into early retirement, although we did refinance after all to a 15-year several years ago.  However, there is something to be said about the tax advantage if a large portion of your retirement income is coming from tax-deferred or annuity streams.


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## Ken555 (Aug 23, 2012)

I think you'll find that the reason different mortgage options exist is because there isn't a perfect solution for everyone. Some variables only you can answer, which will help make a good decision for you. That said, I agree with everything the earlier posts have said.


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## vacationhopeful (Aug 23, 2012)

*I have paid OFF *several 15 yr loans and several 30yr loans. 15 years is not that long and gives you much more freedom as your kids are late teenagers or going off to college. I would not be in good shape now IF I was still paying all the P & I of those long gone 15 yr loans - as I have to pay 6 real estate tax quarterly payments today ($3500)--- now, those do keep going up.


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## ace2000 (Aug 23, 2012)

Go 15 years.  You'll hear some say to take the 30 year route and you can always pay it early in 15 years, and you'll hear about the interest tax deduction, etc.  But the fact is most people will never make the extra payments.  And having a house free and clear is a really nice feeling.


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## EZ-ED (Aug 23, 2012)

15 or 30? How about 10 or even 7? The payments are obviously higher but If your job is steady, if you have sufficient emergency savings, if you expect future raises then the payments become easier as you adjust your lifestyle to meet the monthly obligation. A year or so of hurt getting use to those higher payments is well worth the benefit of having your home free and clear of a mortgage especially if the mortgage deduction on interest were to go away, which I see as a distinct  possibility no matter which party is in charge.


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## Rob&Carol Q (Aug 23, 2012)

ace2000 said:


> Go 15 years.  You'll hear some say to take the 30 year route and you can always pay it early in 15 years, and you'll hear about the interest tax deduction, etc.  *But the fact is most people will never make the extra payments.*  And having a house free and clear is a really nice feeling.



BINGO!

Or, to put it another way, you'll always find something to spend the money on.  Takes a ton of discipline to regularly make extra payments and truth be told, "most" folks don't.

Obviously, we have some here that do...I know I'm not one of them...so 15 year is what we have.  After several versions of 30 yr mortgages over time  and a personal history of maybe three(3) whole extra payments.  Yeah, I needed something to force my hand.  Sometimes seemed like we are hauling the world on our backs but I'm over half way through now and it is easier to lift the burden!  We ARE going to own this thing in about 6.5 years

One point to consider...you lose the tax deduction at some point...we are getting close to that.  Flip side...nobody ever deducted themselves rich.


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## Elan (Aug 23, 2012)

I was going to add what Ken555 said to my earlier post; it's not a one-size-fits-all situation.  While I am pretty convinced that going back to a 30yr term makes sense for me, I wouldn't neccessarily feel the same way if I wasn't:

1) convinced I'd be disciplined enough to pay extra when fixed investment returns are low
2) confident I could do better things with my disposable income when fixed investment returns are higher
3) inclined to believe that inflation will be much higher in the next 10-15 years

  I understand the desire to have no mortgage, but money tied up in a house is "dead money" in the sense that one's house appreciates the same whether there's a mortgage balance or not.  If inflation were to approach double digits, do you really want a large portion of your assets tied up in your house?  I don't. 

  I view my house as part of my investment portfolio.  It's the fixed income portion that "earns" 4ish percent (my loan rate).  I understand that view is not shared by everyone. 

  BTW, on the site I typically reference for current mortgage rates the difference in rates between 30yr and 15yr loans with the same "kickback" amount is only about .25 to .50%.


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## Don (Aug 23, 2012)

We refied our equity line and combined our mortgage with it.  Saved 4% on the EL and 2.125 on the mort.  The plan it to have it paid off within three yrs.


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## geekette (Aug 23, 2012)

Go 30 for the flexibility and lower payments.  you can always pay extra but you must never come up short.


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## barond (Aug 23, 2012)

I believe in the 0 year mortgage.  Cash is King.  Debt is bad.  I rent its cheaper (less risky) than buying.  For houses and timeshares .  at 3.625% interest rate a house is over inflated across the country by quite a bit as normal is around 6-8%.  So unless you are looking to rent from the bank for 30 years I would stay in cash.

300k (100% down)  at 12% yield (investing in stocks etc.) would earn $3k per month which is about what I would need to spend at least to buy a house similar to what I live in.  I rent for 2400 per month plus can move at any time to someplace cheaper (or better) and net 2.4% not buying minimum.  Not including that 300k would cost me about 4% in yearly expenses (2% property, 1% insurance, 1% maintenance).   Of course there is taxes on the yield as well.  I am working on saving up my 100% down payment or until interest rates go up alot more and it makes more sense to buy (as prices come down) or rental costs go up.

references
Housing/Interest Rates
Crown Financial Ministries/Spending Plans
Debt is Bad.  Cash is King

Baron


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## jlwquilter (Aug 23, 2012)

I am starting the re-finance process right now. Does anyone have a mortgage broker or lender that they rally like that is offering rock bottom rates? I personally prefer the flexibility of a 30 year but can do a 15 year if it's attractive enough. You can PM or post a referral  Thanks!

PS: I am starting with Wells Fargo as they currently service my mortgage. But I am not convinced they offer the best rates.


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## antjmar (Aug 23, 2012)

jlwquilter said:


> I am starting the re-finance process right now. Does anyone have a mortgage broker or lender that they rally like that is offering rock bottom rates? I personally prefer the flexibility of a 30 year but can do a 15 year if it's attractive enough. You can PM or post a referral  Thanks!
> 
> PS: I am starting with Wells Fargo as they currently service my mortgage. But I am not convinced they offer the best rates.



I just used amerisave.com for a 20yr refinance they are very competitive IMO.


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## DeniseM (Aug 23, 2012)

We could have gotten a 10 year loan, but we got a 20 year loan and we are paying it off in 10 years by making double payments.  That way if anything should happen that would prevent us from making the larger payment, we can just make the regular payment with no problem - without having to refinance.


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## geekette (Aug 23, 2012)

barond said:


> I believe in the 0 year mortgage.  Cash is King.  Debt is bad.  I rent its cheaper (less risky) than buying.  For houses and timeshares .  at 3.625% interest rate a house is over inflated across the country by quite a bit as normal is around 6-8%.  So unless you are looking to rent from the bank for 30 years I would stay in cash.
> 
> 300k (100% down)  at 12% yield (investing in stocks etc.) would earn $3k per month which is about what I would need to spend at least to buy a house similar to what I live in.  I rent for 2400 per month plus can move at any time to someplace cheaper (or better) and net 2.4% not buying minimum.  Not including that 300k would cost me about 4% in yearly expenses (2% property, 1% insurance, 1% maintenance).   Of course there is taxes on the yield as well.  I am working on saving up my 100% down payment or until interest rates go up alot more and it makes more sense to buy (as prices come down) or rental costs go up.
> 
> ...




I'm glad that works for you, but plenty of us toiling at day jobs just don't have that kind of cash sitting around, so having a loan to enable me to own my home while building equity is a way better option For Me than tossing the money on rent.  You can dismiss equity as vapor value but it is up to me as to how that equity is deployed and my monthly payments on the mortgage do build value in my favor.  At the end of it, I don't have to pay anything more to live there (taxes and insurance excepted) but if I were a renter, those monthly housing payments would never end and each year the lease would be subject to increases, while I own a tangible asset that I can sell for cash.  You can't do that with rent, altho I agree that you can minimize your living expenses.

I have no plans to move every so often when something is cheaper, I chase stability instead.  My home is where I live vs investment, I am building a personal environment for my future vs occupying space.  It makes a big difference in our outlooks.

I do not believe that all debt is bad debt.


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## Elan (Aug 23, 2012)

antjmar said:


> I just used amerisave.com for a 20yr refinance they are very competitive IMO.



  I've also used Amerisave in the past.  IME, they've always been competitive.  They may not be the absolute lowest one could find from calling every institution daily, but you're not going to be ripped off with their rates.  I've also used Amerisave's rates as leverage with a local mortgage broker.


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## jlwquilter (Aug 23, 2012)

Thanks! I'll check out Amerisave. My biggest question area right now is what our house will appraise at. I really have no idea. We live in a rural area and there's very little comps available. I honestly don't know if we are 'underwater' or not. I guess I'll find out soon enough!


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## Egret1986 (Aug 23, 2012)

*We finally were talked into refinancing to a lower rate back in April.*

We' re glad that we did what we did.  We had been approached several times, but they kept trying to talk us into a 15 yr when we were down to 12 yrs on our then current mortgage.  My focus is major debt being paid off so that I can retire.  I don't like debt.  I want to retire in 8 years hopefully.  The latest person to approach us at the bank said that we could go from 5.5% to 3.5% with no costs to refinance on a 15 year.  We gave him the same whine that we didn't want to increase our time to pay off the loan.  His answer (which finally made sense), "keep making your same payment.  You'll pay it off in less time than your current mortgage.  If for some reason, something happens to negatively effect your financial situation, you will have a lower payment to deal with."  All this made enough sense to do it.  So we never stopped making the same payment that we have been paying for the last several years.  I can actually watch my mortgage balance move, where it never seemed to go down before.  




Elan said:


> I understand the desire to have no mortgage, but money tied up in a house is "dead money" in the sense that one's house appreciates the same whether there's a mortgage balance or not.  If inflation were to approach double digits, do you really want a large portion of your assets tied up in your house?  I don't.



I definitely understand this.  It is "dead money".  Unfortunately or not, seeing that light at the end of the tunnel (no mortgage) is a stronger draw for me.  




jlwquilter said:


> PS: I am starting with Wells Fargo as they currently service my mortgage. But I am not convinced they offer the best rates.



Wells Fargo was servicing our mortgage.  Over the last two years, various WF employees asked us about refinancing, but were always pushing a mortgage for a longer period than what we already had.  Other mortgage companies that we checked with were attempting to do the same thing.  The last guy at WF in April, finally gave us reasons where it made sense.   So, we stayed with WF.  Perhaps, we may have done slightly better on the rate if we had shopped around.  The simple answers this guy gave us, convinced us.  All the others could have done the same, but didn't.   It was a very simple process handled with a couple of phone calls and the mail; and no costs to refinance.  I'm happy.


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## bogey21 (Aug 23, 2012)

You maintain more flexibility with the 30 year.  The question is how much you pay for it.  If the difference between the 15 and 30 year interest rate is small (say .25%), I'd go with the 30 year.  If the difference is large (say .75%), I'd probably lean toward the 15 year.

George


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## GetawaysRus (Aug 23, 2012)

Another vote for a 10 year.  I refinanced 2-3 months ago to a 10 year loan at 2.75% (the only fee was $350 for the appraisal).  I had refinanced one year earlier to a 3.25% 10 year (no fees), but I just could not resist going for the even lower rate.

A big wild card is unfortunately the government.  I hear noises every once in a while that the government might consider restricting the deductibility of your home mortgage (possibly for everyone, or possibly just for higher earners).  If the interest on my home mortgage were no longer dedudtible, that would mean that I have a 2.75% expense at the same time that my bank is paying me peanuts on my savings.  That could change your thinking in a hurry about your mortgage.

The AMT (altenative minimum tax) is another factor.  Paying more interest on my home loan means a larger interest deduction, but in the end it also raises my AMT.  That's no good either, so I prefer to keep my mortgage interest costs down with a short term loan so long as the payment is affordable.


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## geekette (Aug 23, 2012)

GetawaysRus said:


> Another vote for a 10 year.  I refinanced 2-3 months ago to a 10 year loan at 2.75% (the only fee was $350 for the appraisal).  I had refinanced one year earlier to a 3.25% 10 year (no fees), but I just could not resist going for the even lower rate.
> 
> A big wild card is unfortunately the government.  I hear noises every once in a while that the government might consider restricting the deductibility of your home mortgage (possibly for everyone, or possibly just for higher earners).  If the interest on my home mortgage were no longer dedudtible, that would mean that I have a 2.75% expense at the same time that my bank is paying me peanuts on my savings.  That could change your thinking in a hurry about your mortgage.
> 
> The AMT (altenative minimum tax) is another factor.  Paying more interest on my home loan means a larger interest deduction, but in the end it also raises my AMT.  That's no good either, so I prefer to keep my mortgage interest costs down with a short term loan so long as the payment is affordable.



While I have no crystal ball, I do not think the mort int deduct will disappear as that would remove a large incentive to purchase a home for many many Americans.  Restricted for high income folks?  That I can see happening but not a total removal.


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## Rose Pink (Aug 23, 2012)

Having no mortgage is a very good feeling for me and my DH.  Even though interest rates are very low and we could use the cheap loan money for home improvements, we have opted not to do so.  We so enjoy not having a mortgage that it isn't worth it to us.

My point is that there is the math and then there is the emotional satisfaction.  That is a very individual thing.


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## spencersmama (Aug 23, 2012)

jlwquilter said:


> Thanks! I'll check out Amerisave. My biggest question area right now is what our house will appraise at. I really have no idea. We live in a rural area and there's very little comps available. I honestly don't know if we are 'underwater' or not. I guess I'll find out soon enough!



Make sure you compare closing costs, too.  When we refinanced last fall, we ended up going with a slightly higher rate fro our existing company because there were to fees.  When we figured out all the extra closing costs from the company with the lowest mortgage rate, it wasn't such a great deal after all.


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## spencersmama (Aug 23, 2012)

winger said:


> Rates I saw today were:
> 3.00 15 yr
> 3.625 30 yr
> 
> For argument sake, if anyone wants to crunch numbers, let's assume a loan $300k.



Here is a website with tons of fun calculators - mortgage, retirement, whether it's worth paying off a loan, how much that coffee habit really costs you...

http://www.hughchou.org/calc/

I have been using his this guy's website for years.  He is a computer guy in St. Louis that is apparently also interested in money.  I can find a calculator for every possible scenario I can think of, and that's saying a lot! It would be best to  


3.00 -15 year
Monthly Payment: $ 2071.74
Total Int:$ 72914.09(No pre-payment) 

3.625 - 30 year
Monthly Payment: $ 1368.15
Total Int:$ 192535.41(No pre-payment) 

Paying an extra $120,000 to a bank in interest is enough to make me nauseous and the reason I chose a 15 year mortgage.  

If you do what some people suggested above and take out a 30 year loan and pay the same as you would for a 15 year, here is what you would get:

    Monthly Payment: $ 1368.15 (plus $700 extra per month to equal approx. the 15 yr)
    Total Int:$ 192535.41(No pre-payment)
    Total Int:$ 95351.72 (As given)
    SAVINGS: $ 97183.68 Total Interest Saved, 14.00 Years shorter loan
    Avg Int each Month: $ 264.87
    SAVINGS: Normal Avg Int/Month : $ 534.82, You Save $ 269.95 

Because of the higher interest rate, you pay an extra $22k in interest and effectively have a 16 year loan.  Using this specific mortgage calculator, http://www.hughchou.org/calc/mort.html , you can plug indifferent prepayment scenarios.  (One time, once a year, once a month, making bimonthly payments, etc)

Have fun!  I love this stuff.  I also love doing taxes.  Crazy - I should have been an accountant or something.


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## winger (Aug 23, 2012)

*Much Thanks!*

I want to first say I have read all the posts so far - and really appreciate the thoughts all of you have shared.

DW and I are at a very important point in our lives (with careers, kids, retirement, and age) input from from all of you, mostly who have been there and done that, is invaluable.  

I echo what's been noted above that the final decision could be either financial/economical or emotional, or a combination of both.  All things said, at this point in time, we are split right down the middle.  In other words, we can afford a 15 year, at the same time, we REALLY could enjoy NOT having a mortgage to pay every month for a variety of reasons.

Please keep the thoughts coming as we just sold our home (closed this month) and am looking to purchase a new one - sooner than later IF it were up to me since I like the rates where they are now (although they have moved up a bit in the past month).  I am sure the input from this thread would assist us in our final decision.


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## VivianLynne (Aug 23, 2012)

My vacation home was vandalized by teenagers. It has been mortgage free for 15+ years (20 year loan when I built it). 

I did NOT have to deal with a mortgage company getting the insurance check directly and doling out my repair money to the contractor and I paying the mtg company's INSPECTOR to make sure their (the mtg co.) interest were still being protected.

Dealing with the insurance company is pain enough.

My vote is for the 15 yr mtg.   If I have a vote ...


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## geekette (Aug 23, 2012)

spencersmama said:


> Here is a website with tons of fun calculators - mortgage, retirement, whether it's worth paying off a loan, how much that coffee habit really costs you...
> 
> http://www.hughchou.org/calc/
> ...Have fun!  I love this stuff.  I also love doing taxes.  Crazy - I should have been an accountant or something.



I can't thank you enuf for this link, I can see spending many hours with my new friend Hugh, a geek after my own heart...

I also dig numbers.  don't Love doing taxes but it's a chore I find worth doing myself.  When the numbers are My Money, it gets very interesting to me.


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## Elan (Aug 23, 2012)

geekette said:


> I can't thank you enuf for this link, I can see spending many hours with my new friend Hugh, a geek after my own heart...
> 
> I also dig numbers.  don't Love doing taxes but it's a chore I find worth doing myself.  When the numbers are My Money, it gets very interesting to me.



  If you want to play with another really cool mortgage calculator, check this one out:

http://www.drcalculator.com/mortgage/

  This has been my go to for many years.  

  I also find financial analysis interesting.  Taxes?  Not so much.....


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## cotraveller (Aug 23, 2012)

winger said:


> I echo what's been noted above that the final decision could be either financial/economical or emotional, or a combination of both.  All things said, at this point in time, we are split right down the middle.  In other words, we can afford a 15 year, at the same time, we REALLY could enjoy NOT having a mortgage to pay every month for a variety of reasons.



We are in the retired, no mortage category.   We paid the house off before we retired and continued to make the same payment into our retirement savings until we did retire.

From a purely financial point of view a mortgage would probably be best considering the low interest rates available right now.  Of course the investments rates are low too, so even if we took the cash out of the house we couldn't invest it at a higher return without taking higher risks.

From the emotional side, it is really really nice to know that you do not have to make a mortgage payment every month and that unless things got so bad that you couldn't even pay the house taxes you will always have a place to live.  It may be dead money tied up in the house but it gives us a nicer outlook on being alive. That is something you cannot put a price on.  We plan to stay mortgage free.


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## antjmar (Aug 23, 2012)

spencersmama said:


> Make sure you compare closing costs, too.  When we refinanced last fall, we ended up going with a slightly higher rate fro our existing company because there were to fees.  When we figured out all the extra closing costs from the company with the lowest mortgage rate, it wasn't such a great deal after all.



I believe this is why you need to *shop the APR *not the rate. My understanding is the APR factors all this in.


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## Mel (Aug 23, 2012)

I see two potential negatives to the 30 year over the 15 year.

First is the difference in interest rate.  If you take the 30 year at a higher interest rate, you will pay more, even if you make monthly payments based on the 15 year loan.  As has already been stated, if the difference in interest rate is small, that is balanced by the flexibility of being able to set your own payment.

Second is the notion that most people don't end up making the extra payments.  It doesn't really matter what most people do - what will you do?  If you are committed to making extra payments, as if it were a 15 year mortgage, then this is not a negative.

We bought our current house in 2006, when our last house was still on the market.  Because we couldn't afford traditional payments on both houses at the same time (and because DH had just left a job as a mortgage broker and knew the ropes) we got a 20 year interest only loan.  Until the old house sold, we made only the interest payments.  Once the old house sold, we took the loan payment from that house and paid it on this mortgage.  We calculated our payments such that we will pay the loan off on our own schedule - next August just as our oldest DD heads of to college.  The mortgage payments will then convert to tuition payments.  

The only advice I would give is to talk to the mortgage company about how extra payments, and make sure there is no prepayment penalty.  I can't even remember who the original loan was with, but everything worked fine with them.  Then they were bought out by Chase, and we've had issues every year since then.  They like to credit the extra payments as early payments (meaning interest paid early, but not reduced), netting them more money.  We've had to have them go back and recalculate every year when we catch them reverting to their method.  They still do it, even when we send paper checks with a clear explanation to apply to principal.

If you have the discipline to make appropriate payments, and the difference in interest rate is small, I would go with the longer mortgage, and pay it off on your own schedule.


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## jmzf1958 (Aug 23, 2012)

Take out a fifteen year biweekly mortgage.  You'll have it paid off in about 13 years, plus will be paying a lot less interest overall and the interest rates are lower than the thirty year.  It's a nice feeling being mortgage free.


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## spencersmama (Aug 23, 2012)

geekette said:


> I can't thank you enuf for this link, I can see spending many hours with my new friend Hugh, a geek after my own heart...
> 
> I also dig numbers.  don't Love doing taxes but it's a chore I find worth doing myself.  When the numbers are My Money, it gets very interesting to me.



Yay!  When I thought about it, I realized I found his site at least 18 years ago!  Wow, time does fly.  Have fun exploring.  I've been trying to get out of my bad habit of going out to dinner so much.  Maybe calculating how many great trips I can take with the money I save cooking at home will give me incentive!


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## Ken555 (Aug 24, 2012)

Mel said:


> Then they were bought out by Chase, and we've had issues every year since then.  They like to credit the extra payments as early payments (meaning interest paid early, but not reduced), netting them more money.  We've had to have them go back and recalculate every year when we catch them reverting to their method.  They still do it, even when we send paper checks with a clear explanation to apply to principal.



BofA does this, too. I simply pay more with each payment rather than extra payments. It was a real pain getting them to recalc what I sent in separately as extra payments.


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## tompalm (Aug 24, 2012)

jlwquilter said:


> I am starting the re-finance process right now. Does anyone have a mortgage broker or lender that they rally like that is offering rock bottom rates? I personally prefer the flexibility of a 30 year but can do a 15 year if it's attractive enough. You can PM or post a referral  Thanks!
> 
> PS: I am starting with Wells Fargo as they currently service my mortgage. But I am not convinced they offer the best rates.



We just did a refi with Provident.  https://www.provident.com/

The rates are the best I could find.  15 year was 2.75 and they pay a credit to do that.  The 30 year at the time was 3.75 and no points.  We did a 2.75, but I had a difficult time making up my mind which was to go.   In the past, I always took a 30 year to keep payments low and put more money in the stock market.  As I get older, I don't want to take as much risk with equities and decided to take the lower interest rate.


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## Mel (Aug 24, 2012)

Ken555 said:


> BofA does this, too. I simply pay more with each payment rather than extra payments. It was a real pain getting them to recalc what I sent in separately as extra payments.


When I say extra payments, I don't mean a separate payment, but extra $$ over what is owed each month.  No matter how you send the money, they put it in as an early payment (or if you pay enough at once, multiple early payments).  If we weren't this close to paying off, we would refinance.


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## jlwquilter (Aug 24, 2012)

I met with the Wells Fargo guy in a few hours. One of my questions for him will be what am I looking at as an APR if we ARE underwater and what will it be if we are not. The rate he's ballparking me if we are - qualifying under the HARP program - is around 4%. Better than what I have now (refinanced in 2008) but way more than what you guys are quoting as getting.

Did any of you re-fi under HARP? If so, what did you get for an APR? Closing costs? Wells Fargo is quoting a $895 fee plus costs such as appraisal and all the doc stamp costs. I assume also I'd pay all the title costs too... so adds up to several thousands.


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## bogey21 (Aug 24, 2012)

Mel said:


> Then they were bought out by Chase, and we've had issues every year since then.  They like to credit the extra payments as early payments (meaning interest paid early, but not reduced), netting them more money.  We've had to have them go back and recalculate every year when we catch them reverting to their method.  They still do it, even when we send paper checks with a clear explanation to apply to principal.



Trust me.  I am not defending Chase (or any other lender for that matter) but if you make you payments on your Chase mortgage on the Chase website it is easy to designate how the payment is to be applied.  My Son is in Iraq and I make his mortgage payments every month on the Chase website and have no problems designating how the extra dollars should be applied.

George


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## PigsDad (Aug 24, 2012)

antjmar said:


> I believe this is why you need to *shop the APR *not the rate. My understanding is the APR factors all this in.


This is true to some extent, but the APR is calculated as if you took the loan to term.  If you are planning to make payments above the minimum, then the published APR is incorrect.

Kurt


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## Egret1986 (Aug 24, 2012)

*Nothing was mentioned when we refinanced in April about HARP Program*



jlwquilter said:


> I met with the Wells Fargo guy in a few hours. One of my questions for him will be what am I looking at as an APR if we ARE underwater and what will it be if we are not. The rate he's ballparking me if we are - qualifying under the HARP program - is around 4%. Better than what I have now (refinanced in 2008) but way more than what you guys are quoting as getting.
> 
> Did any of you re-fi under HARP? If so, what did you get for an APR? Closing costs? Wells Fargo is quoting a $895 fee plus costs such as appraisal and all the doc stamp costs. I assume also I'd pay all the title costs too... so adds up to several thousands.



We had no costs whatsoever.  Whatever program we did was for a 15 year loan only.  We immediately set up the twice monthly payment and extra money going towards principle.  So our monthly payment never changed, it was just split into two payments on the 1st and 15th, which should have our 15 year loan paid off in 8-1/2 years.


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## glypnirsgirl (Aug 25, 2012)

Thanks for those calculators. It really helps to strategize --- much more easily than the excel spreadsheet that I have been using.

elaine


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## gnorth16 (Aug 25, 2012)

*Flexibility with commitment*



jmzf1958 said:


> Take out a fifteen year biweekly mortgage.  You'll have it paid off in about 13 years, plus will be paying a lot less interest overall and the interest rates are lower than the thirty year.  It's a nice feeling being mortgage free.



Well said, that what we did.

It may be different in Canada, but make sure you look at the amount of pre-payments or the amount you can increase the principal payments by.  Ours has the flexibility of 10% lump sum payments per year  AND the ability to increase the payment by up to 10% per year.  It also allows you to skip 2 payments per year (only pay the interest) and catch up later on in the payment schedule if you want, but no requirement.  

I am the type of person who will never put any "extra" on my mortgage, which is why we chose a 15 year mortgage.  If I have a few grand sitting around it goes towards a trip or another TS (but should really go into an education savings plan ).


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## winger (Aug 25, 2012)

glypnirsgirl said:


> Thanks for those calculators. It really helps to strategize --- much more easily than the excel spreadsheet that I have been using.
> 
> elaine


same here. We will be in contact for our new place by the morning, if all goes well.  We likely will go with the 15 yr, and I well look into whether I can be set up for equal payments every two weeks without abut service fees, as that is the better way to go.


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## Big Matt (Aug 25, 2012)

I've been in the mortgage and mortgage security business my whole career.  

The US mortgage is wonderful.  You can lock into a 30 year rate and prepay it whenever you want.

Bottom line:

Get the lowest interest rate that you can find.  If it means getting a 15 year note and you can afford it, please do.  You'll find that there is usually no benefit from a rate perspective by getting a 10 year note (or less).  Getting a shorter term note only locks in your commitment to pay on that schedule.  Take the flexibility of paying longer and then prepay it if you can.

Once you've locked in your rate, pay it off as fast as you can.  Right now housing is at a bottom from a price perspective.  Borrow at low rates on an asset that will go up in price.  Property values have bottomed out and aren't going down (with some very small exceptions).


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## winger (Aug 26, 2012)

Matt.

It seems every time (which is not often) I have asked a bank or people I know over the years about setting up a every 2 week payment plan on their mortgage payments, the bank charges some fee.  

IS there a way to start a new loan (with my pending purchase) straight away on such a payment plan withOUT the service fee?  IF yes, how would you recommend I go around getting this accomplished?




Big Matt said:


> I've been in the mortgage and mortgage security business my whole career.
> 
> The US mortgage is wonderful.  You can lock into a 30 year rate and prepay it whenever you want.
> 
> ...


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## PigsDad (Aug 26, 2012)

winger said:


> Matt.
> 
> It seems every time (which is not often) I have asked a bank or people I know over the years about setting up a every 2 week payment plan on their mortgage payments, the bank charges some fee.
> 
> IS there a way to start a new loan (with my pending purchase) straight away on such a payment plan withOUT the service fee?  IF yes, how would you recommend I go around getting this accomplished?


They generally charge a fee because they would have to process 26 payments a year paying every two weeks instead of 12 on the standard monthly payment.  

I really don't see the incentive to pay every two weeks.  If you want to make extra payments, just send an extra amount every month with your mortgage.  Better yet, set up automatic payments with the extra amount included.  

To keep it perfectly equal to paying every two weeks, calculate the total of wht would be your bi-weekly payments for a year (payment * 26), and then divide that amount by 12.  Then that is your monthly payment.

I really can't believe the number of people that get suckered into paying a monthly fee just to pay every two weeks.  Makes absolutely no sense to me.

Kurt


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## Elan (Aug 26, 2012)

PigsDad said:


> They generally charge a fee because they would have to process 26 payments a year paying every two weeks instead of 12 on the standard monthly payment.
> 
> I really don't see the incentive to pay every two weeks.  If you want to make extra payments, just send an extra amount every month with your mortgage.  Better yet, set up automatic payments with the extra amount included.
> 
> ...



  Agree completely.  Go to the mortgage calculator that I linked, put in the length of time you'd like to pay off your mortgage, and send the calculated amount in every month.


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## Ken555 (Aug 26, 2012)

PigsDad said:


> If you want to make extra payments, just send an extra amount every month with your mortgage.  Better yet, set up automatic payments with the extra amount included.



+1

This is what I've done for years. It works great.


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## spencersmama (Aug 26, 2012)

winger said:


> Matt.
> 
> It seems every time (which is not often) I have asked a bank or people I know over the years about setting up a every 2 week payment plan on their mortgage payments, the bank charges some fee.
> 
> IS there a way to start a new loan (with my pending purchase) straight away on such a payment plan withOUT the service fee?  IF yes, how would you recommend I go around getting this accomplished?



winger - 

Make you sure you check online.  I have received "offers" in the past from companies to pay to have my mortgage converted to biweekly mortgage, but those were third party companies.  I have gone online and set up biweekly direct withdrawal payments from my checking account with no service fees.  Maybe if you go paperless, there won't be a charge.  

I have paid the mortgage both ways - bi weekly and adding extra principle each month.  Each has it's advantages.  I think it's easier to budget with a biweekly mortgage because we always have the same amount of cash to work with every other week after paying the mortgage.  On the other hand, it is nice to have the 2 "bonus" paychecks each year when we pay monthly.  (While the total net money spent is the same, there is something psychological about each choice.)


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## geekette (Aug 26, 2012)

winger said:


> Matt.
> 
> It seems every time (which is not often) I have asked a bank or people I know over the years about setting up a every 2 week payment plan on their mortgage payments, the bank charges some fee.
> 
> IS there a way to start a new loan (with my pending purchase) straight away on such a payment plan withOUT the service fee?  IF yes, how would you recommend I go around getting this accomplished?



That has become part of the desperate money grab banks started some time ago.  Somehow it got popular to do 15 year and like timeshares reselling you points, they managed to get people to pay again for the "privilege" of having a trendy 15 yr.  

They could charge loan origination, title search, doc prep, appraisal, closing costs, whatever, and people were paying it, so, like the famous Nigerian relatives of mine, they continued to try to promote it as a refi option.

Yes, you should not have any extra closing or other mortgage fees Just Because you choose 15 year.  If you want to pay every other week then just make sure that it will be applied to principal and off you go.  

There should never Ever have been any fee to pay twice monthly, especially if it isn't by check.  Charging Me to give Them Money I Owe Them early ?  No, I do not think so.  That's moves the needle towards predatory.  

I do understand "processing overhead" but that should not be a consideration now in the age of electronic automation.  

Keep shopping if you find fees to pay twice monthly.  That just says they do not want your accelerated and conscientious payback and certainly haven't earned your business.

 I look forward to Matt coming back as I'm not sure my crackpot theories are on target


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## geekette (Aug 26, 2012)

see if INGDirect.com has any mortgage product that is competitive.  closing costs seemed high, $2k ish, but that might be good, I dunno.


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## pedro47 (Aug 26, 2012)

According to Suze Orman a 15 yrs mortgage is better.


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## winger (Aug 27, 2012)

Based on a quick glance of the most recent posts and with the help of my newly-found friend Hugh's website, I ran the following three scenarios:

1. Pay 1/2 of $MP every two weeks (means 26 pmts/yr)
2. Pay $MP/mo + make one $MP to principle-only each yr
3. Pay $MP/mo + $(MP/12)/mo to principle-only

Where "MP" equates to the normal monthly payment amount on a given 15 year fixed-rate loan.  I assume the math works out similarly to a 30 yr fixed rate loan.

Duration-wise, scenarios 1. and 2. pays off the mortgage 1.33 yrs sooner than just paying once per month.  Scenario 3. pays off the mortgage 1.42 years sooner than the once per month.  In all three scenarios, but the end of the year, you effectively have made one month's worth of principle-only payment (based on the normal 12 pmts/year monthly amount, MP).


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## Htoo0 (Aug 27, 2012)

Provided the APR and loan costs are comparable and there's no prepayment penalty, I have always gone for the longer term loans. In my younger days I did this with car loans as well. Always paid them off early but liked knowing if something happened to one of us there was hope we could still afford the minimum payments. We were lucky, nothing ever happened and the house was paid off in under 15. Really gave the retirement plan a boost as does driving cars 10-15 years after paying them off in 2-3.


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## Talent312 (Aug 27, 2012)

winger said:


> Based on a quick glance of the most recent posts and with the help of my newly-found friend Hugh's website, I ran the following three scenarios:
> 
> 1. Pay 1/2 of $MP every two weeks (means 26 pmts/yr)
> 2. Pay $MP/mo + make one $MP to principal-only each yr
> 3. Pay $MP/mo + $(MP/12)/mo to principal-only



Mathematical formulas make my brain hurt. My system is far simpler:
(1) Whenever my savings goes over my base amount by 'x' amount;
(2) I pay 'x' on my mortgage.

This happens about 4x per year, and will shorten my term considerably.


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## Ken555 (Aug 27, 2012)

Talent312 said:


> Mathematical formulas make my brain hurt. My system is far simpler:
> (1) Whenever my savings goes over my base amount by 'x' amount;
> (2) I pay 'x' on my mortgage.
> 
> This happens about 4x per year, and will shorten my term considerably.



This is the way I do it, and it's really quite simple.

Just. Pay. More.


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## geekette (Aug 27, 2012)

Ken555 said:


> This is the way I do it, and it's really quite simple.
> 
> Just. Pay. More.



I have mine on autopay with an extra amount already included every month.  No thinking.   I will often prepay January in December with an extra large payment.


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## hutad (Aug 29, 2012)

*I'd go with 15...*

I'd go with a 15 year mortgage if you can afford it and you can lock in a decent rate.  I have no doubt that the rates will go back up again in the next couple years.  If you can buy 15 year money right now and don't see the increase in payment from 30 year money to be a big issue then I would suggest that you with 15.

You never know if one day you'll need money for a rainy day and if you have your home paid off in half as much time, you'll have a much easier time borrowing against it.


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