30 year vs. 15

[dawnwes]

I know the thinking is that a 15 year mortgage is best, no more than 28% of your income, etc.....and that is what we are currently doing.

We are moving. I am actually going to look at houses today with the realtor.

We are considering getting a 30 year mortgage but paying it like it is 15. We have kids going to college and we would like the option to pay less if necessary for a few years.

My hesitation with a 30 year is the interest rate is higher, so even if we pay it like a 15 year, we will be paying more overall.

Thoughts?

[Jluke]

What are the terms of each loan (loan amount, interest rate)?

Amortization schedule will help

[dawnwes]

I have already run the amortization.

Interest is a full point difference. 2.8 vs. 3.8.

Of course, if we paid over 30 years, the difference is far greater......hundreds of thousands of dollars difference.

Loan amount, I am not completely sure. Probably between 200K-300K. We haven't quite decided that yet. If it is 200K, we would just do a 15.....that would be completely doable. But the area we are moving to is higher cost. We have 200K to put down and no other loans/debt.

[TexasHusker]

Back when rates were 7-8-9 percent, I was all for a 15 year. Sub 4%, I'd borrow the funds for 50 years of they allowed it.

[feh]

I know the thinking is that a 15 year mortgage is best, no more than 28% of your income, etc.....and that is what we are currently doing.

We are moving. I am actually going to look at houses today with the realtor.

We are considering getting a 30 year mortgage but paying it like it is 15. We have kids going to college and we would like the option to pay less if necessary for a few years.

My hesitation with a 30 year is the interest rate is higher, so even if we pay it like a 15 year, we will be paying more overall.

Thoughts?

Sounds like you are aware of the pros & cons. Only you can decide which option is better.

FWIW - our first mortgage was a 20 year.

[dawnwes]

on a $250K loan:

2.8% on a 15, paying just the reg. payments, roughly $56,500 in interest over 15 years.

3.8% on a 30, $170K in interest.

3.8% on a 20 year is $107K in interest.

3.8% on a 15 year (paying a 30 like a 15) would be $78K in interest, so the house would cost $22,000 more with the higher interest rate if we paid it off in 15 years.

What I can't find is a calculator to calculate paying more some years and less some years.....

[dawnwes]

Back when rates were 7-8-9 percent, I was all for a 15 year. Sub 4%, I'd borrow the funds for 50 years of they allowed it.

Why would you want to pay more interest?

[Jluke]

Loan amount, I am not completely sure. Probably between 200K-300K. We haven't quite decided that yet. If it is 200K, we would just do a 15.....that would be completely doable. But the area we are moving to is higher cost. We have 200K to put down and no other loans/debt.

You're definitely in control of the situation with having that much cash to put towards the purchase.

Decide what monthly payment you are comfortable with, then figure out what loan amount that translates to with the 15-year loan and hopefully you can find a house for 200k plus the loan amount.

Have you considered a 20-year mortgage?

note: I wrote this while the previous responses were being posted, thus the duplicated suggestions.

[feh]

Why would you want to pay more interest?

Theoretically, if you invest the money that was otherwise going to be used for a mortgage payment, you come out ahead if the investment returns more than the rate on the mortgage (which is even less than the numbers you posted above, after you take the tax deduction into account).

[Jluke]

What I can't find is a calculator to calculate paying more some years and less some years.....

If you use the excel amortization schedule you can unprotect the fields and then you have the ability to insert different amounts for the extra payments at each month. That's how I have been tracking my random mortgage payments.

[dawnwes]

If you use the excel amortization schedule you can unprotect the fields and then you have the ability to insert different amounts for the extra payments at each month. That's how I have been tracking my random mortgage payments.

Thanks, I will take a look, although I am not that Excel savvy.

[dawnwes]

Theoretically, if you invest the money that was otherwise going to be used for a mortgage payment, you come out ahead if the investment returns more than the rate on the mortgage (which is even less than the numbers you posted above, after you take the tax deduction into account).

'

Those are definitely theoretical and full of "ifs"

We do invest. We are rather conservative about it though.

[dawnwes]

You're definitely in control of the situation with having that much cash to put towards the purchase.

Decide what monthly payment you are comfortable with, then figure out what loan amount that translates to with the 15-year loan and hopefully you can find a house for 200k plus the loan amount.

Have you considered a 20-year mortgage?

note: I wrote this while the previous responses were being posted, thus the duplicated suggestions.

Yes, although the interest rate for a 30 year is the same as a 20, so again, getting a 30 and just paying more would be the preference if that is the option.

[dawnwes]

I am currently applying for a job for next school year. If I get the job before we buy our next house, we will feel more comfortable with a 15 year mortgage and just use my salary for college expenses.

I haven't worked for 10 years (stayed home with kids), so I have age and 10 years of no work experience against me, but I am still hopeful.

[Jluke]

Thanks, but.....I need something easier......I don't want to put in every single month's payments for over 300 payments. And I am not that savvy with Excel

I hear you on inputting each month. Perhaps that was a subconscious reason I got aggressive with the mortgage - less to track