Comments on: A 30-Year Mortgage Usually Trumps a 15-Year Mortgage

By: As Rates Spring Back, Is a Weak Summer for Stocks Ahead?

As Rates Spring Back, Is a Weak Summer for Stocks Ahead? — Tue, 23 Aug 2011 14:50:08 +0000

[...] as they were on December 30, 2008 when Treasury yields were at their low, and the average rate on a conventional 30-year fixed rate mortgage remains at about 5%. Rising interest rates are common near the end of recessions, as in fact [...]

By: 15 or 30 Year Mortgage

15 or 30 Year Mortgage — Wed, 10 Aug 2011 13:53:22 +0000

[...] Over the past few years, interest rates on new and refinanced mortgages have fallen to incredibly low levels. This has allowed people to purchase homes at a more affordable level and refinance their mortgages to save hundreds of dollars per month in excess interest charges. While rates are low on all mortgage products, borrowers still need to decide if they want to pursue a 15 or 30 year mortgage. [...]

By: Christoph

Christoph — Wed, 18 May 2011 20:26:18 +0000

Hey Kevin,

I think your post is dead on. Two years ago we were exactly in this position: 30 or 15 years. We knew that for the foreseeable future we would be able to make 15 year payments but then again, if we paid of the 30 year mortgage making 15 year payments, the additional interest payment due to a slightly higher rate for the 30 year loan would amount to less than 2% of the whole paid sum.

Sure enough, two times we hit a rough spot since then where cash got really low and we were really glad to be able to cut down our payments. So yes, I can only recommend going for 30y mortgage, but paying it off in 15y 6mo or so (who says you can’t even pay it off faster

By: Mortgage Rates today

Mortgage Rates today — Wed, 06 Apr 2011 07:20:46 +0000

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By: eric_wan

eric_wan — Tue, 11 Jan 2011 20:40:32 +0000

yeah Matt…I hear you. I’d love to do the 100% down plan, but decided to roll the dice with the bank @ 15 years. I do know a guy who did that though—everyone thought he was nuts at the time.

By: Matt SF

Matt SF — Tue, 11 Jan 2011 18:47:53 +0000

@ eric_wan

Yes, my bias would side towards the 15 year since I’m against paying more in interest payments than need be.

But honestly, after working in finance for a few years and learning the “dark side” of the business, I’d suggest paying in cash or using owner financing.

Why allow banking middlemen to make the profits on the interest rate spread (your savings account at 0.XX% vs. mortgage rates at 4-6%) when you can keep it yourself?

By: House Hunter

House Hunter — Tue, 11 Jan 2011 18:39:14 +0000

Before the housing crisis, my friend reminded me to buy a more expensive house so the house could appreciate more faster. But now I don’t think I would listen to him. I decided to go for a house about $30k less value than my initial plan, therefore I could go for 15 and just add about another $200 which probably I could save from the gas and electricity from a bigger house. Thank you all of you for the posts. I learned a lot from different views.

By: eric_wan

eric_wan — Mon, 10 Jan 2011 16:56:25 +0000

I think your lists pretty much land on the side of encouraging the 15 year. Greater “affordability” is maybe not such a good thing? And while the inflation hedge via a fixed rate works for either term, I don’t equate 15 extra years of indebtedness to lower risk—for me that would be higher risk, but again that is just me.

By: Matt SF

Matt SF — Mon, 10 Jan 2011 16:25:04 +0000

@House Hunter & @eric_wan

The debate and usefulness of the 30 year mortgage could go back n’ forth depending on which team you play for.

Proponents of banking:
1) lowers barrier to entry/greater affordability
2) lowers risk to borrower and bank (lower payment means easier to make payments)
3) locked interest rate & future inflation benefit borrower (a $1000 mortgage payment started in 1996 is easier to make today than it was 15 years ago)

Critics of banking:
1) increases banks profits via amortization equation
2) easier to inflate housing prices
3) US government encourages & rewards indebted citizens (indebted citizenry never strikes; always works)

As with most things, there are lots of variables to consider and what might not benefit one person benefits the other.

By: eric_wan

eric_wan — Mon, 10 Jan 2011 16:01:17 +0000

House Hunter, you are spot on…it can be a virtuous circle for the buyer and generally speaking, the economy.

I think the bank’s came up with the 30 year concept—in conjunction with the mortgage bond market possibly? I don’t know the history on it, but it is an arbitrary number really.

The US suffers from stuff-itis—filling a hole in our lives with stuff. Reminds me of a gas—just fills whatever void it finds. Now we export it! ;]