30 Year Mortgage

[Reel Poor]

Why would you finance for 30 years? On a home mortage loan of $125,000.00 (one hundred twenty five thousand) financed for 30 years at 6.5% is<br />approximently<br />Monthly Payment...............$790.00<br />Annual Payment................$9,481.00 <br />Interest Over Term of Loan....$159,432.00<br /><br />On the other hand a 15 year loan, same money, $125,000.00 is approximately<br />Monthly Payment...............$1,088.00<br />Annual Payment................$13,066.00<br />Interest Over Term of Loan....$70,998.00<br /><br />I realize that the monthly payment is about $300.00 dollars a month higher, but the difference in interest over the term of the loan is about $88,000 dollars more than a 15 year loan. This is enough alone to buy a decent home in the rual areas around here.

 

[treedancer]

Re: 30 Year Mortgage

Well the theory is if you take the three hundred and are a savvy investor you could make more than eight percent. Maybe in a bull market like the nineties but is rather hard now. That being said if you have any kind of credit card debt you could pay that off with the extra three hundred.<br /> <br /> It is just as easy to paying the mortgage down by paying on principle every month .Just takes a lot of dispiline.

 

[Haut Medoc]

Re: 30 Year Mortgage

You & I own a business....We can laugh at $300...$300. a month is the difference between having a roof over your head & other luxuries such as food, etc. for some....One thing I will say about this forum.....Most members have done well for themselves & have no idea what it is like to be truly poor....No disrespect, Reel Poor, but your boat is probably worth more than quite a few peoples domiciles, who can't afford to post here.....There are alot of people who can barely afford $300. to put a roof over their head.....We should thank our lucky stars that we are not among them..... .....JK

 

[T_I_M]

Re: 30 Year Mortgage

Why would you finance for 30 years? On a home mortgage loan of $125,000.00

While here in my area you can't get a house for under $300,000.00. I can see why the terms are going up.We are lucky and got in way before the big Olympic craze/buying spree.

 

[roscoe]

Re: 30 Year Mortgage

Simple answer Reel Poor.<br />When I bought my first house, I financed for 30 years because thats the only way I would qualify for the loan.<br /><br />When I bought my second house, also financed for 30 years. Why? Because I only planned on staying in the house for 2-3 years and wanted to spend the "$300 a month" on remodeling supplies and home improvements.

 

[Andrew Leigh]

Re: 30 Year Mortgage

Hi Reel Poor,<br /><br />Most people I know of who are well off have a substantial asset base. In most cases the assets generate income providing a sustainable long term, inflation beating, retirement plan. These people have taken the strain early on in their lives and have sacrificed things in order to pay off assets sooner i.e. 15 year mortage not 30 year.<br /><br />As you put it, the savings buy you a modest home in the rural areas. Now you have a holiday home too. The problem is to exercise the necessary disipline to ensure that the savings are realised and that they go into the next asset.<br /><br />To be fair not everyone is able to afford this but if you were it may well be the start to financial prosperity.<br /><br />There are many reasons people don't have money. Some are through misfortune, some squander whilst others spend a disprortionate amount of money on depreciating assets rather than appreciating ones. Flash cars, boats, four wheelers etc. these are all fine but if they come at the expense of a home etc. then long term one may be financial trouble.<br /><br />The fist step to financial independence, for the average person that is, is to own your own home. The faster you can pay it off the faster to get to achieving financial freedom.<br /><br />So Reel Poor 15 years if you can. But as Haut Medoc says judging from your boat you probably already know that and are posting a rhetorical question . <br /><br /><br />Cheers<br />Andrew

 

[kenimpzoom]

Re: 30 Year Mortgage

Get a thirty year loan and then make an extra payment on principle once a year.<br /><br />Plus I feel sorry for banks, they need the money. <br /><br />Ken

 

[FSHKPR]

Re: 30 Year Mortgage

usually get the 30 year also and make a extra payment every month. mainly because if something would ever happen i can always drop down to the cheaper monthly payment. like has been said before we all here are pretty lucky. not that some of us havnt been thru hard times but for the most part lifes been good to me. thank you lord.

 

[Link]

Re: 30 Year Mortgage

Wow I paid $34,000 for this place in 1985<br />15 year private contract at 3% and been paid off for years.<br /><br />Now sells for $110,000. Should double that when a contractor wants to build a apartment.<br /><br />My first house in 1973 on a 30 year I paid 14,400 and sold for 40,000 in 1979<br /><br />Would be hard for me to get a 30 year anymore..they thinks I might be dead by then, most likely correct!

 

[lakelover]

Re: 30 Year Mortgage

We bought our house with a 30-year mainly for the lower payments, with the intention of paying extra every month. The idea was that we could fall back to the lower payment if we had a financial emergency. Because of declining interest rates and plenty of hassles over the bank continually increasing our escrow payment, seven years later in the early 90's, we refinanced to a 15 year with even lower payments and no escrow account at a local bank and kept paying extra "almost" every month. After 19 years, we owned the house free & clear. The 30-year was just an "insurance policy" for us. Bought in 1986 for $73,000, now valued at $115,000.<br /><br />By the way, the bank that shafted with the escrow account was sued in a class action lawsuit and lost.<br /><br />And agreed, we all here are pretty fortunate.

 

[RubberFrog]

Re: 30 Year Mortgage

My shed cost $115,000 <br /><br />Starter homes, with no basement or garage, start in the low 500's around here. I'm jealous.

 

[RubberFrog]

Re: 30 Year Mortgage

Going back to PR's example-<br /><br />15 vs 30 on 125k = 300 a month difference.<br /><br />That means on a starter home @ 500k the difference is 1200 a month. <br /><br />That's why people do 30 and not 15. At least around here.

 

[one more cast]

Re: 30 Year Mortgage

The same reason that my BIG boat is only 16'long and 23 years old. The same reason that I have to stay home more now that gas is $2.50+/gal. AND. The same reason that I have to run my vehicles until they die.

 

[aspeck]

Re: 30 Year Mortgage

If you have to do the 30 year on the mortgage, then double up your payments in those first few years. Let me explain:<br /><br />Your first payment is actually $789.98<br />Interest you are paying is $ 670.07<br />Principle you are paying is $ 99.91<br />If you pay the principle for the second payment at the same time, ($167.19) your first payment will be $957.17 and you will have saved $622.79 in interest and knocked 1 month off or your loan.<br /><br />Your second payment is actually $789.98, but pay $914.12 instead. This pays for your interest and the principle for what would have been your 4th payment. You just saved another $665.84 in interest and took another month off your payment plan.<br /><br />Continue this until the principle payment gets too high for you to afford to pay 2 of them plus a month's interest. By then, you will have cut many years off your loan and saved tens of thousands of dollars!

 

[Tyme2fish]

Re: 30 Year Mortgage

Originally posted by aspeck:<br /> If you have to do the 30 year on the mortgage, then double up your payments in those first few years. Let me explain:<br /><br />Your first payment is actually $789.98<br />Interest you are paying is $ 670.07<br />Principle you are paying is $ 99.91<br />If you pay the principle for the second payment at the same time, ($167.19) your first payment will be $957.17 and you will have saved $622.79 in interest and knocked 1 month off or your loan.<br /><br />Your second payment is actually $789.98, but pay $914.12 instead. This pays for your interest and the principle for what would have been your 4th payment. You just saved another $665.84 in interest and took another month off your payment plan.<br /><br />Continue this until the principle payment gets too high for you to afford to pay 2 of them plus a month's interest. By then, you will have cut many years off your loan and saved tens of thousands of dollars!

That's all well and good IF you can afford it. My son just bought a house on a 30 year mortgage. That's all he can afford and that will be tight for him. Hopefully the future will bring better rewards for him.<br /><br />I on the other hand had a 15 year mortgage and paid it off in less than 7 years.Totally debt free now.<br /><br />Before anyone askes why I didn't help my son out with some money, I GAVE him $6,000.00 towards his house.

 

[eeboater]

Re: 30 Year Mortgage

Hey RP... you're on the right track!!<br /><br />Many people do not realize this... but traditionally 15 YR Fixed rates are lower than 30 Yr Fixed...<br /><br />Just a quick look at all our investors. The pricing adjustment on most of them for a 15 yr. fixed is to SUBTRACT .50-.90 to the 30 YR fixed interest rate.

 

[18rabbit]

Re: 30 Year Mortgage

Take the 15-year loan with the $1088/mo payment and then pay $1500/mo ($412 addl prin). Be done with it in 8 years or so.<br /><br />If you can’t afford it, realign your lifestyle and/or keep saving until you can.<br /><br />Also, avoid PMI costs with 20% or more down. That's more money you can throw at the prin.

 

[Reel Poor]

Re: 30 Year Mortgage

I bought a rental property about 5 years ago on a 15 year fixed then refinanced it 2 years later at almost 4% less on a 10 year fixed and saved over $20,000.00 in interest, about $300.00 a month, plus knocked off 3 years of payments. And will pay this off in about 4 years for even more savings, not much but some.<br /><br />The whole point of the topic was to bring attention to the financial savings.

 

[Andrew Leigh]

Re: 30 Year Mortgage

Reel Poor,<br /><br />Then you and I are on the same wave length.<br /><br />Cheers<br />Andrew<br /><br />PS: A more evocotive thread than many may think

 

[Nos4r2]

Re: 30 Year Mortgage

Frightening though, over here the banks are offering 50 year mortgages as soon 1st time buyers will be totally priced out of the market. Just bought our 1st home. 2 bedroom terraced house. £120,000. The mortgage comes to the equivalent of $1300/month.