30 year or 15 year mortgage?

Guest 0.10 Dollars($)

I am currently refinancing my condo and trying to decide between a 30 year loan with a 5.5% rate or a 15 year loan with a 5% rate. The out of pocket difference each month would be about $350 extra for the 15 year loan. I can swing the payments but my concern is what if at some point I can not due to any unknown circumstances? Is it better to take the chance in order to pay down the mortgage quicker or is it much safer to keep my money in a 4.5% APY savings account and go with the 30 year loan? I most likely would not be investing the money in any other way.
I am 31 years old and plan on getting married to my current long term boyfriend within the next few years and maybe starting a family. So, we would probably move at some point and either rent out the condo or sell
it. If we rent it I will have to cover about $350 on the 30 year loan or $650 on the 15 year loan due to the rental market prices in the area. Looking at my current income which will most likely only move up with time, I can afford to cover these costs. In this situation would you recommend the 30 year or 15 year loan? Thank you!

larry · Joined: 27 Jun 2007 Posts: 3328 473.40 Dollars($)

Hi volumeem,

Welcome to the forum.

I think it better to go for 30 year fixed rate as you can save a hand some money every month and may utilize this money in some other work. If you are going to sell or rent it out in near future then why will you invest $ 350 every month?

You may have to pay comparatively a bit higher interest rate initially but you can refinance it any time whenever you get a better rate and term.

Feel free to ask if you have any further questions.

Best of luck,
Larry

jenkin7 · Joined: 04 Jun 2007 Posts: 939 140.77 Dollars($)

Hello Volumeem,

Even I agree with Larry.

If you have plans to sell or rent it out, then it will be wise to go for a 30 year fixed rate mortgage and put the extra money in to a savings account.

Although one may think that it will be better to get rid of the financial liability as early as possible, but if you finally sell the house after 5-7 years then why pay more on that?

michelle · Posted: Fri Jan 18, 2008 5:20 am Post subject:

Welcome to the forum volumeem,

I would recommend that you go for the 30 year loan. You can always pay additional principal each month and still pay off the house faster than the 30 years if you'd like.

By choosing the 30 year term, you would have the flexibility you need of having the lower payment should you decide to rent it in the future. This would save you from possibly having to refinance the home in a few years which would add costs.

Please let us know if you have any other questions we can answer for you.

lisascherzer · Joined: 04 Jan 2008 Posts: 599 69.58 Dollars($)

I would play it safe and go with the 30 year mortgage. Don't trap yourself into a higher mortgage payment if you don't need to. You never know what circumstances may arise in the future. You can always pay extra on the mortgage thus cutting the interest paid over the life of the loan substantially.

Guest 0.10 Dollars($)

Thanks everyone. I decided to go for the 30 year.

adonis · Posted: Mon Feb 04, 2008 10:49 pm Post subject:

That's a good decision Volumeen. You can consult some of the lenders in our community as to what rates they are offering.

dcrum0 · Joined: 18 Feb 2008 Posts: 19 10.17 Dollars($)

Sometimes I like to take the other side in an argument just to make sure I see things from both sides. I will choose the 15 year loan on this one. Why?

1. You seem to be very positive about your current and future income being stable.

2. You say in the next few year you plan to get married and start a family so let's say 2 years.

3. You can save some money!

Now to the math. I think your loan is around $150,000. If you take the 15 year at 5% after 1 year you will have saved close to $5,000 opposed to the 30 year 5.5% loan (enough to pay for any refinance charges if you choose to refinance).

Add another year to the math and you will have saved $10,000 in interest. If for some reason something happens (you start having children, this will cost MORE) you can always refinance the loan to a 30 year loan paying refinance charges and still come out ahead even if the rates are slightly higher. Or you could even sell the condo for a greater profit because of the lower principal balance on the loan (this was an option you suggested).

If your financial situation were different I wouldn't suggest this but you seem pretty confident in your finances and your ability to budget money that I don't see why you couldn't swing the 15 year mortgage. And this was just after 2 years, one more year would make your savings even greater and the benefits even more positive.

Just a thought....

Guest 0.10 Dollars($)

"plan on getting married to my current long term boyfriend"

lol thats a funny was to put it no offense.

I was thinking of engaging with my short term pre-qualified girlfriend
=)))))

gmakerley · Posted: Mon Apr 07, 2008 10:56 am Post subject:

just for chuckles...20- and 25-year terms were not an option?

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