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<\/a><\/p>\nMoney guru Dave Ramsey has a lot to say about buying houses, and one of the things he\u2019s most adamant about is choosing a 15-year mortgage rather than a 30-year mortgage.<\/p>\n
He also says that you should wait to buy until you can put 20% down and avoid private mortgage insurance, and to temper your choice so the payment on your mortgage is no more than 25% of your monthly take-home pay.<\/p>\n
Dave says that if you can\u2019t afford the payment on a 15 year mortgage, you either aren\u2019t ready for home ownership, or you need to scale down your wants in order to buy a home you can afford.<\/p>\n
Why does Dave recommend a 15-year mortgage?<\/p>\n
The first reason is obvious. If you stay in your home until it\u2019s paid off, you\u2019ll own your home in 15 years rather than 30.<\/p>\n
The second reason is that you\u2019ll spend thousands less to achieve that ownership.<\/p>\n
Let\u2019s look at the difference in what you\u2019ll spend to own that house.<\/p>\n
Say you\u2019ve chosen a house that costs $250,000 and you\u2019re able to put 20% down. Your new mortgage will be for $200,000.<\/p>\n
Let\u2019s say you\u2019ll pay 3.77% on a 30-year mortgage. The payment for principal and interest will be $928.50. Because banks charge a lower interest rate on 15-year mortgages, that interest rate would likely be 3.23%. Your monthly payment would be $1,403.39, or $474.89 more.<\/p>\n
That seems like a lot, coming out of your monthly income, but if you can afford it, it\u2019s worth it for the long term.<\/p>\n
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- With the 30-year mortgage, you\u2019ll pay a total of $334,260.<\/li>\n
- With the 15-year mortgage, you\u2019ll pay a total of $252,610.20<\/li>\n<\/ul>\n
That\u2019s a difference of $81,649.80.<\/p>\n
I won\u2019t be there that long, so what does it matter?<\/strong><\/p>\n
It\u2019s true that in today\u2019s mobile society, most people don\u2019t stay in the same home long enough to pay it off. Some reports say the average American moves every 5 years.<\/p>\n
So doesn\u2019t it make good sense to keep all the money I can in my pocket?<\/p>\n
No, not really. Think about equity. <\/strong><\/p>\n
After 5 years on a 15-year loan, you\u2019ll have paid in $84,203.40 and will still owe $143,752. You\u2019ll have gained $56,248 in equity.<\/p>\n
After 5 years on a 30-year loan, you\u2019ll have paid in $55,710. And will still owe $180,214. You\u2019ll have gained only $19,786 in equity.<\/p>\n
With the 15-year loan, you\u2019ll have paid in $28,493 more in payments and will have gained $36,462 more in equity.<\/p>\n
See how the difference would affect you\u2026 <\/strong><\/p>\n
If you\u2019d like to explore the difference between a 15-year and a 30-year mortgage on your new home purchase, call us here at Homewood Mortgage, the Mike Clover Group.<\/p>\n
We\u2019ll be glad to get you pre-qualified for a loan, help you decide how much you should pay for a new home, show you the current rates, and give you facts and figures with which to make a sound decision about your mortgage.<\/p>\n
Call us today at 800-223-7409<\/strong><\/p>\n
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Money guru Dave Ramsey has a lot to say about buying houses, and one of the things he\u2019s most adamant about is choosing a 15-year mortgage rather than a 30-year mortgage. He also says that you should wait to … Continue reading