Not a precise answer to your query, but variations of your question are common on the long-running Bruce Williams radio advice show....which I confess I've not heard for several years, but now I see he's still in business on that XM network
http://brucewilliams.com/aboutbruce_a.html
Most commonly if I recollect, his counsel was to stick with the 30 year mortgage making the agreed payments, while channeling an equal amount each month (consistently) into an investment vehicle that paid a higher rate of return than the percentage rate charged within your mortgage. Meanwhile , you continue to enjoy the tax deductions related to interest payments for a longer period.
However (he would ususally add), if one was not confident in their discipline and/or ability to consistently rechannel those investment dollars, it may well be better to double down as frequently as possible during the course of your 30 yr term because each such payment does of course shorten the eventual length of the agreement.
http://brucewilliams.com/aboutbruce_a.html
Most commonly if I recollect, his counsel was to stick with the 30 year mortgage making the agreed payments, while channeling an equal amount each month (consistently) into an investment vehicle that paid a higher rate of return than the percentage rate charged within your mortgage. Meanwhile , you continue to enjoy the tax deductions related to interest payments for a longer period.
However (he would ususally add), if one was not confident in their discipline and/or ability to consistently rechannel those investment dollars, it may well be better to double down as frequently as possible during the course of your 30 yr term because each such payment does of course shorten the eventual length of the agreement.
In related returns on my Google search for Williams, I of course found a couple of disparaging articles from other "financial advisor" types.
That noted, it seems the short summary I listed above holds merit, but - like you - I am interested to hear from anyone here at the Rx who has first hand experience handling numerous mortgage deals from either side of the table.
That noted, it seems the short summary I listed above holds merit, but - like you - I am interested to hear from anyone here at the Rx who has first hand experience handling numerous mortgage deals from either side of the table.
Well seeing that the industry consistently pushes 30 year mortgages my guess is that 30s are best for them (mortgage guys and banks) and bad for you that's typically how things work today in our financial sector these days....Shun whatever is the popular option pushed by the mainstream.....but I personally have no experience this breakdown also made sense to me.....home "ownership" (u don't own shot till u pay off the bank) is overrated when u add up property taxes, up keep costs, time spent upkeeping it etc.....and just the overall glut of supply created by the housing bubble will make it a pretty useless "investment" over the long haul
Renting is wayyyy underrated
http://financialplan.about.com/cs/mortgagesloans/a/15YrMortgages.htm
-----------------------------------------
Best Financial Moves - 15-Year Mortgages
Pay Yourself Instead of the Bank
Would you like to own your home free and clear before your kids start college? Before you retire? Or would you simply like to save a significant chunk of change over the life of your mortgage, perhaps as much as $100,000? Consider the 15-year mortgage instead of the more common 30-year mortgage.
If you think you can't afford to pay off your mortgage in half the time (15 years versus 30 years), you may be wrong. While the monthly payments are somewhat higher on a 15-year mortgage, the interest rate is typically a bit lower, which offsets part of the increase in the monthly payment. See the illustration at the the monthly payment. See the illustration at the bottom of this page.
Most importantly, you end up paying less than half the interest over the life of the loan. When you consider that if you borrow $100,000 for 30 years at 8% you will end up paying the lender over $264,000 ($100,000 principal loan amount and $164,000 in interest), it's worth the higher monthly mortgage payment if you can afford it. For most people, this is the greatest opportunity they will ever have to save a very large sum of money.
You may wonder if you could achieve the same thing by putting the difference in the monthly payment into a savings account and letting it earn interest. If you saved $193 every month without fail over a 15-year period and put it in a money market account or other account earning 4% interest, your money would grow to $47,495. Not bad, but it's less than half what you'd save by having a 15-year mortgage.
In reality, this is not as simple as it sounds. There are complexities we haven't considered, such as the fact that by paying less interest you'll also get less of a tax deduction. However, tax deductions for mortgages are over-rated. Sure, if you're in the 28% tax bracket you save 28 cents for every dollar you pay in interest, but you're still paying 72 cents in interest to a lender. What sounds better to you: save 28 cents or save 72 cents?
The real issue is that most people will NOT exercise the discipline necessary to consistently and without fail save the difference (in this example, $193) every month and never touch it for 15 years so that it will grow to the same amount they would have saved with a 15-year mortgage.
In summary, with a 15-year mortgage versus a 30-year mortgage:
You build equity much more quickly
You own your own home in half the time
You save more than half the amount of interest
The rate is typically lower than the rates on 30-year mortgages and stays the same throughout the life of the mortgage
The 15-year mortgage may or may not be right for you, but it's worth considering. Use the Internet to educate yourself and run some numbers with a few of the excellent online mortgage calculators (see Elsewhere on the Net in the box in the upper right of this page) before speaking to your lender.
Note: The higher the interest rates, the more dramatic the savings in a 15-year mortgage versus a 30-year mortgage. As of this writing, mortgage rates are fairly reasonable. However, let's say that rates were to go back to the 9.5% level. Under that scenario, the payment for a $100,000 mortgage would be $840 per month and the total interest paid over a 30-year loan would be $202,707. The same amount of money borrowed over 15 years at 1/2% lower rate (remember, 15-year rates are usually 1/2 to 1% lower than 30-year rates) would result in a monthly payment of $1,014 and total interest paid of $82,567, a savings of $120,140! What are the chances you will save this amount yourself in 15 years, given the myriad of demands on your finances?
15- vs 30-year Mortgage Illustration
30-yr @ 8% 15-yr @ 7.5%
Loan Amount $100,000 $100,000
Monthly Payment $734 $927
Total Interest $164,165 $66,862
Savings 0* $97,293
Renting is wayyyy underrated
http://financialplan.about.com/cs/mortgagesloans/a/15YrMortgages.htm
-----------------------------------------
Best Financial Moves - 15-Year Mortgages
Pay Yourself Instead of the Bank
Would you like to own your home free and clear before your kids start college? Before you retire? Or would you simply like to save a significant chunk of change over the life of your mortgage, perhaps as much as $100,000? Consider the 15-year mortgage instead of the more common 30-year mortgage.
If you think you can't afford to pay off your mortgage in half the time (15 years versus 30 years), you may be wrong. While the monthly payments are somewhat higher on a 15-year mortgage, the interest rate is typically a bit lower, which offsets part of the increase in the monthly payment. See the illustration at the the monthly payment. See the illustration at the bottom of this page.
Most importantly, you end up paying less than half the interest over the life of the loan. When you consider that if you borrow $100,000 for 30 years at 8% you will end up paying the lender over $264,000 ($100,000 principal loan amount and $164,000 in interest), it's worth the higher monthly mortgage payment if you can afford it. For most people, this is the greatest opportunity they will ever have to save a very large sum of money.
You may wonder if you could achieve the same thing by putting the difference in the monthly payment into a savings account and letting it earn interest. If you saved $193 every month without fail over a 15-year period and put it in a money market account or other account earning 4% interest, your money would grow to $47,495. Not bad, but it's less than half what you'd save by having a 15-year mortgage.
In reality, this is not as simple as it sounds. There are complexities we haven't considered, such as the fact that by paying less interest you'll also get less of a tax deduction. However, tax deductions for mortgages are over-rated. Sure, if you're in the 28% tax bracket you save 28 cents for every dollar you pay in interest, but you're still paying 72 cents in interest to a lender. What sounds better to you: save 28 cents or save 72 cents?
The real issue is that most people will NOT exercise the discipline necessary to consistently and without fail save the difference (in this example, $193) every month and never touch it for 15 years so that it will grow to the same amount they would have saved with a 15-year mortgage.
In summary, with a 15-year mortgage versus a 30-year mortgage:
You build equity much more quickly
You own your own home in half the time
You save more than half the amount of interest
The rate is typically lower than the rates on 30-year mortgages and stays the same throughout the life of the mortgage
The 15-year mortgage may or may not be right for you, but it's worth considering. Use the Internet to educate yourself and run some numbers with a few of the excellent online mortgage calculators (see Elsewhere on the Net in the box in the upper right of this page) before speaking to your lender.
Note: The higher the interest rates, the more dramatic the savings in a 15-year mortgage versus a 30-year mortgage. As of this writing, mortgage rates are fairly reasonable. However, let's say that rates were to go back to the 9.5% level. Under that scenario, the payment for a $100,000 mortgage would be $840 per month and the total interest paid over a 30-year loan would be $202,707. The same amount of money borrowed over 15 years at 1/2% lower rate (remember, 15-year rates are usually 1/2 to 1% lower than 30-year rates) would result in a monthly payment of $1,014 and total interest paid of $82,567, a savings of $120,140! What are the chances you will save this amount yourself in 15 years, given the myriad of demands on your finances?
15- vs 30-year Mortgage Illustration
30-yr @ 8% 15-yr @ 7.5%
Loan Amount $100,000 $100,000
Monthly Payment $734 $927
Total Interest $164,165 $66,862
Savings 0* $97,293
Also with what will likely continue to be a long term zirp (zero interest rate policy) outta our fed..... good luck finding an investment to get you 4% (used in the article) you gonna have to throw your money into the speculative pit of equities and pray (you could lose your ass) cause you ain't gonna get anything near 4% in a savings account anytime soon
Funny story know a pretty wealthy guy who took out one of those front loaded mortgages where you get the really low rates up front but the explodes at the end.....during the housing bubble days you could still get a decent interest rate in a CD and at that time the cd rate was higher than front end mortgage rate so he was essentially scalping them than when the rates went up he just paid the whole thing off......
Granted the housing bubble collapsed and house nowhere near what he paid for it but that's a different story
Anyway in the end seeing that the outlook for any significant "safe" return (cd/savings account) on your money is very dim....you almost for sure better off being a debt slave for 15 years vs 30 years and handing the banks less interest payments as well
Plugged in calculations of 100k loan at 4.8 (30) and 4.1 (15) rates and you pay around 138k total for 15 and 188 k total for the 30
Granted the housing bubble collapsed and house nowhere near what he paid for it but that's a different story
Anyway in the end seeing that the outlook for any significant "safe" return (cd/savings account) on your money is very dim....you almost for sure better off being a debt slave for 15 years vs 30 years and handing the banks less interest payments as well
Plugged in calculations of 100k loan at 4.8 (30) and 4.1 (15) rates and you pay around 138k total for 15 and 188 k total for the 30
