15 or 30 yr mortgage??

[beaucoup]

Did you know the mortgage does not have to be for just 15 or just 30 years? You can pick any number of years you want. Any length over 15 yrs will have the 30 yr rate.

One note though, if you pick a number other than 15 or 30, watch every piece of paper they send you before closing & during closing, because its a habit for them to use 15 or 30 & they seem to forget you are picking a different term and they get it wrong sometimes.

 

[mrsklamc]

at 3.99% 30 year is fine - besides you can pay if off early with 30 years - with 15 years it is harder. banks are impressed if you pay off early.

Just because it's a low interest rate doesn't mean you want to pay it for 15 more years. And who cares about impressing banks? As long as you pay on time your credit score will be fine.

 

[Swimalie]

The way I question it is, will you be in the house long enough to matter? We bought our house in 2006 with a 30 year fixed. We just refinanced with another 30 year fixed to lower our payment $290 a month. We have the extra money to pay a 15 year mortgage but we want out of this house as soon as the value comes back to what it was when we paid for it. Not a day longer. So why pay extra in to it?! We put down 35% already so we have enough equity. The extra money we will save will go in to a car fund and next year we will be buying a brand new car. The car will be full paid for with a downpayment and the extra money we will be saving from the refinance therefore not really costing us any out of pocket.

So, with that said, does it make sense for you all to be out from under the mortgage? Do you plan to stay in the house? Do you want extra money in the house now? If so, then go for the 15. If not, then go for the 30 year and put the money aside for the next house or something special.

 

[ssawka]

Just because it's a low interest rate doesn't mean you want to pay it for 15 more years. And who cares about impressing banks? As long as you pay on time your credit score will be fine.

I think what spiceycat was trying to say is that even though a 30yr Mortgage has a higher interest rate, 3.99% is still amazing! I don't think they were saying they were going to pay it off over the full term.

 

[mrsklamc]

I think what spiceycat was trying to say is that even though a 30yr Mortgage has a higher interest rate, 3.99% is still amazing! I don't think they were saying they were going to pay it off over the full term.

No, but I'm addressing OP's question, who doesn't think she will pay extra to pay off early.

 

[Frantasmic]

You say that if you get the 30 year, you won't get in the habit of paying an extra $200 a month, which is understandable.

If you get the 30 year though, you do have the lower payments which is nice on a month to month basis.

Try this: look at the 30 year mortgage. See what the payment would be. Say escrow, principal, and interest is $1110 a month. $200 extra a month might be much, but round up to the next hundred and pay $1200 a month. That 90 extra a month will shave off up to a third of your term. AND, you have the option of skipping a month or two if you need it. But, looking at paying an extra (less than 100) is easy to budget and easier to be disciplined about.

 

[ICF]

Did you know the mortgage does not have to be for just 15 or just 30 years? You can pick any number of years you want. Any length over 15 yrs will have the 30 yr rate.

.

That's not true, at least not here.

When we shopped around for our refi many places had 20 year loans with rates between those of 15 and 30 year rates.

We got a 20 year loan whos rate was a bit higher than the 15 and about a 1/4 pt lower than the 30 year rate.

 

[crispychicky]

We are thinking of refi that rates are sooo low! We are 5 yrs into our current 30 year mortgage. If we go with a 15 year it will raise our pymts 200.00/month. If we start at 30 again it will lower them 229.00/month. The 15 year will be a pinch...but we could do it. I'm just worried about what we will have to give up to do it. The thought of starting over at 30 yrs bugs me too! I know we would not put extra $$ towards it to pay off sooner...it just never happens even with our good intentions!! I really don't want to stay where we are, because the rates are so much better right now.
Any suggestions, thoughts are much appreciated!!
Jen

DON'T DO IT!!!! Stick with the 30yr (or maybe 20yr). If the latest economic bust has taught us anything, it's NOT to overextend yourself when it comes to housing costs. Most of the folks who were 'house-poor' got clobbered with the economic down turn. Keep your required minimum monthly payments low and pay extra when you can.

If you're concerned about not paying off the 30yr sooner, set up an autopayment that adds an extra (say) $100 a month on top of the minimum payment. If it happens automatically, you won't miss it. Then if you lose a job, remove the extra $100/month. There are other tricks you can do too. With our original loan, the mortgage company let us pay half on the 1st and half on the 15th (normal payment was due on the 15th). This will knock off something like 7 yrs on our 30yr loan. Check with your mortgage co. to see if there are other ways to pay the loan off sooner.

If you do decide to go for the 15yr mortgage, please please please make sure you have at least 1 yrs worth of an emergency fund.

 

[beaucoup]

That's not true, at least not here.

When we shopped around for our refi many places had 20 year loans with rates between those of 15 and 30 year rates.

We got a 20 year loan whos rate was a bit higher than the 15 and about a 1/4 pt lower than the 30 year rate.

The point was that the OP has options besides 15 or 30. Even if they are not listed. It seemed to solve the OPs problem of an increase in payment they might not always be able to swing.

 

[mrsklamc]

DON'T DO IT!!!! Stick with the 30yr (or maybe 20yr). If the latest economic bust has taught us anything, it's NOT to overextend yourself when it comes to housing costs. Most of the folks who were 'house-poor' got clobbered with the economic down turn. Keep your required minimum monthly payments low and pay extra when you can.

If you do decide to go for the 15yr mortgage, please please please make sure you have at least 1 yrs worth of an emergency fund.

The problem was far and wide more people with 30 year mortgages on homes they were far from being able to afford to begin with, than people paying $200 extra a month for a 15 year mortgage. Another huge cause of the problem was people looking at the 'payments' for things rather than the actual cost.

 

[disneychrista]

I say get the 30 year and have it set to auto pay, with an extra $ so you don't have the choice to "not pay extra."

I have a 30 year. I pay an extra $75 per month on auto-pay. I know if I didn't have it set up like this I would find something to spend the extra $75 on.

 

[eliza61]

My concern is that you say the extra money will make things "tight". Do you have an emergency fund? If your car breaks down and you don't have the extra 200 bucks will you have to resort to credit cards?

 

[eliza61]

The problem was far and wide more people with 30 year mortgages on homes they were far from being able to afford to begin with, than people paying $200 extra a month for a 15 year mortgage. Another huge cause of the problem was people looking at the 'payments' for things rather than the actual cost.

That is totally not true. Most foreclosures where not caused by people having more house than they could afford. most are caused by loss of INCOME and severe medical bills.

Underlying Causes of Foreclosure
Financial Slippage: This is the condition in which most responsible, smart and hard working individuals in foreclosure find themselves. We live in a capitalist system society. The system creates more opportunities but it is also less forgiving. Long term un-employment is devastating to the middle class. So is the astronomical cost of health care. People in this category often resort to tapping equity in order to make ends meet. If matters do not get quickly resolved, the house becomes over mortgaged; they default and end up in bankruptcy. Foreclosure comes next.

Sure some folks brought more house than they could afford but as a percentage, the main culprit seems to be loss of income or catastrophic life events (sickness and divorce being major).

 

[crispychicky]

The problem was far and wide more people with 30 year mortgages on homes they were far from being able to afford to begin with, than people paying $200 extra a month for a 15 year mortgage. Another huge cause of the problem was people looking at the 'payments' for things rather than the actual cost.

People who could afford the minimum monthly payments (even though their homes may have been way overpriced and they maybe paying for years and years) are still in their houses. It sounds like an extra $200 a month maybe close to a budget buster for the OP (at least that's how I interpreted the post). Whether your $100 over or $1000 over, it doesn't matter, when you're over, you're over. I'd hate for the OP to get herself in this type of situation where something bad happens, say the loss of a job, and not be able to afford the monthly payments on her home.

If you can comfortably afford the monthly payment on a 15yr mortgage, great! Go for it! In most cases, that's the smartest option.
If the monthly payments on a 15yr are tight, I'd skip it.

 

[mrsklamc]

That is totally not true. Most foreclosures where not caused by people having more house than they could afford. most are caused by loss of INCOME and severe medical bills.

Underlying Causes of Foreclosure
Financial Slippage: This is the condition in which most responsible, smart and hard working individuals in foreclosure find themselves. We live in a capitalist system society. The system creates more opportunities but it is also less forgiving. Long term un-employment is devastating to the middle class. So is the astronomical cost of health care. People in this category often resort to tapping equity in order to make ends meet. If matters do not get quickly resolved, the house becomes over mortgaged; they default and end up in bankruptcy. Foreclosure comes next.

Sure some folks brought more house than they could afford but as a percentage, the main culprit seems to be loss of income or catastrophic life events (sickness and divorce being major).

The article you've quoted here is from 2007. More recent foreclosures have been caused by loans the banks never should have been making. Many people assumed that the banks would not give them loans they could not afford.

 

[ENSOCK]

see if you can do a 20 yr.

 

[PrincessNoelle'sMom]

Check into a bi-weekly. It knocks about 6 years off your loan (so 30yrs = 24 years, and 15 yrs = 9+ years). We originally took a 30 year bi-weekly 9 years ago and now have 16 years left to pay. Just modified to a 15 year bi-weekly, lowered our rate and payments and will by paid off in about 9 years!

 

[DawnM]

I am not sure this is correct. It does indeed take off 6 years from a 30 year loan but not from a 15 year. We looked at bi-weekly and it was only going to pay off our mortgage in 13 years instead of 15 and would take off 2 years of our loan.

Dawn

Check into a bi-weekly. It knocks about 6 years off your loan (so 30yrs = 24 years, and 15 yrs = 9+ years). We originally took a 30 year bi-weekly 9 years ago and now have 16 years left to pay. Just modified to a 15 year bi-weekly, lowered our rate and payments and will by paid off in about 9 years!

 

[PrincessNoelle'sMom]

I am not sure this is correct. It does indeed take off 6 years from a 30 year loan but not from a 15 year. We looked at bi-weekly and it was only going to pay off our mortgage in 13 years instead of 15 and would take off 2 years of our loan.

Dawn

Maybe it is different with a modification since we are paying more into our principal now, rather then interest. We satrted with a 30 year bi-weekly and are modifying to a 15 year bi-weekly. Our payoff date is 11/2020. Not sure why, but it worked for us.

 

[*Flower*]

We bought our home in 4/2000, refi'd twice to lower the interest rates (8% to 6.75% to 5%).

We did a 30 year each time, and will have the home paid off in about 3 more years. So it will be a 13 to 14 year mortgage that was a 30 year mortgage.

I make one full payment (P, I & E) and add the principal amount from the next payment onto it and send that in each month.

If you knew how much in debt we were once (and that won't happen again!)- you'd understand how happy I am that I can do this without breaking the bank!!