Current Events > 15 or 30 year mortgage?

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We're looking to buy our second home (selling our first home), and can't decide on a 15 or 30 year mortgage...

While 15 year mortgage sounds better on first glance, I argued that we can, instead, put the money difference between the 15 and 30 year mortgage payments into our Roth 401k and we'll make more money doing that.

But then my wife argued that we can, instead, put the entire 15 year mortgage payments into our Roth 401k after we pay the house off in 15 years, and the quality of life won't change (because we're "used to" paying the bill).

So...... What does CE think?

30

the difference in interest rate is tiny

if you're not already maxing your roth 401k you absolutely should not be paying down low interest debt faster
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Darkman124 posted...

if you're not already maxing your roth 401k you absolutely should not be paying down low interest debt faster

We're maxing to the company match, but not to the yearly contribution limit.

Darkman124 posted...

30

the difference in interest rate is tiny

if you're not already maxing your roth 401k you absolutely should not be paying down low interest debt faster

15 years @ low 3's vs 30 @ low 4's is a full point difference and depending on the purchase price of a home can be immensely different.

TC if you do 30 years, pay bi-weekly. Or try to make a full extra payment a year.

If you do that over the 30 years you'll knock off about 5-6 years off that mortgage.
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My parents also think 30 years is better, because then we have a choice about payment (e.g. Pay more if you can afford it).

chrono625 posted...

Darkman124 posted...

30

the difference in interest rate is tiny

if you're not already maxing your roth 401k you absolutely should not be paying down low interest debt faster

15 years @ low 3's vs 30 @ low 4's is a full point difference and depending on the purchase price of a home can be immensely different.

TC if you do 30 years, pay bi-weekly. Or try to make a full extra payment a year.

If you do that over the 30 years you'll knock off about 5-6 years off that mortgage.

We will definitely consider that, since this second house is most likely our final house.

chrono625 posted...

15 years @ low 3's vs 30 @ low 4's is a full point difference and depending on the purchase price of a home can be immensely different.

who is paying low 4s for a mortgage these days? wells fargo customers?

https://www.provident.com

the gap is a half percent, not a whole percent. has been for years. when I refi'd in 2013, I got [email protected]%; [email protected]% was available but the difference in interest was trivial and my home is worth a ton.

IdiotMachine posted...

We're maxing to the company match, but not to the yearly contribution limit.

max to the yearly contrib limit for sure.

emergency fund, employer 401k match min, high interest debt, roth IRA/401k to maximum, then low interest debt.
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Definitely 30. You can always pay more if you want to, but if you ever need extra money you can just dial it back to the minimum amount.
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Darkman124 posted...

the gap is a half percent, not a whole percent. has been for years. when I refi'd in 2013, I got [email protected]%; [email protected]% was available but the difference in interest was trivial and my home is worth a ton.

Yea, my current house ("starter home"), I got 2.25% at 30 years back in 2014.

IdiotMachine posted...

Yea, my current house ("starter home"), I got 2.25% at 30 years back in 2014.

uh, was that an ARM? we're talking fixed rate

there's never been a MBS at that rate that was viable

generally the FNMA 3.0, 3.5, and 4.0 have been the principal securities that are actually traded frequently.
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30 year. See if you can get the seller to pay some of your closing costs to buy some discount points. You can pay it like a 15 year when you want but have the flexibility to pay it like a 30 year in lean times.
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30 years because you can usually pay it off sooner anyway, including 15 years. But if an emergency comes up you have a little wiggle room.
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Darkman124 posted...

uh, was that an ARM? we're talking fixed rate

there's never been a MBS at that rate that was viable

Fixed rate. All closing costs paid for. And 5% minimum down with no PMI. This was offered through my company for relocating.

Sad that I can't transfer this, or get another offer for buying our second home...

jesus your company paid a fortune to give you that rate

like...i think it would cost about 4-5 points to buy down to a rate that low. it's not something a normal person ever does because the net return on that investment is actually negative

you might consider keeping your house and renting it out because giving up that mortgage is leaving a ton of $$$ on the table
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Darkman124 posted...

jesus your company paid a fortune to give you that rate

like...i think it would cost about 4-5 points to buy down to a rate that low. it's not something a normal person ever does because the net return on that investment is actually negative

you might consider keeping your house and renting it out because giving up that mortgage is leaving a ton of $$$ on the table

Alternatively, we were thinking of moving to a different site in VA, so that they offer us the relocation benefit again, as I was offered a 4 year temporary position in the VA site. They would also make accommodations for my wife to work remotely. Then when we move back to PA, get another relocation benefit, and buy our final house.

go with the 30 so you aren't as locked into a higher monthly payment. make sure your loan allows you to pay extra and do early payoff so you can put any extra cash flow towards paying it off sooner.
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One thing to note if you go with the 30-year mortgage is that if you pay off only what you are supposed to, you will be paying a fuckton more interest than the 15-year which can make it quite a bit of a raw deal in the long run (almost 50% of the amount mortgaged will be payed extra into interest alone vs. the 15-year option).
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Paragon21XX posted...

One thing to note if you go with the 30-year mortgage is that if you pay off only what you are supposed to, you will be paying a fuckton more interest than the 15-year which can make it quite a bit of a raw deal in the long run (almost 50% of the amount mortgaged will be payed extra into interest alone vs. the 15-year option).

gotta consider inflation there

more dollars

but they're tomorrow's dollars, which are worth less
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Paragon21XX posted...

One thing to note if you go with the 30-year mortgage is that if you pay off only what you are supposed to, you will be paying a fuckton more interest than the 15-year which can make it quite a bit of a raw deal in the long run (almost 50% of the amount mortgaged will be payed extra into interest alone vs. the 15-year option).

But you get 15 additional years out of it...

For my current house, I'm only paying the minimum and planned it that way, because I knew I was going to sell it pretty quickly (and we are, within 5 years of purchase). We like it in PA, so if we choose to go to the VA site, we'll come back. So if we buy a house in VA, we're definitely doing the minimum possible again.