Why I chose a 30 year Mortgage

The whole mortgage process can be a little daunting. There are so many steps. Pre-approvals. Actual Approvals. Providing all the documentation under the sun. (Pro tip:  Underwriting is relatively easy when you are a neurotic financial nerd like me 🙂 )

One piece that didn’t get much attention was WHAT kind of loan.

I don’t remember anyone talking to us about it. Maybe because I said with conviction that we had 20% and that I wanted a conventional mortgage. Why would they talk us into anything different?

I do remember a few comments about loan options. “We could do this if you want to put 3.5% down.” No thanks. We’ll put the full 20% down. PMI is no joke.

The biggest question I had internally was whether it was better to have a 15 or 30 year fixed rate mortgage. There is so much out there about why a 15 year is better. We chose the 30 year for one simple word.

Flexibility. 

We wanted the ability to chose when and how much extra we were putting on the mortgage. We can choose to pay at the 15 year amount or we can choose the 30 year amount. If one of us faces a job loss or chooses to Nope out of our employment, a 30 year payment gives us more options.

This is a similar approach to how I paid off my student loans. I chose to switch to graduated repayment and lowered my monthly obligation. By lowering my payment, I had the flexibility to choose where I paid extra or even if I paid extra (of course I paid extra. You know how that went!).

Going with a 15 year loan would have given us a slightly better interest rate. That was tempting. But at 3.375 over 30 years, we aren’t paying that much in interest. The 15 year rate was like 3%. The biggest interest saver between the loans was the length of the loan, not the interest rate.

I fully expect to get mad at the mortgage eventually and kill it with a vengeance.

I’ve proven with my student loans that when I set my mind to debt slaying, I can do it.

For now, I’m loving the flexibility to make the smaller payment each month. In this loan, I can always pay more, but with the 15 year mortgage, I never would have been able to less.

Did you choose a 15 or 3o year mortgage? Why?

Advertisements

11 comments

  1. We don’t have a mortgage, but with those interest rates, I’d almost definitely go with a 30 year as well.

    Flexibility is really important for us, and we’re in a good renting situation now, so very unlikely to change in the near future. 🙂

    1. The flexibility of renting is awesome. If it works for you, go for it! We realized that we have no interest in ever leaving our state or even town. We’d already been renting for 6 years. If we could buy and stick around, why not?

  2. I also agree that the 30 year mortgage is the way to go. All you need to do is just pay it like a 15 year mortgage and you still get rid of it quickly without the higher default risk. Even better is if you can just invest the difference for the next 15 years. That way, 15 years from now, you’ll have a huge stash of cash that you could use to wipe out your entire mortgage if you want.

    1. My brain is totally onboard with what you are suggesting. I’m not sure if I can get my heart to join it. We’ll see how things progress. I like the idea of having one goal (invest all the money!). Then, if I so choose, I can slam dunk the mortgage at anytime. If I’m balancing between investing and paying off debt, there will always be the battle to find the right balance. Always.

  3. When we refinanced, we were already eight years into a 30 year, so it didn’t make a lot of sense to go with another 30 year, unless we cared a lot about flexibility like you do. And the slightly better rate of the 15 was attractive as well.

  4. That makes sense.

    We refinanced with a 7/1 when we were 7 years into our mortgage, bit of unintended symmetry there. With a new house, we’d be taking a 30 year for the flexibility and attack it like it was a 7 or 15 year.

  5. Our first mortgage we locked in on a weird day when 15 year and 30 year interest rates (6.75) were the same so we took the 30 year. Then we no-cost refinanced (5.25) into another 30 year because that was what they offered us, then a little while later we no-cost refinanced (4.75) again into a 20 year because that’s what they offered us. We paid off the mortgage last month, so we held it for about 11 years, give or take.

    1. Congrats on paying off the mortgage!! Refinancing 3 times in 11 years seems crazy to me, but I also bought at rock bottom interest rate prices. I don’t expect I’ll have anything to refinance to. Interest rates are only going up from here!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s