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.
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.