15 year loan vs 30 year loan
We really don’t like to be in debt for long. Planning to buy a house soon. We plan to choose 15 year loan instead of 30 year. Are there any pitfalls if it is 15 year? I think, we can afford the EMI if it is 15 year! We live in SFO Bay Area!
I never understood why people get a 15 year mortgage with a higher monthly payment instead of a 30. Why not just get a 30 and pay it off in 15?
No one who lives here calls it SFO Bay Area. SFO is the airport.
Noted!
He is not local . Just moved
I opted.out for 15 year for tax purposes. Paid off first property and bought another on a 15 year plan. If you can afford it, go with the 15.
It is idiotic to get a 30yr if you know you can long term afford a 15. That’s throwing away money.
Not true if you know how to plan it.. you can pay an additional 1k per month and you move your 30yrs to 15yrs. On the other hand you have the flexibility to go back to the lower pay when shit hits the fan
Just depends on how big your loan is and how big the interest rate spread is. Right now the spread is usually well under 1% and if your loan is 750k or less you'll get 25%+ (depending on your tax bracket maybe as much as 46% in California) of that difference back in tax savings. Essentially no mortgages have prepayment penalties anymore, so you can always pay the principal as if it's a 15. The net cost if you pay a 30 off in 15 years is not that much higher.
Delta in rates is too small, always get a 30. Pay if off in 15 if you hate money.
Paying off in 15 isn't about hating money, it's more about freeing up the cash flow sooner (either when paid off or by refi) and it's a very safe return. On a 4% loan you really pay something like 2.5% after tax savings, and paying down equity is basically the same as savings. 2.5% on something super safe isn't as impossible this year as it was with rates lower the past few years but it's still hard to get a truly safe return that high even now.
If you're young and your risk tolerance is high you will often be better off putting less into the mortgage and putting the difference into the market instead
The cost of capital is so low, you should be getting a 30 year fixed. Right now you can get a mortgage for < 3.5%. Over the next 30 years, as real interest rates rise, you will be paying zero or negative real rates on that loan. Why burn cash now when inflation will handle it for you? Invest in more property or in stocks/businesses.
“I really don’t like to be in debt for long. Planning to buy a house soon.” Those two are incompatible.