30 yr. or 15 yr. mortgage? Which builds more wealth? I retire in 20 yrs. I’d invest the monthly difference.

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I’ve got 18 years until retirement and I’m looking at buying a home. I was planning on a 15 year mortgage so I could own the joint when I’m retired. My lender is trying to sell me on 30 yr vs 15 year mortgage. He says with the 30 year, I can invest the monthly difference in payments about $ 500.00/ month in a tax deferred account and be way ahead in 15 years…I could pay off the mortgage and have big money in my pocket vs. just pay off the mortgage.(with a 15 yr mortgage). What doesn’t make sense to me is the fact that today’s loan rates don’t seem to allow sufficient spread against what I could earn with conservative investing. 6.2 to 7% mortgage rate seems like the same percent return I might get from a reasonably diversified investment. This seems to me like a wash. What am I not understanding? FWIW I am pretty good at saving. I’m an Automatic Millionare in the making….not boasting but I read that book and found it mirrored the stuff I’ve already been doing with my finances

  1. Reply
    February 13, 2011 at 12:23 am

    He wants you to get the 30 year because he makes more money, with the 15 year you pay less interest.

  2. Reply
    February 13, 2011 at 12:48 am

    Well, sounds like you don’t really need an answer. But I suggest you read the logic Dave Ramsey uses to diss 30-year mortgages, and what he says about when to invest.


  3. Reply
    February 13, 2011 at 1:22 am

    You are missing the time value of money. Compound interest is not calculated the same way you are looking at the interest rate of your mortgage. The mortgage broker is not going to make more money on you (unless he is the bank) on the 30 year over the 15 year anyway. It is sound advice. Take the 30 year loan and invest the difference and you should come out ahead. Never guarantees but history is on your side. We live in a cyclical economy. YOu can also refiannce when rates drop again and invest the difference of what you thought you would pay as well. Good luck.

  4. Reply
    linwood l
    February 13, 2011 at 1:29 am

    mine is 15. i’d have done 10 if they offered it.
    your lender is a scum bag.
    you have to make more than 7% just to come out even.
    even good HONEST investment counselors frequently don’t do that well.
    when i asked my stock broke what to do with 300k, he said, “pay off the mortgage.”
    the stock broker.
    btw, i sure wish i’d done a roth ira.
    if you die you can pass it on w/o tax.
    and there are no minimum withdrawls.
    hmmm, maybe i should look at your book-although my stock did fairly well for me.
    i only wish i could say it was skill, rather than dumb luck.

    if you put the http://www.daveramsey.com it’ll be clickable. 🙂

  5. Reply
    big bad b
    February 13, 2011 at 1:52 am

    If you can afford the higher payment with the 15 yr do it. The interest you will save will be rediculous. Or take the 30 and make 1 extra payment a year and it will shave off about 8 years off the loan.

  6. Reply
    February 13, 2011 at 2:16 am

    This is strictly a gut instinct. 15 versus 30 years will save you a whole lot of interest. You know where you are at and I am a millionaire, thanks to Vegas. Honey, do what feels right, gut instinct.Trust your own thoughts!

  7. Reply
    mom of a boy and girl
    February 13, 2011 at 2:56 am

    The first answer is absolutely correct…………
    So therefore you should go with the 15 yr. mortgage………..And don’t forget, If your payment were $ 500.00 a month, you can pay $ 700.00, and the extra will go to the pricipal only, therefore paying it off sooner.Make sure you get a fixed rate(that way it is locked in and it can’t be changed with the cost of living) Which fluctuates all the time.Fixed rate or nothing…15yr mortg. or nothing tell him.or you can go elsewhere.
    P.S. Read b/tween the lines . Is your lender legit? If not you may be asking for trouble……Be very careful.(.good luck)

  8. Reply
    ron d
    February 13, 2011 at 3:49 am

    take a 30 year mortgage, and double your principal
    payments when you can.

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