What are the benefits and negatives of a 15 year mortgage versus a 30 year?
My wife and I have a fourth-grader, which is discussed later.
On the plus side for the 15-year, we’d get more equity in the house faster. It appears that within three years, the equity difference would outweigh the difference in payments. So if we stayed 3 years or 33 years (for example), the 15-year would present a better equity position with much less interest paid over the life of the loan, not to mention a rate that’s a half point lower over the life of the loan.
On the down side, if we later need equity (we have not decided on public v. private high school down the road), it would seem that a 15-year mortgage might tie us down financially. Even if we have more equity in 5 years, we might have to borrow against it at a considerably higher rate if our daughter goes to private school because we would not have been saving nearly as much monthly. Also, because a 15-year loan for $ 170k would be $ 400 more monthly than a 30-year loan, there is really no option of keeping and renting the house if we decide to move four years down the road. Our costs could be covered with a low monthly payment from a 30-year loan. Then again, who wants to be a landlord? Another thing to consider.
I’m confused. Thanks for any ideas.