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Mortgage term/house decisions, help me think this through please.


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I've been a Dave Ramsey fan for a couple years now and our only debt is our mortgage, we are on baby steps 5, 6, 7.

 

We can't afford our current home, due to increase in taxes, that will only continue to rise. We are looking at this as an opportunity to get under the 25% take home that Dave recommends.

 

I struggle with the 15 vs 30 year thing. It makes quite a difference on the type of house we can afford. We could live in a row home type thing in a not so good neighborhood and have it paid for in 15 years, or a 60 year old home and have dc's share a bedroom, we are not very handy though. OR we could do the 30 year and have a new/used single home with a little bit of land.

 

Either way, I can't see us staying in that home longer then 15 years, we want a safe comfortable home to make memories with our family. I understand the money aspect, but have trouble getting past enjoying our family and home now.

 

Also when it comes to college, is it better to have a mortgage since we'd be paying the same amount for mortgage either way and it will just change the type of home we live NOW.

 

I'd go for the house with land. No way would I sacrifice that and throw in a not-so-good neighborhood to boot. Get the 30 year, pay it off in 20 by accelerating payments.

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Yesss! Get the 30 year fixed, then pay as much as you can afford above your P&I. There are several ways you can do this: you can pay extra every month, and apply it directly to your principle. You can make a half payment every two weeks, which adds four(?) extra payments a year. You can make lump payments anytime, and apply them directly to your principal. You don't need to be locked into a 15yr mortgage in order to pay off your house early.

 

FWIW, dha and I are in a good place right now, financially, and we're able to pay an extra $1000 per month on our 30yr mortgage. If we keep it up, we'll pay off our house 13 years early. But, if something bad happens, and dh gets laid off or something, we're not locked into that high payment. We can stop anytime and go back to our regular payments.

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This isn't Dave Ramsey, but my parents' experience was that a 30 year at low interest rates was a great financial asset. They bought in the late 60s and had a 6% fixed rate all through the late 70s and early 80s interest rate peaks (double digits, if you remember). They didn't pay it off early because they could make more putting the cash in a money market accout than they could prepaying the mortgage. This was a terrific boost to their financial security and it's certainly possible that we're heading into stagflation similar to the late 70s/early 80s so this may work for you too. But, full disclosure, we have a 15 year mortgage on a very affordable house but we did this to be close to our oldest's school so it doesn't apply to your situation. I'd definitely pick a yard and a nice area over not so safe rowhouse even if you need a 30 year mortgage (which may be a great deal in a few years).

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