DawnM Posted July 1, 2014 Share Posted July 1, 2014 I hesitated to even post this, but here goes. We have been following Crown Financial. It is similar to Dave Ramsey. The guideline has always been to get a 15 year mortgage and with mortgage, taxes, and insurance, keep the payment at 25% or less of your take home income. Sounds like reasonable advice and we have been following that to the letter. However......... We are moving. Where we are moving to is a bit higher priced. We have college costs looming, although we have agreed to a certain amount for each year of college and that is it. The boys know that and can either go to the local 4 year school for "free" (to them) or they can pay the difference at any school of their choosing. I was talking to a friend who suggested we move to a 30 year with the thought that "you can always pay more if you want but you can have extra cash available if you need it." Now, I am struggling with this because we are bottom line people. When the realtor asks "how much can you afford per month?" our response is always, "Can we see that fully amortized and see how much interest we will be paying over the life of the loan?" It drives realtors crazy. However, I am starting to wonder if we shouldn't think about a 30 year. The main issue is not that we can't pay more each month to "pay like a 15" if we want, the issue to me is that the interest rate is a full point higher, so even if we try to pay it off in 15, the payments will be more than $100/mo higher. We are mid to late 40s if that makes a difference in your suggestions. However, Dh says that whatever house we get we will probably not live in forever and can sell when we retire if we want to. Just running some thoughts through my head as we look online at houses and interested to get others' opinions. Quote Link to comment Share on other sites More sharing options...
Pawz4me Posted July 1, 2014 Share Posted July 1, 2014 We've always opted for longer-than-necessary mortgages. We have the discipline to pay extra each month (so that a 30 year mortgage effectively becomes a 15 or 20 year, etc.). It's given us that extra security of knowing that in a pinch such as a job loss or some totally un-anticipatable (I think I just made that word up) emergency that we'd have the option of reducing the payment to the regular amount if needed. The obvious key to that is whether or not you have the discipline to stick to paying the extra every month. If you do that then the amortization for a 30-year mortgage is irrelevant. But in the interest of full disclosure I have to post the caveat that I am NOT a DR fan. And that's an understatement. Quote Link to comment Share on other sites More sharing options...
klmama Posted July 1, 2014 Share Posted July 1, 2014 Based on what you've written, paying off that 30 year loan in 15 would cost you $18,000 more. Is having the flexibility of a 30 year loan worth that to you? ETA: Obviously, paying it off in 30 will cost even more. Have you figured out exactly how much more? Quote Link to comment Share on other sites More sharing options...
DawnM Posted July 1, 2014 Author Share Posted July 1, 2014 Well, we aren't truly fans either, he truly grates on my nerves, but we do follow Crown Financial, and their principals are somewhat similar. I only mention DR because most people haven't heard of Crown. We've always opted for longer-than-necessary mortgages. We have the discipline to pay extra each month (so that a 30 year mortgage effectively becomes a 15 or 20 year, etc.). It's given us that extra security of knowing that in a pinch such as a job loss or some totally un-anticipatable (I think I just made that word up) emergency that we'd have the option of reducing the payment to the regular amount if needed. The obvious key to that is whether or not you have the discipline to stick to paying the extra every month. But in the interest of full disclosure I have to post the caveat that I am NOT a DR fan. And that's an understatement. Quote Link to comment Share on other sites More sharing options...
Pawz4me Posted July 1, 2014 Share Posted July 1, 2014 I hesitated to even post this, but here goes. We have been following Crown Financial. It is similar to Dave Ramsey. The guideline has always been to get a 15 year mortgage and with mortgage, taxes, and insurance, keep the payment at 25% or less of your take home income. Sounds like reasonable advice and we have been following that to the letter. However......... We are moving. Where we are moving to is a bit higher priced. We have college costs looming, although we have agreed to a certain amount for each year of college and that is it. The boys know that and can either go to the local 4 year school for "free" (to them) or they can pay the difference at any school of their choosing. I was talking to a friend who suggested we move to a 30 year with the thought that "you can always pay more if you want but you can have extra cash available if you need it." Now, I am struggling with this because we are bottom line people. When the realtor asks "how much can you afford per month?" our response is always, "Can we see that fully amortized and see how much interest we will be paying over the life of the loan?" It drives realtors crazy. However, I am starting to wonder if we shouldn't think about a 30 year. The main issue is not that we can't pay more each month to "pay like a 15" if we want, the issue to me is that the interest rate is a full point higher, so even if we try to pay it off in 15, the payments will be more than $100/mo higher. We are mid to late 40s if that makes a difference in your suggestions. However, Dh says that whatever house we get we will probably not live in forever and can sell when we retire if we want to. Just running some thoughts through my head as we look online at houses and interested to get others' opinions. Ahh . . I missed the bolded in my first reading. Have you shopped around for interest rates? It's been awhile since we've done any financing, but I don't recall encountering that big of a discrepancy in rates. Quote Link to comment Share on other sites More sharing options...
DawnM Posted July 1, 2014 Author Share Posted July 1, 2014 Yes. A 15 year is roughly 3% right now and a 30 year is roughly 4% right now. One full point difference. We currently have a 15 year with 2.6%. Rates have gone up slightly. Ahh . . I missed the bolded in my first reading. Have you shopped around for interest rates? It's been awhile since we've done any financing, but I don't recall encountering that big of a discrepancy in rates. Quote Link to comment Share on other sites More sharing options...
JustEm Posted July 1, 2014 Share Posted July 1, 2014 I'm a bottomline person too and would never pay more in interest if I didn't have to. So I'd get the 15 year if it was doable. Quote Link to comment Share on other sites More sharing options...
goldberry Posted July 1, 2014 Share Posted July 1, 2014 I am about to face this same dilemma. We thought this would be our last house. But we are about to move to a more expensive area, so the mortgage will already be going up. My husband is 53 though, and if we do a 30, we will still be paying into our old age. We are not disciplined enough to pay the extra. For a 30, our payments will be going from $900 to about $1300. If we do a 15, it will go to about $1700. From $900 to $1700 scares the heck out of me! Quote Link to comment Share on other sites More sharing options...
vonfirmath Posted July 1, 2014 Share Posted July 1, 2014 Well, we aren't truly fans either, he truly grates on my nerves, but we do follow Crown Financial, and their principals are somewhat similar. I only mention DR because most people haven't heard of Crown. We did Crown Financial too! Is Crown still around" I don't hear as much about it. However, we do have the 30 yr mortgage. I sometimes think about the 15 year thing. But-- it was still the better decision for us to buy than to continue to rent. Quote Link to comment Share on other sites More sharing options...
Arcadia Posted July 1, 2014 Share Posted July 1, 2014 I was talking to a friend who suggested we move to a 30 year with the thought that "you can always pay more if you want but you can have extra cash available if you need it." We pick a 30 year because of that. It gives us breathing room if hubby gets a pay cut or unemployment. We do pay down the principal every few months so our 30 year is going to be paid off in less than 15 if nothing bad happens job wise. Rates has gone up by quite a bit from a year ago. Quote Link to comment Share on other sites More sharing options...
DawnM Posted July 1, 2014 Author Share Posted July 1, 2014 I know it is still around because I just taught it last semester at church! We did Crown Financial too! Is Crown still around" I don't hear as much about it. However, we do have the 30 yr mortgage. I sometimes think about the 15 year thing. But-- it was still the better decision for us to buy than to continue to rent. Quote Link to comment Share on other sites More sharing options...
maize Posted July 1, 2014 Share Posted July 1, 2014 We've done something Dave Ramsey would never recommend: gone with a 30 year 5:1 ARM in order to get the lower initial interest rate. In fact we've done this twice. The first time we knew we were likely moving out of state within a few years so we wouldn't be in the house long enough for the rates to increase, the second time we had a fair bit of equity already and a plan in place to pay off the house entirely in less than a decade. We're in year 4 of that mortgage and while we won't have the house paid off completely before the first interest rate adjustment our balance will be so low that any rate increase will not have a huge impact.ETA: I would never have gone the ARM route of I did not already know we would have the discipline to pay it down aggressively. Quote Link to comment Share on other sites More sharing options...
Ottakee Posted July 1, 2014 Share Posted July 1, 2014 I would shop around at local credit unions for the best rate. Maybe try a 20 year. The biggest thing would be buy ONLY as much house as you NEED. Don't buy bigger as then the taxes are higher, the upkeep is higher, the heating/cooling costs are higher, etc. and on and on. Buying a house a bit smaller for $25,000 less is a LOT of money over a 15-30 year mortgage. When house shopping, also look at tax rates. If you are on the line between cities, townships, etc. they can vary dramatically just across the street. Also check what the tax rate IS, not just what the current owners are paying in taxes as any tax caps, special deals, etc. will cease and the taxes will readjust to the current value of the house---what you pay for it. Quote Link to comment Share on other sites More sharing options...
DawnM Posted July 1, 2014 Author Share Posted July 1, 2014 Honestly, $25K won't make a big difference. We have set a max amount, but even if we do a lateral move (pay the same for the next house as we sell this one for), we still have to pay realtor fees, etc.....so it will be more. We are also very aware of the tax rate in our new location. It is about double what we currently pay. What do I NEED? Well, I suppose I need a roof over my head, a small two bedroom apartment, and some food. However, that is not what we will be getting. We also would like to enjoy where we live, we have the income for more, but would also like to pay for some other things, like vacations, college, replacement cars in the future, etc.....THAT is really where the rubber meets the road and what I am trying to figure out. We know we have some specifics for what we won't buy or look at, so that does help a bit in terms of finding homes. Dawn I would shop around at local credit unions for the best rate. Maybe try a 20 year. The biggest thing would be buy ONLY as much house as you NEED. Don't buy bigger as then the taxes are higher, the upkeep is higher, the heating/cooling costs are higher, etc. and on and on. Buying a house a bit smaller for $25,000 less is a LOT of money over a 15-30 year mortgage. When house shopping, also look at tax rates. If you are on the line between cities, townships, etc. they can vary dramatically just across the street. Also check what the tax rate IS, not just what the current owners are paying in taxes as any tax caps, special deals, etc. will cease and the taxes will readjust to the current value of the house---what you pay for it. Quote Link to comment Share on other sites More sharing options...
Carol in Cal. Posted July 1, 2014 Share Posted July 1, 2014 I like Crown Financial materials, but I think you have to use them (or anything generic like that) with wisdom and discernment and do what is right for your family. I don't think that they are totally the voice of God. (Not that you said that they were, but some take them that way because they are Biblical in focus.) Quote Link to comment Share on other sites More sharing options...
Annie G Posted July 1, 2014 Share Posted July 1, 2014 Honestly, $25K won't make a big difference. We have set a max amount, but even if we do a lateral move (pay the same for the next house as we sell this one for), we still have to pay realtor fees, etc.....so it will be more. We are also very aware of the tax rate in our new location. It is about double what we currently pay. What do I NEED? Well, I suppose I need a roof over my head, a small two bedroom apartment, and some food. However, that is not what we will be getting. We also would like to enjoy where we live, we have the income for more, but would also like to pay for some other things, like vacations, college, replacement cars in the future, etc.....THAT is really where the rubber meets the road and what I am trying to figure out. We know we have some specifics for what we won't buy or look at, so that does help a bit in terms of finding homes. Dawn The taxes and realtor fees will be the same whether you go with a 15 or a 30, so I wouldn't include those costs in your calculations. (I say that because it sounds like you have enough income to support either the 15 or 30 year model) Have you run the calculations on a mortgage calculator to see the differences? A side by side comparison is usually the only way I can decide things like this. It might really help for you to also run a 'how much will we owe' for like 5 years down the road, as it appears that 5 years is as long as you usually live in a house. Seeing the difference might make you push to make a 15 happen or it might make you decide that the extra money in your monthly budget is worth a 30. Do you plan to teach the Crown class at the new location? If so, will having a 30 year loan bug you when you are teaching others to do a 15? Quote Link to comment Share on other sites More sharing options...
Tap Posted July 1, 2014 Share Posted July 1, 2014 If you take the 15year, can you still afford to help the oldest with tuition? If you can do that, I would take the 15 year. Help the oldest with tuition as you can, have them take loans on the rest, but You make the payments. For the next 2 children do the same, make payments as you can. If you need them to take loans, have them do so, but You make the payments on the loans. Here is my reasoning....pay the interest on the money you NEED to borrow....only as you need it. Not the hypothetical money you may want in the future, which is what you will be doing if you extend your mortgage to cover tuition costs. Even though the student loans will be at a higher interest rate, you will be able to pay them off in a shorter amount of time because they will be smaller loans. $18,000 will cover a lot of interest on student loans! Quote Link to comment Share on other sites More sharing options...
DawnM Posted July 1, 2014 Author Share Posted July 1, 2014 We are moving locally. We currently live too far from the city and will be moving in towards the city. In fact, we will be moving very close to our church. Crown doesn't really teach that you have to have a 15 year mortgage, they simply encourage it. We have run the calculators and I am aware of the extra we will pay. Part of me simply doesn't care right now. Maybe that is my big issue. And part of the reason I am asking is because it will affect how much we can afford. And we do stay in some homes longer than 5 years. We have been in this one for over 9, and it will be 10 when we sell. The taxes and realtor fees will be the same whether you go with a 15 or a 30, so I wouldn't include those costs in your calculations. (I say that because it sounds like you have enough income to support either the 15 or 30 year model) Have you run the calculations on a mortgage calculator to see the differences? A side by side comparison is usually the only way I can decide things like this. It might really help for you to also run a 'how much will we owe' for like 5 years down the road, as it appears that 5 years is as long as you usually live in a house. Seeing the difference might make you push to make a 15 happen or it might make you decide that the extra money in your monthly budget is worth a 30. Do you plan to teach the Crown class at the new location? If so, will having a 30 year loan bug you when you are teaching others to do a 15? Quote Link to comment Share on other sites More sharing options...
Annie G Posted July 1, 2014 Share Posted July 1, 2014 I wasn't passing any judgement on how long you stay in a house. Sorry if it came across that way...wasn't my intent. Quote Link to comment Share on other sites More sharing options...
DawnM Posted July 1, 2014 Author Share Posted July 1, 2014 I didn't take it that way. I was just saying that Crown doesn't really tell people what to do, just more guidelines and suggestions. Whether or not we have a 15 year mortgage is not relevant for teaching the class. I wasn't passing any judgement on how long you stay in a house. Sorry if it came across that way...wasn't my intent. Quote Link to comment Share on other sites More sharing options...
Slache Posted July 1, 2014 Share Posted July 1, 2014 I would shop around at local credit unions for the best rate. Maybe try a 20 year. :iagree: A credit union could literally make a difference of $200 a month. Also, 20 years is a good medium. Quote Link to comment Share on other sites More sharing options...
prairiewindmomma Posted July 1, 2014 Share Posted July 1, 2014 It sounds like you are examining all of the issues and trying to come to a rational decision. I think it's completely ok to think about quality of life when considering the true "cost" or "value" of money and loans. It's also normal for your priorities to shift as you progress through life. Best of luck! Quote Link to comment Share on other sites More sharing options...
shawthorne44 Posted July 1, 2014 Share Posted July 1, 2014 So, if you get a 15-year note, your payment will be X. If you get a 30-year note but pay it as if it were a 15-year note, you payment will be X + $100 $100 per month seems like a lot of money to waste to have the option to possibly pay a lower amount later when money might be tight later. Seems better to get the 15-year note, and also set aside an extra $100 per month into savings for when the money gets tight. If the interest rate were closer and the difference was say $15, then I might change my mind. Quote Link to comment Share on other sites More sharing options...
DawnM Posted July 1, 2014 Author Share Posted July 1, 2014 So far I am not seeing rates better at the CU than what I am finding other places. Our current rate of 2.6 was not through a CU. No closing costs for the refi and we researched quite a bit. I am currently just quickly looking and not seeing better rates through 3 different CUs than what another institution can offer. I can keep looking, but so far I am not seeing it. Dawn :iagree: A credit union could literally make a difference of $200 a month. Also, 20 years is a good medium. Quote Link to comment Share on other sites More sharing options...
vonfirmath Posted July 1, 2014 Share Posted July 1, 2014 So far I am not seeing rates better at the CU than what I am finding other places. Our current rate of 2.6 was not through a CU. No closing costs for the refi and we researched quite a bit. I am currently just quickly looking and not seeing better rates through 3 different CUs than what another institution can offer. I can keep looking, but so far I am not seeing it. Dawn It might depend on your credit union. When buying our house, our credit union was competitive on rates, but not cheaper. And they lost our business due to not being responsive enough when I was trying to gather information. I needed someone who would answer questions and get paperwork done in a timely manner. I never had similar problems with the Boeing Employees Credit Union (ten-ish years ago) Quote Link to comment Share on other sites More sharing options...
Liz CA Posted July 1, 2014 Share Posted July 1, 2014 Sounds like you are disciplined people. If you get the 30 year mortage and pay extra, write two checks or make two separate online payments and mark the extra payment "Principal only." This should pay down your principle and not your interest which is included in your regular mortgage payment. Could you pay extra on the 30 year regularly? If yes, then it sounds like the better deal because of the lower interest rate. ETA: Read other posts and now am not sure which mortgage has better interest rate? The 15 or the 30 year? Someone else also suggested a 20 year. Quote Link to comment Share on other sites More sharing options...
vonfirmath Posted July 1, 2014 Share Posted July 1, 2014 You don't need two separate checks for that. (At least I don't) I fill out the payment coupon with the amount on the Additional Principal line that is to go for principal only. I get Receipt for it on the next statement. Quote Link to comment Share on other sites More sharing options...
Arcadia Posted July 1, 2014 Share Posted July 1, 2014 Yes. A 15 year is roughly 3% right now and a 30 year is roughly 4% right now. One full point difference. I'll look at the amortization for both. If the loan payment for the 3% 15 year loan is a comfortable amount then go for it. Assuming that you are selling your current home, you can down pay the principal down the road with the money, which would bring monthly payments down. Quote Link to comment Share on other sites More sharing options...
Alice Posted July 1, 2014 Share Posted July 1, 2014 Assuming that both loans are within what you can afford and that you aren't buying a house that is much bigger and more than you "need", I think it's reasonable to factor in how having a lower payment with the 30 year mortgage might mean. Less stress? More margin in your budget? Greater ability to help pay for college? On the other hand, are you someone who is so bottom-line oriented that you are going to feel bad about the extra you are paying in interest to the point that it causes you more stress/anxiety? One of the reasons I've always disliked DR and Crown is that I think they only emphasize the bottom line of staying out/getting out of debt over all other considerations. I think it's a great goal to stay out of debt and I think many people benefit from their services and programs. But I also think sometimes there are more factors than purely financial ones. For example, when I was in medical school and about to go to residency my church did a Crown Financial course (I think, it could have been DR). I went and they had this neat calculator to figure out what you needed to spend on rent, food, etc. And how much you should spend to pay off debt. I was about to be $160K in debt from medical school and residents make very little money. The calculator couldn't work for me. I understood that being that much in debt wasn't something they would advise but their counselors just were flummoxed. They had nothing to offer, other than that I should start paying off debt right away. And how would I eat? Pay less in rent. I was already going to be paying as little as possible in the area of my residency. It was when they suggested I get a second job (as a medical resident) that I kind of realized they had no clue how to help me and stopped listening. All that to say, the bottom line is important but I think other things are important too. Personally, we've made the decision to do things like travel while our kids are young even though it means paying off the mortgage more slowly and paying more in interest. I would weigh what the different options mean for your particular family's overall values and goals. That might be different than other people. Quote Link to comment Share on other sites More sharing options...
ChristyB in TN Posted July 1, 2014 Share Posted July 1, 2014 I've never heard of crown financial and I'm not a Dave Ramsey fan and I still say go with the 15 year. If something comes up that you must borrow money for it, you can! You probably won't borrow any and will save a ton of money. 'Near to me' state schools are great. Quote Link to comment Share on other sites More sharing options...
Kim in Appalachia Posted July 1, 2014 Share Posted July 1, 2014 It's not an easy decision, and honestly, I don't think there's a wrong answer. Personally, we have gone with the longer mortage (20yr). The first time we did a 30 yr mortgage, but did reduce the time when we refinanced. I think it is important to pay attention to your cash flow. It isn't always easy to borrow the money you need, and having the wiggle room built into your monthly mortgage is a nice cushion. We always paid extra each month until our oldest hit college. It is nice to have that extra cash. I know the bottom line is important but so is cash flow. You do have to look at both. Quote Link to comment Share on other sites More sharing options...
idnib Posted July 1, 2014 Share Posted July 1, 2014 I like the above suggestion to go with the 15 year and put away the extra $100. If I was in your position I would do the above. If we ended up in a real pickle I would borrow the money for the college expenses I promised. Not that I would like that, but I'd rather be in a position right now of maybe having to borrow money in case of a problem down the road, rather than automatically spending more money to avoid it. Quote Link to comment Share on other sites More sharing options...
DawnM Posted July 2, 2014 Author Share Posted July 2, 2014 Thank you all. Definitely all thoughts I have been mulling over! Quote Link to comment Share on other sites More sharing options...
DoppeltGemoppelt Posted July 2, 2014 Share Posted July 2, 2014 Here is another thought: If you decide to go with a 30year or 20year, another way to reduce your bottom line, besides paying more principal, is to pay every 25 days instead of every month. For every day that you pay early, you are saving $$ in interest. Plus you have the benefit of being ahead two extra payments per year. Some mortgage companies will accept weekly payments as well. You could get a loan that states you are paying bi-weekly, thus reducing your overall interest and in some cases even the points. Quote Link to comment Share on other sites More sharing options...
DawnM Posted July 2, 2014 Author Share Posted July 2, 2014 Well, if I get a 20 year and pay that way, shouldn't I just go ahead and get a 15? I think a 15 year or a 20 year with biweekly or paying every 25 days would be so similar that it wouldn't allow the flexibility of having cash on hand. I have never heard of paying every 25 days but for ME, I would have a hard time with that, I like knowing exactly when it is coming out of my bank account (every 1st and 15th for example) and line it up with paychecks coming in. Dawn Here is another thought: If you decide to go with a 30year or 20year, another way to reduce your bottom line, besides paying more principal, is to pay every 25 days instead of every month. For every day that you pay early, you are saving $$ in interest. Plus you have the benefit of being ahead two extra payments per year.Some mortgage companies will accept weekly payments as well. You could get a loan that states you are paying bi-weekly, thus reducing your overall interest and in some cases even the points. Quote Link to comment Share on other sites More sharing options...
shawthorne44 Posted July 2, 2014 Share Posted July 2, 2014 Not all banks will apply the payments more than once a month on a certain date. 3% to 4% is a huge jump. With the same starting balance every month, if for example, $600 goes to interest on the 15-year note, $800 would go to interest on the 30-year note. Quote Link to comment Share on other sites More sharing options...
maize Posted July 2, 2014 Share Posted July 2, 2014 Here is another thought: If you decide to go with a 30year or 20year, another way to reduce your bottom line, besides paying more principal, is to pay every 25 days instead of every month. For every day that you pay early, you are saving $$ in interest. Plus you have the benefit of being ahead two extra payments per year. Some mortgage companies will accept weekly payments as well. You could get a loan that states you are paying bi-weekly, thus reducing your overall interest and in some cases even the points. The way most mortgage companies work, extra full payments are applied as future payments and follow the same amortization table as if you had waited to make the payment when it was due. In other words, they do not save you interest, the company still applies the full amount. If you want to save interest, do not make extra full payments--make extra principal only payments and double check to be sure your loan servicing company applies them this way. I have had to call many times and have payment applications reversed and re-applied according to my directions because the mortgage company was ignoring my instructions to apply extra payments as principal only and was instead applying them as future payments with full interest. Fortunately our current mortgage servicing company has been more honest... Quote Link to comment Share on other sites More sharing options...
DoppeltGemoppelt Posted July 3, 2014 Share Posted July 3, 2014 We have had to call the mortgage company many times over as well, restructure payments, etc... Every mortgage company deals with your payments differently. Unfortunately you have no way of knowing ahead of time who your mortgage may be sold to. Quote Link to comment Share on other sites More sharing options...
DawnM Posted July 21, 2014 Author Share Posted July 21, 2014 Just an update. We have definitely decided to stick with the 15 year and are even now talking about options to lower our mortgage. How low/small we are willing to go is the issue now. Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.