Zeev's Turnips Patch-No Politics (ZEEV)

[Smart_Money]

We'll I have a Finance Degree and not a teaching certificate so I will try to explain better. No difference of interest paid for the 30 year loan if you pay it like a 15 year loan. The lender will give you about 1/2 point better rate for the 15 year loan. The extra 1/2 pt buys another 15 Years to pay which is a bargain when you look at previous rates the last 40 years. CoalTrain was right....under 6% we should be asking for 40 years

It is very simple, take the 30 year loan and treat it as a 15 year loan. You don't pay a dime more in interest. The 1/2 point rate increase gives you the option of paying less on months when you are short cash flow. You can make it up months later and save yourself some dings on credit and/or late charges. Better yet, invest the difference in payments to earn more than 5.5% and have the bank make you a profit.

30 year loan = Flexability
15 year loan = stuck with no room to deviate.

ps. Most loans NOW have no prepayment penalty because they want you to pay it back sooner. They want to stick you with prepayment penalty when they have you locked at a high rates. This fact in itself should give away the banks game.