Replies to post #72820 on Zeev's Turnips Patch-No Politics (ZEEV)

[Newly2b]

Tantal, I believe you are very wise. The same thoughts are occupying my mind these days. And you are right about the 15 yr. loan -- hands down, you pay less due to the half point lower rate. My dilemma is if we get deflation, owning property with a mortgage that has to be paid with more valuable dollars is not good; if we get inflation, you don't want to be holding cash, so real property ownership is good and the mortgage is paid off with cheaper dollars.

The question is, which will it be?

Newly

[Smart_Money]

"I am paying more interest from month one with the 30 year, paying the same amount as the 15 year - it doesn't matter how much principal you pay,"

I telling you that is wrong if I ever heard it. Ask your bank if: you take the 30 year loan and pay as a 15 year loan, will it cost me a penny more. Please ask them and see what answer you get. You have to remember that a mortgage loan is amortized very differently than a car loan. Most car loans use the rule of 78 while mortgage loans use SIMPLE interest.

Simple is simple! sorry I could not resist.

"it doesn't matter how much principal you pay, the interest is greater because the rate is higher, right?"

Yes, you pay 1/2 pt more from day one for the 30 year but you get 15 additional years to pay it the loan back. So you get something in return for the 1/2.


I want to own it all in the event of economic calamity

That is good thinking but remember the 15 loan give you the obligation of 15 years and the 30 year loan give you the obligation and the "right" to pay off early with no additional interest if you paid it as a 15 year loan. If you lose your income for a few month you can pay less and avoid any costly late charges and possible protect your credit.