Still on the Learning Curve - 30 year mortgage better than 15 year mortgage?

Are you taking the 15-year, monthly note about and investing it after the loan is paid off?

If you really want to get technical, you should also be factoring in the TVM for the tax benefits for the extra mortgage loan interest.

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Are you taking the 15-year, monthly note about and investing it after the loan is paid off?

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Good point. Just threw that in the calculator and it comes out about the same. $447k if I invest $1700 for 15 years at 5% return. Of course, I can't imagine being 50 and looking at a free $1700 and investing all of it. I don't know if I'd be that disciplined.

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If you really want to get technical, you should also be factoring in the TVM for the tax benefits for the extra mortgage loan interest.

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What is this?

Yeah not sure if I did this correctly.. but looks like if you took the $1,700 and invested it monthly after paying off the 15 year mortgage and it got 5% return you'd make $454,391 in the 15 years after the mortgage ends.

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I can't imagine being 50 and looking at a free $1700 and investing all of it. I don't know if I'd be that disciplined.

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Are you disciplined enough to invest the $600 every month then?

You need to factor in your tax savings. Assuming you are in the 25% tax bracket, you can add about $2500/year average for the first 15 years in direct savings.

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What is this?

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You get a deduction from your income for mortgage interest that is paid for the year.

Using your numbers, I came up with $6,826 in interest for the 15 year mortgage for the first year and $9,421 for the 30 year. The difference between the two is $2,595, so you'll pay an extra 2,595 in interest on the 30 year mortgage in year 1. Now you get to deduct that extra 2,595 on your tax return and assuming you're in the 25% bracket, you'll pay $648 less in taxes because of the extra interest you paid during the year.

Yes, definitely run the numbers on this. Remember that the interest is tax-deductible if you itemize, that may make a difference.

I refinanced a couple of years when rates were at the bottom and went with 30 simply because the after-tax rate was roughly the long-term inflation rate. You don't want to pay extra to reduce your rate below inflation, that is a negative ROI so it was a pretty easy decision for me. But rates may have climbed enough since then that it's a closer call.

I suspect the 30 is likely still the better deal if you are disciplined about investing the difference but I haven't done a detailed analysis in a while.

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How much do you expect your income to increase over the next 15-30 years? $1100 a month is not much if you're making $150k a year vs 50k a year, especially considering inflation over the next 15-30 years.

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That's a horrible way to think about it. $1100 a month is still $1100 a month, no matter how much you make. That's the type of thinking that keeps people from gaining wealth.

While no one can predict the future, let's assume that from year fifteen forward, interest rates will be substantially higher than they are right now (let's say the ten year treasury is back hovering around its historical norm of 6-7%, based on 1960 to the present). If you were a bank or a bond holder, under that scenario, would you want to be long or short a long term debt instrument yielding 3.8%? As the mortgagor, you are effectively short. Again, I can't predict the future. But I've placed my bet on the short side.

I have a 30 year fixed. Other than commercial real estate loans, I've always leaned toward the 30 year fixed for its flexibility (I can pay it as I see fit, from 1 to 30 years). And at my current, crazy low rate, my plan is to not allow the bank to get its 3% money back until I either sell the house or die. I plan on moving into a (free & clear) house that I own closer to town in ten years or so. So at that point, we'll both walk away with our money. But unless I have done something uncharacteristically stupid, having use of their money at 3% should have given me ample opportunity to make a much greater after tax return than if I'd given them their "cheap" money back early. From my days in banking, I learned that whatever the house prefers (pay that cheap money back ASAP, son!), is not necessarily what the consumer should be doing. As happens with high interest bonds in low interest rate environments, don't think that the bank wouldn't love to call that low rate, long term fixed rate debt instrument if it could. I mean, wouldn't you?

But now, what works for me might blow up in your face. I'm not concerned with job loss, divorce or a mystery kid showing up and calling me "daddy". I'm only speaking for myself up there. And who knows, once President Caitlyn Jenner takes office, long term rates could be down to less than .25%.

So, your mileage very well may vary...

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If life was that simple, everyone would be rich.

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The sad part is this is absolutely false.

Back to OP, the hedge is a 30 if paid like a 15 adds very few payments Over the life of the loan. If in 5-10 years market volatility is out of comfort level, knock down mortgage with that extra $.

The "what if" advantages of a 30 year with tax benefits and flexibility in today's lending environment is a no brainer IMO