We've all heard Dave say to never get a 30-year mortgage, but do you know why?
For starters, you're basically throwing your money away. Some people get a 30-year mortgage, thinking they'll pay it off in 15 years. Good intentions aside, this rarely happens. Why? Because life happens instead. You might decide to keep that extra payment and take a vacation. Or maybe it's time to upgrade your kitchen. What about a new wardrobe? Whatever it is, you'll find an excuse to spend that money somewhere else.
Let's check out the difference between the two options. A 30-year mortgage on a $225,000 home with 6% interest has a payment of $1,349. On that same house with the same interest, the payment on a 15-year mortgage would be $1,899. That's a $550 difference!
That may not seem like much, but take a look at the bigger picture. When you pay $1,349 a month for 30 years at 6% interest, you are actually paying $486,000 for your $225,000 home.
Now how do those numbers work for a 15-year mortgage? A monthly payment of $1,899 for 15 years at that same interest rate will equal $342,000. So if you go with the 15-year mortgage, you'll save yourself $144,000 over the life of the loan!
You're still in that $225,000 home 10 years later. The 15-year mortgage has been paid down to about $98,000. However, the balance on a 30-year mortgage is only down to $188,000. What does this mean exactly?
It means that if you have a 30-year mortgage, you've paid almost $162,000, but you've only knocked $36,000 off the loan. So over the past 10 years, you've given the bank $130,000! Wouldn't it be worth it to pay a little extra every month so you could avoid that?
If you think you're getting a better deal with a 30-year mortgage simply because you save a few hundred bucks each month, then you're only thinking short term. Go over the math again. If you open your eyes, you'll see that you're literally throwing away thousands of dollars. Don't fall into the same trap as everyone else—refuse to go with a 30-year mortgage.
Trust us—you'll be happy you paid the extra money each month to save yourself from years of debt.
New study adds to recent research that examines the merit of snowballing debts and how small victories provide encouragement to pay others.From Seattletimes.com
Buying a used car can be both a scary and expensive experience. Here are seven ways to be better prepared when shopping for a used car.From Huffingtonpost.com
Whether you are going through a new job search or a complete career transition, it's important to have a solid personal finance plan.From Blog.Chron.com