Hello Mustachians--

My husband and I are about to buy our first home and I'm hoping someone can look over my assumptions/budget predictions and help me decide between a 15 year and 30 year mortgage.

Monthly Budget

Income: 10416 (Minumum--not including overtime, differential/hazard pay, or per diem, all of which could be substantial. Yay new job, for which new house is being bought.)

Taxes: 2291 (Assume 22% marginal rate based on online 2019 tax estimator.)

Automatic retirement deductions to maximize matching: 520

Average expenses: 1250 (All insurance, cars, food, phones, all other goods. I could certainly break this down, and am open to ways to reduce this--but that's not the primary point of this thread so for now let's just assume this won't change.)

Big additional expense: 1450 (Rent on current house, which we will maintain so husband can keep his job. New job will be 240 miles from current house--we will commute to each other on weekends, take leave, etc.)

**Monthly income to play with in this thread: 4905**

*Note: When looking at scary housing cost numbers (1450 for rent for husband's job, XXXX for new house)--keep in mind that these are absolute max numbers. We intend to get a permanent roommmate for one house OR switch to a cheaper rental for husband when one comes available, roommates for both houses during the summer when seasonal workers flood in, maybe roommate for new house. This should reduce monthly expenses by 800-1100. But we certainly do NOT intend to pay full housing costs on two very expensive houses indefinitely. However, I'd like to budget conservatively for the worst case scenario and still try to get a savings rate that I'm comfortable with.*

Mortgage numbers for this thread (happy to play with other numbers, too, but here's one scenario from our pre-approval):

Home price: $300,000 (close to minimum price for single-family in not-sketchy neighborhood that's bikeable/skiable to new job, with at least one extra bedroom for roommate, and garage for primary hobby, furniture building)

Loan amount: $240,000

Property taxes, homeowners insurance: $500 monthly

Utilities and internet on new home: $380 monthly

15-year mortgage: 3.75%; monthly payment $2622

30-year mortgage: 4.25%; monthly payment $2061

Using mortgage interest calculators, choosing the 15-year mortgage would save $120,000 in interest costs. Choosing the 30-year mortgage and paying the additional $565 saves $95,500 and the mortgage is paid off in 16 years.

This is where my brain starts breaking down--is it wiser to choose the 15 or 30-year mortgage? Choosing the 15-year and investing the minimum $2300 (difference between $4905 expenses and $2622 monthly payment) yields an investment rate of 24%, or 29% if you consider the $565 increase in mortgage price as an investment that will yield $120,000 in interest savings. That's a number I can live with, especially considering that I truly believe all of the above expense and income numbers are very conservative. It seems that if we can keep our home price around $300,000, choosing the 15-year mortgage is wise, and could be considered a diversification of investments.

So, should we be looking at a different mortgage--or a cheaper house?

Thanks, all. I am increasingly anxious about this huge decision.