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Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: Grid on April 04, 2017, 10:06:49 AM

Title: 30-year fixed at 4% or 15-year fixed at 3.25%
Post by: Grid on April 04, 2017, 10:06:49 AM
Hi all,

I'm looking to buy a home in a few months.  Assuming I'm going to invest the extra money instead of paying extra towards a mortgage, which would you prefer and why?  We aren't planning on spending longer than 5 years in the house.  I'm torn between the 15-year's lower interest (better returns on invested money) and the 30-year's lower down payments (more money to invest), and am not sure how to decide between those two options.

Thanks in advance!
Title: Re: 30-year fixed at 4% or 15-year fixed at 3.25%
Post by: notsofast on April 04, 2017, 11:46:26 AM
I'd choose 30Y/4% all day long.  Power of compounding!   If you truly invest the difference in payment and don't spend it then over 30 years you will be greatly rewarded for having that leverage on the balance sheet.
Title: Re: 30-year fixed at 4% or 15-year fixed at 3.25%
Post by: Samsam on April 04, 2017, 11:55:11 AM
Have you found something at 4%?  I locked something in a couple weeks ago and best I could find was 4.2% for 30 yrs
Title: Re: 30-year fixed at 4% or 15-year fixed at 3.25%
Post by: Tiger Stache on April 04, 2017, 11:58:58 AM
if you're not planning to stay in the house more than 5 years, have you looked at ARM loans?

of the two, i'd take the 30 year loan.
Title: Re: 30-year fixed at 4% or 15-year fixed at 3.25%
Post by: patchyfacialhair on April 04, 2017, 01:29:43 PM
We closed a month and a half ago; 30 yrs, 4% even.
Title: Re: 30-year fixed at 4% or 15-year fixed at 3.25%
Post by: acroy on April 04, 2017, 01:42:16 PM
30yr 4%
Invest the rest ;)
Title: Re: 30-year fixed at 4% or 15-year fixed at 3.25%
Post by: v8rx7guy on April 04, 2017, 01:56:50 PM
A 5 year time frame is short term, not long term.  Yes, long term you can average 7% in the market... but short term, who knows?  I'd go with the 15-year @ 3.25% and have more equity to roll over into buying your next home.  The market could verrrrry easily down turn over the next few years and not only would you be paying more in interest on your home, but your investments could go also down.  For a short term 5 year window... take the sure bet, that's my opinion.
Title: Re: 30-year fixed at 4% or 15-year fixed at 3.25%
Post by: Grid on April 04, 2017, 02:51:15 PM
if you're not planning to stay in the house more than 5 years, have you looked at ARM loans?

of the two, i'd take the 30 year loan.

I had taken a look at ARM loans.  They generally have a lower interest rate to start out with, but I was worried there was some kind of "catch" with them if you sell the home before the initial fixed rate period.  I haven't seen anything that says that they do.  I also read there are usually no penalties for prepayment (ARM or otherwise), so paying it off quickly if the adjusted rate was undesirable was also an option.
Title: Re: 30-year fixed at 4% or 15-year fixed at 3.25%
Post by: mr_orange on April 04, 2017, 02:55:28 PM
Use the longer amortization period and invest the rest.  You can always prepay the mortgage if you choose to do so.  Granted it will be at a slightly higher interest rate, but the lower payments will be nice if you are ever cash strapped during a layoff period or some such.  In general it is better to have a lower payment as long as the rates are pretty close so that the different can be invested at high rates. 
Title: Re: 30-year fixed at 4% or 15-year fixed at 3.25%
Post by: Dicey on April 09, 2017, 10:13:28 AM
Was in my local bank the other day. They have an interesting adjustable option. Thirty year adjustable loan, first 10 years fixed at 3.25%. See what else might be available at smaller banks or credit unions in your area...
Title: Re: 30-year fixed at 4% or 15-year fixed at 3.25%
Post by: mr_orange on April 09, 2017, 10:46:39 AM
Use the longer amortization period and invest the rest.  You can always prepay the mortgage if you choose to do so.  Granted it will be at a slightly higher interest rate, but the lower payments will be nice if you are ever cash strapped during a layoff period or some such.  In general it is better to have a lower payment as long as the rates are pretty close so that the difference can be invested at high rates.
Title: Re: 30-year fixed at 4% or 15-year fixed at 3.25%
Post by: Capt j-rod on April 11, 2017, 10:23:22 AM
I borrow for 30 and make the 15 payment. If in need money, I have the option of making the 30 payment. If I can get better investment interest then I will use the money elsewhere. My FIRE date is carved into the wall, so everything is reverse engineered to hit that day.