When it comes to buying a home, there are two very popular mortgages to choose from – you can choose the 15 year fixed rate mortgage or the 30 year fixed rate mortgage.
Far and away the 30 year mortgage is the most popular option for Americans with only 10% (!!) selecting the 15 year mortgage. But just because the 30 yr mortgage is the most popular option, does it mean that is it is the BEST option? Well that is what I set out to discuss in this video.
The 15 year mortgage does indeed come with perks. First of all it will generally have a lower interest rate…and being that you pay it off in literally half the time fo a 30 year mortgage, you are going to save yourself a boat load on interest with the 15 year mortgage. (I’m taking more more than double the interest if you go with the standard 30 year mortgage…that translates to tens if not hundreds of thousands of dollars depending on the size of your mortgage.)
So from a numbers perspective, I bet you are going to be thinking that the 15 year mortgage is the way to go. 100%, right? And being that I am a HUGE fan of saving money, I bet that is what you think I am going to recommend.
Well, no so fast.
We have to take a moment to consider the opportunity cost of our money.
If you go with a 15 year mortgage, you far a significantly higher monthly payment – which can greatly reduce your ability to save and invest your money. However, if you choose a 30 year mortgage, you face a lower monthly payment – which opens up more options for saving and investing your money.
Remember, time is your best friend when it comes to investing your money. Time is what allows compound interest to work it’s magic and grow your net worth.
So once we start to factor in that opportunity cost of your money – aka – factoring in what would happen if you invested the difference between your 15 yr monthly mortgage payment and that 30 year monthly mortgage payment, which option comes out ahead. Well you are going to have to tune in to find out!
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Want to boost your returns by 3% annually: https://www.youtube.com/watch?v=8z_cxJjm7Ps
Why your home is NOT an investment:https://www.youtube.com/watch?v=b7ZX0_PpTf0&t=38s
How much of a house can you afford: https://www.youtube.com/watch?v=aGbtD6IS5FU&t=11s
How much money should you have saved up? Here’s what net worth should look like by age: https://www.youtube.com/watch?v=VLu7BGHdSbU&t=2s
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