myth that longer mortgages are better

C

Chapdog

Abreast of the situations
You have been told that you can deduct your mortgage interest so its good to have a long mortgage to keep tax paid down. BUT when I actually break down the numbers its a no brainer to pay off the house (if you can afford the higher monthly payments).

Lets use an example with some arbitrary assumptions. I would suggest you do out the math on your personal situation if this interests you.

assumptions
200K mortgage balance
4.25% interest rate
25% fed tax bracket

Scenario 1 (30year mortgage)
200k @ 4.25% 30year = 154200 interest paid
38550 in tax savings over 30 years
net cost = 115,650

Scenario 2 (10year mortgage)
200k @ 4.25% 10years = 45850 interest paid
11500 in tax savings over 10 years
net cost = 34,350


Rest my case. If you can afford to pay a shorter loan then do it.
 
This is good info for a future home buyer such as me. I'm guessing that many long-term holders are more interested in being able to afford the payments on a month-to-month basis then they are in how long they have to keep up with said payments...
 
Chapdog said:
You have been told that you can deduct your mortgage interest so its good to have a long mortgage to keep tax paid down. BUT when I actually break down the numbers its a no brainer to pay off the house (if you can afford the higher monthly payments).

Lets use an example with some arbitrary assumptions. I would suggest you do out the math on your personal situation if this interests you.

assumptions
200K mortgage balance
4.25% interest rate
25% fed tax bracket

Scenario 1 (30year mortgage)
200k @ 4.25% 30year = 154200 interest paid
38550 in tax savings over 30 years
net cost = 115,650

Scenario 2 (10year mortgage)
200k @ 4.25% 10years = 45850 interest paid
11500 in tax savings over 10 years
net cost = 34,350


Rest my case. If you can afford to pay a shorter loan then do it.
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If you can afford it, that is the clincher We took out a 15 year mortgage, but my daughter had to take out a 30 year, it is our hope they can pay a little more each month to help speed up the process.
 
Threedee said:
This is good info for a future home buyer such as me. I'm guessing that many long-term holders are more interested in being able to afford the payments on a month-to-month basis then they are in how long they have to keep up with said payments...
Click to expand...
Most people believe that they will move long before paying off the home and that they'll use their equity for the down on the next.
 
right, its if you can afford the higher payments... BUT id also go so far to suggest that you could even potentially save money by shortening up your mortgage in combination of lowering your retirement plan / or personal savings investments if you dont have the extra couple hundred monthly otherwise. Now im not advocating it, merely suggesting that its worth while to do out the math.
 
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