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Thread: Switching from a 30 year mortgage to a 15 year?

  1. #1

    Switching from a 30 year mortgage to a 15 year?

    Switching from a 30 year mortgage to a 15 year? Switching can be a wise choice to become financially independent more quickly. You will pay slightly more each month, but over time you pay much less in interest than you would with a 30 year mortgage. If a family can afford it, what do you think about this strategy?

  2. #2
    Junior Member
    Join Date
    Aug 2012
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    The interest rate is higher on 30-year mortgages than on 15-year mortgages. This can show up as a higher rate, more points, or both. Often, one can obtain 15-year and 30-year fixed-rate mortgages at identical rates but with 1 - 3 more points up front for the 30-year. A typical differential is 1-3/4 points up front.
    Suppose we compare the 15-year to the 30-year as follows: We take out a $100,000 mortgage at 9 percent in either case. However, with the 15-year, because we pay 1.75 points less up front, we have $1750 to invest.
    The monthly payment on the 30-year mortgage is only $804.62, compared with $1014.27 for the 15-year. Therefore, each month, we have over $200 more available to invest with the 30-year mortgage.
    What we are going to do is invest the money ($1750 up front in the case of the 15-year, $200+ per month in the case of the 30-year) at a reinvestment rate until we have reached the end of 15 years. At that point, we will compare the value of what we have invested to our outstanding liabilities.

  3. #3
    Yes it is possible but you EMI would be doubled. If you can manage and you think that you can manage than for sure you should switch your mortgage from 30 years to 15 years.

  4. #4
    Junior Member
    Join Date
    Feb 2014
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    Quote Originally Posted by Derrick View Post
    Switching from a 30 year mortgage to a 15 year? Switching can be a wise choice to become financially independent more quickly. You will pay slightly more each month, but over time you pay much less in interest than you would with a 30 year mortgage. If a family can afford it, what do you think about this strategy?
    15 year loans have higher payments, but less interest. On the other hand, 30 year term loans have lower monthly payments but higher interest rates. If your family can afford it and you can still meet your retirement and other saving goals then I think it you can switch to 15 year mortgage.

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