MB and Roadracer, what’s the matter with you two? By today’s standards, you’re both mentally ill! Get with the times! [sarc/OFF]
Seriously, my hat’s off to both of you. Thank you for posting those excellent examples for anyone young enough here that is still in the earlier decision-making stages of life. There’s wisdom in them-thar words. And even if people aren’t in a position to pay off a mortgage early, they should at least be keeping a penny-by-penny accounting for about three months (maybe more) of where every bit of their money is going. Once they’re sufficiently shocked, they can realign their priorities and come out much better with the above kinds of decisions and situations. We did exactly that with our spending 40 years ago, and were utterly shocked at what we were actually spending our money on day to day. It was literally a life-changing experience.
For any that don’t know, it’s less out of pocket each month than most people would imagine to get a 15 year mortgage as opposed to a 30 year mortgage. While that spread was much less back in the days of 8-10% mortgage rates (or higher), it’s still not twice as much per month to take a 15 year loan as opposed to a 30 year loan. First, interest is tacked on up front in mortgages,with virtually nothing going to principal. The amount of any given mortgage payment actually applied to one’s principal only starts becoming meaningful in the late years of a mortgage. So equity isn’t built up for many, many years. Second, 15 year rates are considerably lower than 30 year rates. It’s best to get it paid off as early as possible. Forget the noise about “freeing up” more money for other things now by stretching out the mortgage to 30 years. Get the security of some place you can’t be moved out of unless (1) Trump wants to build a casino or hotel on your land and it gets taken through eminent domain, or (2) you simply can’t even pay your property taxes once a year. Short of those two things, having a paid off place to live can be one less significant worry.
Nice posts, both of you!