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This was the approach that made the most sense to me. Purchase a house where you can afford the 15-year fixed mortgage, but take out the 30-year fixed mortgage
by ncallaway 5y ago
This was the approach that made the most sense to me.
Purchase a house where you can afford the 15-year fixed mortgage, but take out the 30-year fixed mortgage. Pay it off as if it were the 15-year fixed (ensure that your loan has no penalties for prepayment or extra payments, and that 100% of extra payments go toward the principal).
If things go smoothly for you, you’ll pay a marginal amount of additional interest (because your % will be higher as a 30-year than a 15-year). However, if you run into cash flow issues, you have a good amount of reduction in mortgage payments that you can make while keeping the bank completely satisfied.
- avidiax 5y agoNo reason to make principal-only payments with interest rates so far below the avg. stock market return. Obviously if a bond paying 3% would be interesting to you, pay the mortgage off first before buying the bond.
- ncallaway 5y agoI agree that produces a better expected return, however the downside-risk from a bad outcome is worse for me than the expected upside gain. Essentially, I don't expect my overall happiness and satisfaction to be linearly correlated with my finances, and I expect that non-linearity to be such that I'd rather be more risk-averse in such a way that I have to give up some of the potential gain. If there were a world where I could _guarantee_ the avg. stock market return, then I'd of course take that offer, but sadly such guaranteed returns only exist in the form of scams and ponzi schemes.