The majority of buyers never see the tail end of a mortgage. Most end up selling or refinancing (or both!) way before 30 years ever rolls around. A select few, the creme of the financial responsibility crop, want to pay off their mortgage and live without that particular millstone around their necks (make no mistake - even though it's a necessary evil, a mortgage IS an evil).
Lots of people say things like 'If you pay an extra $100/mo you can pay off your mortgage in 17 years.' And while I'm sure that there is a mortgage amount out there about which that would be true, it isn't true for very many (just the one, really). There isn't a universal dollar amount that will achieve that goal. If there were I'd buy a million dollar house and then pay $200 extra every month and pay it off in 8.5 yrs. Sadly, math doesn't work that way. But there are a few ways you can pay off your mortgage in half the time. Here's the first one:
Obvious-chick says: Get a 15 year mortgage
Duh! Yes, I realize that's obvious. There are two advantages to doing it this way:
- You'll probably get a slightly lower interest rate than if you had a 20 or 30 yr loan. That means that you will pay less in interest overall while you are also paying off your mortgage faster.
- There isn't really any fiscal discipline needed. If a great new pair of shoes comes hurtling into your consciousness you don't have the option of blowing off that extra amount toward your mortgage. You HAVE to pay it.
The corollary of that advantage is the biggest disadvantage: You HAVE to pay it. If it's actually an electric bill that you'd rather pay instead of that extra amount toward your mortgage, you're stuck. And that's not a good place to be in.
I usually recommend that my clients forgo the 15 year mortgage because you never know what's going to happen. Job loss, extended illness, suddenly having to take care of an aging parent, life is what happens while you were making other plans. In my mind, the advantage of a lower interest rate usually isn't enough to make up for this downside.
OK, Jules, if you don't recommend a 15 year mortgage, what DO you recommend to pay off your mortgage in 15 years?
You're going to have to come back next time to find out. I know, I know, it's almost as exciting as watching LOST where you can hardly wait to find out what happens next!
Originally posted at JuliaOdom.com
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