Dave Ramsey - 15 year mortgages

amother

Carnation ↓

Tue, Oct 01 2024, 6:41 am

Any financial advice is not one size fits all

I had a 40 year mortgage with an option to pay interest only any month I wanted. It was a great financial decision since interest was very low and it enabled me to go lean periods without accumulating any expensive credit card debt as income bounced around at times.

When there was a surplus of money I just paid more each month during that period.

Any interest I paid was tax deductible and I was diligent about putting money into retirement accounts which I didn't touch. The value of those accounts increased far more than my interest especially since interest on a mortgage is tax deductible so actual interest paid was less than on paper.

On the other hand I stayed in the same relatively modest home and so the amount of my mortgage was relatively low.

Chayalle

Tue, Oct 01 2024, 6:44 am

I bought my first starter home around Y2K with a 30 year mortgage (rates were relatively high then). About 2 years later rates dropped and I refied to a 15 year mortgage. About when I paid my mortgage off, I was able to move to a larger home 6 years ago (which has now doubled in price....)

I think it's sometimes worth buying at 30 years and refinancing when rates drop.

amother

Amaranthus

Tue, Oct 01 2024, 7:54 am

Just know, a 15 yr mortgage doesn’t cost double per month the 30 yr mortgage. This is because every month you are paying a lot more towards the principal amount, and you’re borrowing money for much shorter amount of time. Also, the mortgage rate is lower. We did this and it was very tight in the beginning but sooo worth it. Yes, we trimmed a lot in all other areas (clothing, food, etc) but the mortgage always gets paid.

amother

↑ Poppy

Tue, Oct 01 2024, 1:10 pm

amother Crocus wrote:

This advice is for couples who do have some money in the beginning. Usually money that they had saved up from before marriage.

I am in Lakewood kollel circles, so this is the crowd I am referring to.

Take a lakewood girl in a starting salary of 45k a year. In two (most girls do not end up getting married right away) she should be able to save 80k, living at home and no real expenses.

That should be enough for 20% down on a 400k home. Now, that wont get them much in Lakewood today, but it is enough for a Coventry town house.

Todays interest rates are high, but according to the online calculator, the monthly payment on a 320k loan for 30 years should be around 2500 a month, which is comparable to rent in such a house. If they cant afford something that big, they can easily get that rent and rent something smaller

If the parents have more resources and are giving support, the couples can take a 15 year and put that extra 1k ( the difference between a 15 year and 30 year a month)

By the time the support is over, the income should have gone up, and they should be able to continue to do that. This way, but the time they have a bunch of tuitons, they will have a paid off home, and equity.
They can then upgrade to a larger home, but it will be a much lower mortgage then there peers, who do the typical thing of only buying after they stop getting support and the husband started working....

amother

Brunette

Tue, Oct 01 2024, 1:14 pm

amother Poppy wrote:

Unrealistic numbers. If you make 45k a yr you can't save 80k in 2 years. Taxes will take more than 10k

↑ lamplighter ↓

Tue, Oct 01 2024, 1:20 pm

I guess this conversation doesn't apply to me/my circles.
What's the expression - you need money to make money.
I agree that a 15 year mortgage is ideal but the numbers, especially these days, don't add up. Most people are struggling to buy even with a 30 year mortgage.

amother

↑ Carnation

Tue, Oct 01 2024, 1:25 pm

amother Brunette wrote:

Unrealistic numbers. If you make 45k a yr you can't save 80k in 2 years. Taxes will take more than 10k

As would living expenses even if she were fairly frugal.

Does she not need clothing?

Does she not have any kind of social living?

Does she not need a car to get to work and to visit friends?

Does she never take even an inexpensive trip with friends?

Does she never go out to lunch with her co-workers? Do her parents provide her with lunch to take every day at no cost?

What about miscellaneous expenses like cosmetics, medical care/dental care, grooming like hair and nails?

While her "room" doesn't cost her parents anything feeding her costs something so either her parens are subsidizing her or she is paying at least something towards her food expenses.

amother

↑ OP ↓

Tue, Oct 01 2024, 1:27 pm

lamplighter wrote:

Right and Ramsey seems to say then don't buy. Just continue paying 4k a month in rent paying someone else's mortgage

↑ lamplighter

Tue, Oct 01 2024, 2:10 pm

amother OP wrote:

Right and Ramsey seems to say then don't buy. Just continue paying 4k a month in rent paying someone else's mortgage

I agree that it's not a good idea to wait until you can do a 15 yr.

I was responding to the discussion about buying a house on a 15 yr mortgage as a newlywed.

amother

↑ OP

Tue, Oct 01 2024, 7:04 pm

Genius wrote:

Ramsey is great for people who are in real debt (not including house or car loans) or just starting out in life. His theories should be graduated at some point.
I particularly dislike his “all debt is bad” attitude.

Yes. Debt is a financial tool. It needs to be used correctly.