While I admit I am no financial whiz, one of the smartest things I ever did was get a 15 year mortgage instead of a 30 year. With my payoff clearly in my sites, I can’t fathom the idea of having an extra 15 years to pay that thing off. Some food for thought…
A $250,000, 15 year mortgage at 6.75% is $2,212 monthly.
A $250,000, 30 year mortgage at 6.75% is $1,622 monthly. Or, $590 less monthly.
The difference (savings!) between these two loans is $185,000+, assuming you had the mortgage for the full term. While $590 per month might be too much for some families to manage, I suggest you cut up your credit cards, pay them off, and go without the new BMW before you take on any mortgage. Take a look at your budget, there is always some place where you can save a couple hundred monthly. Once you figure that out, get the 15 yr. mortgage. Another idea is to spend less on your purchase. A $20,000 difference in mortgage amount can save you another $177 monthly. (15 yr, 6.75%) After a few payments, you will realize you can do without the non essentials.
At the end of your 15 year loan, you’ll think you’re a financial genius!