Paying off your mortgage

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amother

Thu, Jul 02 2020, 6:30 am

So we are finally starting to look at buying an apartment.

We are currently renting a house and prefer to downsize if it means the money each month will be going somewhere.

Were still just getting by but have finally put together probably just enough for a down payment.

I'm just curious if you own a house - over how many years did you spread paying your morgage?

Teomima

Thu, Jul 02 2020, 6:36 am

Our mortgage is split into 3 separate payment plans, but the bulk of it is a 30 year mortgage. It's a long time, but we don't plan on moving again and this way each monthly payment was as low as possible. We figured we could afford to pay a small sum long term instead of more per month for a shorter period. As appealing as the idea is of paying it all off sooner rather than later, there was always the risk of us hitting a financial rough spot and having trouble making the payments were they higher than what they currently are.

amother

Pink

Thu, Jul 02 2020, 6:41 am

We started with a standard 30-year mortgage, and refinanced a couple of times with shorter-term mortgages as interest rates changed. Ultimately, we paid off the house in 22 years. Make sure your initial plan is something you can afford, because you can't count on refinancing, but always keep your eyes open for opportunities.

amother

Babyblue

Thu, Jul 02 2020, 6:44 am

On the one hand you get a lower interest rate when you take a shorter mortgage. On the other hand your monthly payment is higher with the shorter mortgage even though the rate is better than you'd get with the longer term mortgage.

shabbatiscoming

Thu, Jul 02 2020, 6:47 am

30 years.

amother

Maroon

Thu, Jul 02 2020, 7:33 am

Most common is 30 years. Other terms are 25,20,& 15. If you take a 30 year mortgage and make an extra payment each year, you will finish in 22 years.

essie14

Thu, Jul 02 2020, 7:50 am

We took a 30 year mortgage 5 years ago and we will probably refinance within the next few years to a 15 year mortgage.

Elfrida

Thu, Jul 02 2020, 7:54 am

My father paid their mortgage off early. I think around five years early. A certain national/political event took place, which he was sure would lead to a rise in interest rates. He had the money available, so he went to the bank the next morning and paid off the mortgage. My mother and I were sitting watching the process of events on the television, when he came home and announced what he had done, and my mother got even more of a shock from that than from everything else that was going on.

He later admitted that it was a mistake. Interest rates did rise, but did not go as sky high as he had expected. He took some of the money from savings, and it would have earned more interest in savings than he saved by paying off early, but he couldnt know in advance exactly how things would work out. At least that way he had peace of mind about it.

As for me, I'm still renting and trying to save the enourmously high down payment that Israel requires.

mommish613

Thu, Jul 02 2020, 9:42 am

Most young first time home buyers take a 30 year loan as the monthly payments are more affordable.

We started with a 30 year and refinanced 5 years later to a 15 year when the rates went down so the payments were more affordable.

With a 15 year loan the payments go more toward principal whereas in a 30 year loan it can take many payments until you notice a significant change in principal as much of the beginning payments go toward interest, or mostly interest.

chocolatecake

Thu, Jul 02 2020, 9:55 am

We took out a 30 yr mortgage 2 years ago. Rates dropped and we just refinanced to a 25.

amother

Green

Thu, Jul 02 2020, 10:06 am

First house we put half down and took out a 20 year mortgage. We pre-paid towards the principal every month and finished in 12 years.
The next house we put half down on a much more expensive house and took out a 15 year mortgage in two parts five years apart. One part to reserve on paper and one part when we received the keys. So basically we paid a smallish amount for 5 years, a reasonable amount for 10 years and again a smallish amount for 5 years in what ended up being a 20 year mortgage.

lamplighter

Thu, Jul 02 2020, 10:11 am

30 yrs fixed.
Our rate is very low so it doesnt pay to refinance.
We can pay off extra on the principal here and there but usually the money is better off saved for other things.

Chayalle

Thu, Jul 02 2020, 10:13 am

I started off with a 30 year mortgage and about 3 years later, rates had dropped and I refinanced to a 15 year. I paid it off a little over a year ago.

amother

Red

Thu, Jul 02 2020, 11:06 am

How much do rates need to drop to be worth a refinancing from 30 to 15 y? Monthly amount difference is significant between the 2 terms.

amother

Red

Thu, Jul 02 2020, 11:10 am

mommish613 wrote:

With a 15 year loan the payments go more toward principal whereas in a 30 year loan it can take many payments until you notice a significant change in principal as much of the beginning payments go toward interest, or mostly interest.

That means you can't write off much on income tax with a 15 y mortgage?

amother

Seagreen

Thu, Jul 02 2020, 11:15 am

Our original mortgage was 30 years, but when rates dropped, we did a refi to 15 years. It saved us a very substantial amount in interest over the years, and we won't have a mortgage payment as we head toward child marriages and retirement.

amother

Vermilion

Thu, Jul 02 2020, 11:28 am

I took out a thirty year mortgage but that doesn't mean one is limited to the minimum amount each year and one can also prepay if one wants early. Just make sure that your mortgage doesn't have a pre- payment penalty - most don't.

Some months I would pay much more than the minimum and some months I would pay the minimum - depending on my income which sometimes fluctuated.

I have a very small amount left on my mortgage which I could easily pay off but I chose not to. I would rather have money available versus paying off the mortgage since it is relatively low interest and interest is still deductible for me. anyway.

Most people take out a thirty year mortgage since most people want to lower payments as much as possible especially in the first years. In my experience, one stretches a bit in the first years of buying a house especially because there are generally costs involved in just moving in - moving; buying furniture; painting and even minor things that need to be done.

Then income generally becomes higher and one's mortgage payment remains the same. That is one of the chief benefits of homeownership. My mortgage payment is now ridiculously low versus what the cost of renting an comparable place would be.

doctorima

Thu, Jul 02 2020, 11:33 am

With rates at record lows, DH called our mortgage broker a couple months ago to ask about refinancing. His advice was that if we had just taken out a 30-year mortgage, it would be worth it to refinance.

But considering that we've already been paying it for several years, the cost to refinance would outweigh the rate savings we'd get (B"H we already have a pretty good rate), so we should just stay put, and if we have extra money, just manually pay it toward paying down the existing mortgage early.

Many mortgage brokers will gladly help you with a refinance, since that's how they make their money. But you need to run the numbers and see how much you'll really save when you subtract out the cost of the refi.

amother

Pink

Thu, Jul 02 2020, 11:49 am

amother [ Red ] wrote:

How much do rates need to drop to be worth a refinancing from 30 to 15 y? Monthly amount difference is significant between the 2 terms.

.

It depends on how much you have already paid and the cost of the refinance. The mortgage broker can run the numbers for you.

amother

Mint

Thu, Jul 02 2020, 12:54 pm

I'm in Israel. We have a fifteen year mortgage. I like knowing that well either be done in fifteen years or if we want to upgrade we'll have built a lot of equity.
Prepaying in Israel isn't simple (banks won't accept less than 100 thousand shekel; in America banks by law must accept your extra payments).

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