In episode #09 of the podcast, we covered the monstrous benefits of compounding interest (you can tune in to the episode here).
If you understand compounding interest you understand the importance of selecting how to fund lifes major purchases (like a home).
There are many creative mortgage products out there…
- Fixed Rate vs. Adjustable Rate (ARM)
- Government Insured (FHA, VA, USDA/RHS) vs. Conventional
- Conforming vs. Jumbo
- 203k Rehab
And then there are the many ways to actually pay off the loan…
- Interest only
…which is right for you?
For the average Joe looking to buy a home or a second vacation home, the process of choosing which loan can be overwhelming. To be perfectly honest, it reminds me a lot of our tax-code (which I have a strong distaste for).
I am all too familiar with this overwhelming feeling because as I type these show notes I am in underwriting and set to close 10 days from now.
While we are not going to go into full detail of all mortgage options today, we are going to identify what we believe is the best strategy to paying off the mortgage.
Shockingly, it is not the 15-year mortgage.
In most scenarios, we strongly believe stuffing the additional monthly payment a 15-year mortgage includes is not beneficial to you.
Put simply, we believe an additional $6,000 – $12,000 (assuming the additional payment is between $500 – $1,000 per month) can earn more and present a greater opportunity by being stored elsewhere. Not to mention, which house will sell quicker? A paid off home or a home with a 90% balance left on the note.
It doesn’t impact the sale, of course.
Food for thought in today’s podcast episode regarding the 15-year mortgage vs. the 30-year mortgage.
Take a listen to decide for yourself which is best for you and your family.