Transcript:
Easan Arulanantham:
Should I consider taking a 15 year or 30 year mortgage? You know, with interest rates being so high, I can see, I think about percent maybe on that 15 versus that, you know, 30 year is that kind of worth that, you know, savings?
Tom Vaughan:
Yeah, it, it can be. And so the rate of you know, the cost of your loan, obviously, it’s going to be less, you pay it off quicker, that the caveat, I guess that I would worry about here, it depends, you know, talking a small loan probably doesn’t matter, you’re talking to a big loan, then what happens is you have signed up for a especially a 15 year fixed, you’ve signed up for a guaranteed payment, right? That’s a lot higher than the guarantee payment on a 30 year. So you can split the difference by taking a 30 year mortgage out and even though the interest rates higher and pay it off in 15 years, you still pay more interest. But if everything falls apart, and we ended up at a big downturn or recession, or you lose your job, or whatever it is, that’s going to affect you financially, you could go back down to paying that normal payment for the 30 year mortgage, you have flexibility. So it depends, you know, how much how much outside assets do you have, where you could dip into if something fell apart, otherwise, to make that 15 year payment? How big is that 15 year payment? Right? Those are two big ones, if you’ve got a lot of assets on the side, and the payment isn’t that big to you, 15 years is better, right? It just is because it’s just less cost if the loan is big, and the actual payment is pretty high compared to what you have. And if you were to take away your income sources via that, you know, stock market downturn or bond market downturn or losing your job or you know, whatever it is, then you really want to look at that because you don’t want to get to a spot where you can’t make your house payment, because that’s a good way to lose your house, trying to save a percent. So I would prioritize that. So it depends on the situation that you’re in, as far as that goes. And you do then have to have the discipline to if you can afford it, and we don’t have a big downturn, to make that 30 year payment, and basically try to pay it off in 15 years. Not everybody has that discipline for that long. And then that’s another case where you can make an argument for a 15 year loan because the disciplines instilled already, you have to pay it. So it’s a good question. I think it’s kind of interesting.
Easan Arulanantham:
Yeah. And the thing is, you can always refinance this mortgage, you’re never completely stuck to a mortgage. Yeah. So if interest rates go back down, you maybe you go 30 year goes down to 5%. And maybe 4%. That’s a good time to refinance. If, if you’re at 6% loan? Yeah. So you’re not you’re not, you’re never fully committed, if the market rate changes, you can kind of move and wiggle around.
Tom Vaughan:
Yeah, I mean, you might get stuck. I mean, just because if you’ve lost your job, yeah, it’s gonna be hard to get that refinance at that point in time. So you do want to consider that. But if the differential is 1%, I would choose flexibility personally, and I always advise that with clients, you do not want to get to a spot where you could lose your house because of some giant downturn in the stock market. You know, you want to be able to go back down to a lower payment. As far as that goes, which a 30 year mortgage would have pretty substantially lower payment, your fixed in at this much faster, much higher payment with that 15 years. So it really just comes down to flexibility versus the interest rate. And a lot of that is how much flexibility do you need? Right now biggest alone? How much other money do you have? What what your sources, those types of things? I mean, I’ve got some clients with, you know, so much income and so many assets and what have you that no matter almost what happens, they’re pretty safe, they could take a 15 year, and even if their incomes dropped a lot it because it’s a small amount of money, even if it’s a big loan, compared to you know what they have, right. So, hey, that’s okay, too. So, again, it has a lot to do with what your what your situation is, as far as that goes.
So. All right. So we’ve reached the end of another great show. Some really good questions today. Had some fun. Hopefully everybody got something out of this today too. And you’re able to kind of join us on a regular basis. Keep sending in your questions, send them to ask Tom talk money with tom.com Send him in during the week, like Greg did. Really great questions, give us some time to you know, think about it and come up with some good answers. Or, you know, go ahead and sign up for you know our channel by hitting the subscribe button. Hit the little bell there if you want to get notified. Education is huge and your ability to have a more successful retirement retirement is can be I think, really one of the best portions of your life, especially if your health is good. And your financial situation is good, right? I mean, so we deal with the financial side here for the most part. And then lastly, of course, feel free to book an appointment with Easton and I the buttons at the top of our web page, you just, you know, schedule a 30 minute phone or video time with us and we’d be happy to meet with you. So, thank you very much for coming today. Enjoy your Fourth of July weekend. Really looking forward to seeing you next week. Thank you.