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Why we have a 15 year mortgage

Why we have a 15 year mortgage

We refinanced our house about a year ago in order to take advantage of the lower interest rates. We decided on a 15 year mortgage. Our goal is to pay off our house very, very quickly, so a shorter time period made more sense intuitively. Paying off our house early is what’s right for us.

But of course I’d heard the argument that taking out a 30 year mortgage gives some wiggle room in case of an emergency. We could always take out the 30 year and then pay as if it were a 15 year, while having the safety net of lower required minimum payments. And then we could pay even more on top of that to really accelerate our payoff. Sounds good in theory, right?

Well, theories are only as good as reality.

In reality, I’ve taken out 30 year mortgages in the past with the intention of paying them off in 15. But what actually happened was that I didn’t do what I intended to do. Not only did I not pay extra on the mortgage consistently, but I kept refinancing and essentially extending the mortgages even longer.

Way to meet a goal, right?

Not.

But this time is different.

Not because I’ve convinced myself that it’s different somehow, but because we MADE it different. We contractually committed to paying off our mortgage in no more than 15 years.

Ok, so there’s no wiggle room in the repayment schedule. That means we won’t wiggle out of doing what we intend to do!

And what will we do if there is an emergency? Well, we’ll use our emergency fund instead of extending the length of time that we borrow money.

View Comments (4)
  • I work this way to. I’m much more motivated when I “have” to do something instead of just thinking it’s a possibility.

  • I’ve only had 30 year mortgages, because at the time, we couldn’t afford the higher payment of the 15 year term. We did pay it off early by sending extra principal payments, though not every month. I can see why you’d want to commit to the payment schedule. A friend of mine recently refinanced his 30 year mortgage, which had 20+ years remaining, with a 15 year mortgage.

  • I agree with you on this completely… Shorter term loans always make sense because
    1. They ensure that you stcik to the discipline of paying back substantial part of the debt regularly.
    2. Shorter tenure means lesser interest outflow on an absolute basis.
    3. Lesser interest outflow in the initial years and more principal gets repayed making it easier for you to foreclose the loan before tenure.

  • For those who have a stable income, but may not have the discipline to pay down a mortgage, a 15 year fixed rate can provide a realistic goal of eventually being mortgage free, while saving thousands on interest payments, compared to a 30 year loan.

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