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Is the 30 year mortgage really a bad option?

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Is the 30 year mortgage really a bad option? 

Financial guru, Dave Ramsey, certainly thinks so.  According to the well-known expert, he believes you're better off with a 15 year mortgage:

[T]he 30 year mortgage robs your future. […] It simply enabled borrowers to buy more house than they could afford by spreading the payments out over a longer term. On top of that, those homeowners paid tens—even hundreds of thousands of dollars more in interest.1

Instead of a 30 year mortgage, Dave recommends getting a 15 year mortgage with "at least a 10% down payment and monthly payments that are no more than 25% of your take-home pay."1Following this advice is a great first step to ensure you build wealth quickly and avoid paying a mortgage into your retirement. Here's why:

Affordability is Key

As you may have read, one of the main reasons for the mortgage industry collapse was that many Americans bought houses they could not afford. When times got tough, these Americans were the first to lose their homes. So why take the risk of an unaffordable payment where you could end up losing you home and all the money you've poured into the mortgage?

That's why it make sense to only set aside 25% of your income towards a mortgage payment. With a 15 year mortgage, you'll even get more benefits by building equity faster as Dave mentions in his article. Paying off your mortgage completely will free up income later for other investments and allow you to live more comfortably in your older age. Let's face it, how many of us today can claim we will be mortgage free before retirement. By following Dave's advice, you can be.

What if I'm Already in a 30 Year Mortgage

If you've recently committed to a 30 year loan, there is still a way to save and be mortgage free before retirement. Some homeowners have been able to switch to a 15 year mortgage with rates near historic low and we encourage anyone who can shorten their loan to do so. If you can't afford the 15 year payment comfortably though, don't risk it. The last thing you want is to lose your home completely if you can't make your payment.

Instead, use this brilliant strategy:

Did you know you could qualify for low mortgage rates though a government program called the Home Affordable Refinance Plan (HARP)? Unknown to some, the HARP program was designed by the U.S. Government to reduce mortgage payments and put money back into your pockets.

If you owe less than $650,000 on your mortgage, the chances of qualifying for this program could be high.  Homeowners who have refinanced have saved on average $250 per month2

If you apply that $250 over a year, that's $3,000 you can use for other expenses or better yet, to pay off your mortgage faster! The HARP program is great news for Americans whose wages have remained flat and who could really need some extra cash in their pockets, but homeowners need to act fast.

TIP: Close to a million homeowners could still benefit today, but sadly, many perceive HARP to be too good to be true. Remember, HARP is a free government program and there's absolutely NO COST to see if you qualify. See if you qualify

So Where Do I Find HARP Rates?

Time is running out for homeowners and the HARP program is set to expire in 2015. The good news though is that once you’re in, you’re in. The savings you get are permanent.  Not all lenders offer HARP rates so it’s best to use services such as The Easy Loan Site, which has one of the biggest lender networks in the nation. What's better is that they work with HARP lenders to provide consumers with a comprehensive set of mortgage options.

There’s no obligation to homeowners, and The Easy Loan Site offers easy and fast comparisons. It takes about five minutes, and the service is 100% free. You have nothing to lose, except for your money problems!

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Comment by Jane Grath on December 16, 2020 at 1:28pm
For sure, every mortgage has as benefits so minuses. I can mention some minuses of 30 years mortgage. Higher interest rate. Loan balance remains higher for longer. Spend more in interest over the life of the loan. Home equity is slow to build. Making monthly payments over a long period. But for sure, everything depends on how much money you have before to take a mortgage. Not so long time ago I could buy the house of my dreams where I live now. For sure, it is never enough to pay all amount in one moment. In this case mortgage deal really saves you. Thanks [url=https://www.Hullmoneyman.com]Mortgage Advisor Hull[/url] I could find one which corresponded all my needs.
Comment by Dominick smith on September 21, 2020 at 6:35am

If you are finding the best mortgage houses then I'll suggest you for mortgage whitby because from this place you can get the best mortgage rates which are really so easy for all of us at the time of repaying the loan.

Comment by Jessy on February 15, 2015 at 5:08pm

I heard the same thing when one of my co-workers told me she didn't want to finish paying off her house too fast because she would lose the tax deductions.  Oh well.

Comment by Big Woman on February 15, 2015 at 2:24pm
Hey @uglyman how u doin? Long time no see. I remember reading somewhere about adding more to your monthly mortgage payment like say 10 percent which helps cut down on your principal in the long run.Google maybe 'alternative mortgage repayment' or something like that and see what comes up.
About buying a house in full, I was told by a mortgage specialist not to do that because you would lose all the tax deductions that a mortgage provides especially if it includes rental units. In addition everyone needs a positive credit history that timely mortgage payments gives
Debt is the American way. You get no points for not having debt in fact it will be difficult to establish credit in order to purchase big ticket items like houses and cars without some sort of credit history even if you have a great income. Just make sure you manage your credit paying on time (trust me I know about this! Lol!).

@Corliss entrepreneurs fuel this economy and more of us need to do just that. If we could pool our money with each other to get started we could go far. We all deserve prosperity if we put the work in with God's blessings!
Comment by Junior Sloan on February 15, 2015 at 12:49pm

A great article because most "Black communities" has been the main targets of predatory lending.

Comment by ugly man on February 15, 2015 at 1:26am

NHT a kill me , ten years ago i take out a loan and right know i still owe the same amount i took out ..Shh 

Comment by Jessy on February 14, 2015 at 8:25pm

Congratalations Corliss, I agree.  If I had the money, I rather buy my house in full, not pay in monthly installments.  Entrepreneurship is one of the greatest things to try and be.  I want my children and I to be entrepreneurs.

Comment by Vinny Pat on February 14, 2015 at 7:59pm
@Corliss that's the way to go but not everyone is disciplined enough to be an entrepreneur so for those ppl who can't pay cash for a house this is a good idea. Look at all debt and try to get rid of debts with the highest interest rates. Break the cycle and be debt free!
Comment by Corliss Rogers on February 14, 2015 at 4:36pm
FOH. not taking me 30 yrs to pay for a house. . I rather pay for my house one time. I'm on the road to entrepreneurship. I'm not holding my hand out for no more paychecks.
Comment by Roots aka TJ What De Ras on February 14, 2015 at 2:59am
Nice

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