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MORTGAGE—GET A FIFTEEN-YEAR MORTGAGE

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While there is no “one size fits all” with mortgage rates, it’s clear to me that a fifteen-year mortgage
is your best option. A fifteen-year mortgage (versus a thirty-year mortgage) accomplishes two things:
(1) assures that you’re not buying more house than you can afford and, as importantly, (2) saves you
tens of thousands of dollars.
An example will show you why:
Option A: A thirty-year mortgage
▪ $200,000 mortgage, thirty-year-term, 6.5 percent interest rate (interest rates for thirtyyear
mortgages are typically at least 0.5 percent higher than those for fifteen-year
mortgages)
▪ Monthly payment: $1,264
▪ Interest paid over the life of the loan: $255,089
Option B: A fifteen-year mortgage
▪ $200,000 mortgage, fifteen-year term, 6 percent interest rate
▪ Monthly payment: $1,687
▪ Interest paid over the life of the loan: $103,788
The fifteen-year mortgage costs you $423/month more than the thirty-year mortgage. However, you
pay $151,301 less in interest with the fifteen-year mortgage. More importantly, with the fifteenyear
mortgage, you own your home fifteen years earlier than you do with the thirty-year mortgage.
I am not going to get into different types of mortgages (variable rate, jumbo, etc.). I believe a fixed
fifteen-year mortgage allows you to effectively manage your budget without getting into trouble by
“betting” that you’re going to sell your house sooner than expected.

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