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30 yr vs 15 yr Fixed Home Loan - YouTube

Channel: Scott Wynn is Lending a Hand

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should you do a 30-year fixed or a

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15-year fixed

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home loan great question and the exact

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question that alexandra w

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asked if you have a question of your own

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feel free to submit it

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on our youtube channel facebook page

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instagram page

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or our website at lendingahand.com

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my name is scott nguyen i'm a licensed

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mortgage advisor with the win and eagan

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team at citywide home loans

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and i work jointly with my wife

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marlawynne and our business partner

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joe egan so today we're going to compare

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a 30-year fixed mortgage against a

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15-year fixed mortgage

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now one thing i want to be clear about

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is that there are different options you

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don't just

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have 30 years and 15 years as the

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options

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in fact you can do a 30 year 25 20

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15 or even a 10 year fixed mortgage but

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for today's

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video we're just going to cover 30 year

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and 15 year but i wanted you to be aware

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that there are other options available

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so first thing we want to do is look

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and see what the difference in interest

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rate is between a 30-year and a 15-year

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term

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when looking at fixed-rate mortgages the

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best place to do that the most reliable

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and accurate source of getting

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up-to-date interest rates is going to be

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freddie mac's rate survey they do a

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weekly rate survey

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of nationwide lenders to get an average

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so you can get a really good idea of

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where interest rates actually are

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to find this just go to google and

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search for freddie

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mac rate survey should be the first

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result

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in your search results and you'll be

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able to see exactly where things are at

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if we pull that up here today what we

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see is is that the 30-year fixed rate

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mortgage is at 2.88

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and the 15-year is at 2.44

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now of course those are averages it also

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shows you the estimated fees and things

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like that based on the averages that

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they have found

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so make sure that you understand that

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there are some additional details

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associated with that but again for

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today's purposes since the fees between

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the 30 year and the 15 are the same

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we're going to be comparing the

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difference between the interest rate of

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2.88

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and 2.44 percent now to do some of our

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calculations we've got to

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know some additional details so the

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other piece of information

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that i pulled up is the median home

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price in the united states right now

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according to redfin it's currently at

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311

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254 dollars so we're going to use that

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when we calculate our loan amount

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so if we take that 311 254 and we assume

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a 20

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down payment that comes to roughly 249

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000 as our loan amount let's start with

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a 30-year fixed we do the 30-year fixed

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at a 249 000 loan amount

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and a 2.88 percent interest rate then

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what we end up with is a principal and

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interest payment of

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dollars and 1033. five cents so now

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we'll do the same calculation on a

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fifteen year term

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fifteen year term two hundred forty nine

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thousand dollar loan amount

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at a two point four four percent

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interest rate comes out to a principal

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and interest payment of one thousand

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six hundred fifty three dollars and

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twenty eight cents

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a difference of just six hundred and

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nineteen dollars and fifty three cents

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not maybe as much as you would expect a

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lot of people think

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that because you're cutting the time of

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repayment in half

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that your payment would double that's

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not the case at all in fact

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the 619.53 is only an increase

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of 40 percent so at first glance you

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might think that

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15-year term is way better not only do

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you get a better

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interest rate but you pay it off twice

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as fast

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and your payment only goes up 40 percent

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but

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there's some additional information that

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we might want to consider

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so the first thing is is that in my

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opinion

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as a mortgage advisor looking at

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hundreds if not thousands of people's

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finances as well as my own finances is

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that my opinion is that cash

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is king because there are things that

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are going to happen in our lives that

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are unexpected

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such as medical emergencies auto repairs

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maybe pet situations or emergencies

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you might want to have some extra money

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set aside for the holidays for gifts

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or you might want to do some traveling

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and things like that and having some

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extra money will allow you

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to do that it's all about flexibility

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to be able to do what you want when you

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want and that's why i don't necessarily

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like a 15-year term mortgage

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in fact if you consider a 30-year term

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at the higher rate of 2.88 but you were

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to pay it off at the pace of a 15-year

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term

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you can actually get very similar

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results to

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a 15-year fixed mortgage but without the

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requirement of having to pay that higher

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payment month after month after month

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in case one of those unexpected expenses

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comes up in fact what we

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find is if we take that difference that

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619

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difference between the two payments and

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we apply it towards the 30-year term

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what we see is is that we pay it off in

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just nine months longer than the 15

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years

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and it's only 11 789 dollars more in

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interest which basically comes out to

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about 786 dollars a year

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or a mere 66 dollars a month to me

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paying 66 a month is worth that

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flexibility

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to give me the option to either pay it

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or not pay it

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and handle the unexpected expenses that

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may come up but there's more to this

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see i think that there are other things

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that you might miss out on let's say

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an opportunity cost if you will

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associated with

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paying your mortgage at a 15-year pace

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if there are other places

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that your money can work better for you

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so just having an emergency fund

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set aside so in case something comes up

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you can handle

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those unexpected expenses maybe setting

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aside money for a retirement account

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or paying off some higher interest rate

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debt such as credit cards or

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auto loans maybe even student loans in

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comparison to your mortgage

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you might also want to be setting aside

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some money for

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a college fund for the kids you might

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also consider alternatives such as

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investing in the stock market where you

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may be able to get a better rate of

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return

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in comparison to what you would save on

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your mortgage

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in fact i recorded a complete video

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about that particular topic

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about whether or not you should pay off

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your mortgage

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or invest in the stock market which i'll

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share with you a little bit later

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see overall if we consider the

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difference between a 30-year term and a

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15-year term

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what i would suggest is that you should

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expect the unexpected you don't know

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what will occur in the future and if

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you've tapped

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out your monthly expenses with a 15-year

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term

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you don't leave anything extra for those

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unexpected expenses

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you might want to consider the overall

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plan that you have for your finances

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about setting aside money for savings

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retirement

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college savings interest rate debt that

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is higher than the mortgage all of those

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sorts of things but also considering

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where you can receive the maximum

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benefit whether that's

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paying off the mortgage and eliminating

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that debt or

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maybe investing elsewhere and also

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consider that there are other term

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links you don't have to go all the way

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from a 30 to a 15 you can consider those

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25 or 20 year terms as an example

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so i hope that helps you in deciding

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what you may want to do for your

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particular mortgage option

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so again if you have any questions

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