What’s the Cost & Risk of a 30yr Mortgage?

If you are in your 40’s and thinking about purchasing or re-financing a house, then there are a lot of things that you should be thinking about. The 30 vs. 15 year mortgage is probably at the top of the list.

Although the 30 year might look attractive because of the lower monthly payments, think about how old you will be when you in the last 10 years of the mortgage. If you are 45 today, then you’ll be 65, and still have 10 years of mortgage payments ahead of you!   Do you think that you’ll want to work until you are 75 in order to pay off the mortgage?  How many 60 and 70 year olds do you see in high paying jobs today? If you are like me, you haven’t seen too many. By the way, a lot can happen health-wise when we are in our 60s and 70s. So you may not even be around to make those final payments. 

The point is, as long as you are making those mortgage payments, you (and your family) are exposed to risk. Before you commit to a new mortgage, extrapolate out to 20 or 25 years and ask yourself if you think it makes sense to still be making mortgage payments. Maybe a better strategy is to think about when you want to be free of mortgage payment, and use that as a guide.

By the way, I know that most people already know this but here is a table showing the cost of a 30 year vs. 15 year mortgage for a $200,000 loan.  I’m using some average interest rates for illustrative reasons.  Note the almost $100,000 difference in interest payments.  Imagine what you could do with $100,000.

Term	30 years	15 years	Difference
Interest Rate	4.25%	3.63%	0.62%
Monthly Payment	$984	$1,443	$459
Total Interest Payments	$154,197	$59,662	$94,535

Brycast Financial Planning in Austin Texas --- We Can Help
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What's Your Level of Interest? (in your savings account)

Don't expect banks to pay you much in order for them to use your money. First of all, it's hard to find their posted rates. On three national bank websites, it took me several clicks of hunting to find their savings account rates. And for good reason, they are nothing to brag about! Try 0.05%!!. It looks better with the % sign after it. In reality, it's 0.0005.  So, if I put $100 in my savings account today, I should have about a nickel more a year from now.

There are a few banks that will pay you considerably more interest in order to use your money. They are  Ally Bank, CapitalOne360, and Emigrant Direct. Their posted rates (9/2016) are easy to find on their websites at 1.0%, 0.75%, and 0.5%, respectively.  So, if I put $100 in an Ally savings account today, I'll have a dollar more after 1 year. Big deal, right?  Think of it as a scale. If it were $10,000 you had in a savings account, then you would have $100 vs $5. 

All of the banks I looked at are FDIC insured. You should weigh all of the advantages and disadvantages of dealing with any financial institution, such as fees and access to funds. 

Brycast Financial Planning in Austin Texas --- We Can Help
Income Tax Preparation in Austin Texas
contact: service@brycast.com  http://www.brycast.com/
Enrolled Agent; Investment Advisor
(Updated Sept. 6, 2016)

How to Save Money...I'm Not Kidding

I know that it can be really hard to save money. Often, the money is gone with before it's put into your savings account. Let me ask you this. Do you think that you can 25 cents per day?  If your answer is yes, then you can probably save over $90 a year. If you think that you can save a dollar a day, then that's $365 per year.

The technique that I have found useful is to set up a weekly automatic funds transfer between your checking and savings account. If you think that you can save a dollar a day, then set the automatic weekly transfer to $7. After a year, you'll have $365, plus  interest.

Brycast Financial Planning in Austin Texas --- We Can Help
Income Tax Preparation in Austin Texas
contact: service@brycast.com  http://www.brycast.com/
Enrolled Agent; Investment Advisor