Mortgage Term vs. Retirement Date

[A_Harman]

OK, here's one for BITOG'ers who are savvy in matters of personal finance:

I am in the process of buying a new home as part of relocating to my new job. I'm about 13 years from retirement, so when I take out a new mortgage, would it be better to get a 15 or 30 year term? It doesn't appeal to me very much thinking about paying a mortgage deep into my "golden years".

 

[Mykl]

I would want the house paid off as fast as possible. So in this situation I'd choose the 15 year for the lower interest rate.

 

[Boomer]

Personally, if you can afford it, take the shorter term. I am retired now (66) and knew too many who retired with a mortgage only to see other expenses like taxes and medical care creep up. With the mortgage payments, they were forced back into the job market. I was able to pay mine off before retiring which helps.

But DON'T forget to keep putting funds away for your retirement.

 

[Volvohead]

Your mortgage should not outlive your working years.

Only take a 30 if you are certain you will be in a position to comfortably pay it off after 13 years. A lot can happen in 13 years.

 

[Dave Hess]

Yep. 15 years is the option for you.

I agree with paying off a mortgage ASAP.

 

[The_Jeff]

Do you have any equity in your old house you can use? I'd look at crazy ideas like a 5 year fixed that turns into an adjustable.

I bought my house 12 years ago and interest rates were "good" then and never really went sour since.

 

[spasm3]

Originally Posted By: LT4 Vette
Yep. 15 years is the option for you.

I agree with paying off a mortgage ASAP.


I agree as well.

 

[Joe_Power]

15 is a no brainer. Run the numbers and compare. They will make you sick! I'm 41, paid off my home in 12 years(on a 15 yr note), house was appraised at 130K when I bought it, now it's at 250K. Started buying rental properties in the past year.

 

[DirkDiggler]

only do a 30 yr if you are DISCIPLINED to pay it off in 13 or less. Otherwise, go for 15.

One thing you can do is take out a 30 yr (so you can buy something "bigger" for a lower payment), but make payments like a 15 yr.

I have a 30 yr. I have auto payments taken out every month, but I set it up to take out 1/12th extra every month so I am making 13 payments a yr. Also, I pay an extra month at bonus time. Essentially, I am paying 14 months a year instead of 12 and when I get an increase, I make another payment. I will have my mortgage paid off in less than 20yrs.

 

[bubbatime]

I'd definately get the 15 and make additional payments so it is payed of before you retire.

 

[hattaresguy]

Get the 30 and make two additional payments a year, now you have a 17 if I remember correctly.

Unless their is a pre payment penalty you can adjust the mortgage terms very easily by paying more. I always recommend a 30 though for the lower payments *IF* something in life comes up and money all of a sudden gets tight for a bit.

 

[99Saturn]

Originally Posted By: eljefino
Do you have any equity in your old house you can use? I'd look at crazy ideas like a 5 year fixed that turns into an adjustable.

+1 if you can comfortable make the payment in a significantly shorter time frame than 15 years.
---
OP - what's your payoff plan in either case? Would you take the mortgage to full term or pay it off early in each case? Is the 15 a hardship, is less than 15 a hardship? Is any an issue if something in life goes wrong?

The benefit IMO to the 30 year is if you need a lower fixed payment you have that safety built (but at the cost of a higher rate). Between the two I would want to pay it off in 15 or less as long as the "or less" timeframe is comfortable and doable, I'd match the mortgage term with that payment plan.

I'm assuming you're not say, going to be 35 at retirement age.

 

[Joe_Power]

Interest rates are generally lower on a 15.

 

[Donald]

Originally Posted By: A_Harman
OK, here's one for BITOG'ers who are savvy in matters of personal finance:

I am in the process of buying a new home as part of relocating to my new job. I'm about 13 years from retirement, so when I take out a new mortgage, would it be better to get a 15 or 30 year term? It doesn't appeal to me very much thinking about paying a mortgage deep into my "golden years".


I am not that many years from retirement (5 to 7) and my plan is to make as much as I can on my current house and buy a smaller house for cash.

 

[rjundi]

15 year. I fell for the 30yr trap and refinance trap many times over.

Finally at 15yrs with 14yrs left and never refinancing it.

 

[expat]

Do you intend to live in the same house or area after you retire?

 

[OneEyeJack]

It turns out that one of the very important things in life is to be debt free but it's a difficult lesson to learn. When you're young that long term mortgage is tempting and you may find it very easy to get in over your head and end up carrying a lot of debt from various sources. Your debt is someone else's gravy train. In other words take the 15.

 

[supton]

Take the 15, then sell when you retire. Property taxes are unlikely to go down in the future.

 

[Pop_Rivit]

Unless you have a tremendous amount already invested for retirement, I can't imagine any retirement scenario that includes mortgage payments. But if you had a tremendous amount invested for retirement, you probably wouldn't be asking this question.

Get a 15 year (or less) mortgage, and then make extra payments each year in order to pay it down quickly.

 

[Mykl]

I think the most regretful decision I've made recently is the one to compromise and go with a 30 year mortgage instead of a 15. The reasoning at the time was that if something happened that prevented me from getting it paid off as early as I had intended, that I might need the extra flexibility in my budget to compensate.

That was a fair concern and all, but even though I'm currently paying three times more toward principle every month than the payment requires it still adds quite a few months to my pay off date (close to a year IIRC); interest is fun.