If I only plan to own the house I’m buying for 6-8 years, is it better to do 30 year or 15 year mortgage. Assume about a 0.5% lower rate for the 15 year.

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Put it in an amortization calculator. It’ll have a line graph on equity and on payments you’ve made. Calculate what brings you most net profit with same expected sales price

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Math. Econ minor

It shouldn’t matter the time you hold. It’s about the principal and interest you’ve paid which translate to saving. But if a 30 years mean higher interest and you plan to invest the extra which will get you higher return than your interest, go for 30 years. If you want to save interest, go for 15.

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Take the 30yr. In the event you have a life event that requires you to step away from a paycheck for a month or two, the lower payment will be much appreciated. There’s nothing to say that you can’t pay a 30yr off earlier and I’m only seeing a 1/8th point spread between 15yr and 30yr currently (that would depend on your lender and credit). Even at .5%, that’s not too much to worry about as if it’s your primary, you can still deduct that on taxes which lowers the burden even more.

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Oh. Another option is 7/1 ARM. 30 years monthly but lower than 30 yr fixed rate.

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Yeah if you know you’re definitely selling in <7, the arm could be an interesting way to reduce interest costs.

Why are you buying if you know you will only hold for 8 years. You will likely lose money after all the fees and brokerage commission. Why don't you rent?

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Usually the payoff is in 5-7 years. Use NYT buy vs rent calculator for specific circumstances

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I’m done the analysis to know it is the correct decision to buy for this situation . So now deciding between the 15 vs 30

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I’d love to have Deloitte 2’s time machine here he knows this is true for all markets

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Amortization schedule is your friend. Go to a site (google or bankrate.com or any that can give you amortization schedule).

Put in the rate for 15 years, 30 years and 7/1 ARM. See how much your monthly payment and your interest over 7 years. It’s a simple math of different between your monthly payment vs your payment to interest. Can you make more money (E.g. with $400 a month. $4800 a year over 7 years) over the saved interest ( E.g. $100 a month)?

Pick the number that’s in your favor.

We can’t help because the interest you pay is dependent on your principal.

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I’d do an Arm

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The 15 years gives me a higher percentage of expense that goes towards principle vs interest, but is there any point in paying off more if I know I’m not going to hold onto it for the long haul?

Thanks for any help!!

OP/ unless you’re getting the deal of the century then now is not the time to buy 6-8 years. The likelihood of being upside down is very high. With that said, you’d want to go 15 to pay that principal down ASAP.

@kpmg that is kind of my thinking. I know I can get a higher return over the next 7 years in the market / other investments. At first it only seems to me that the benefit of a 15 yr is that you remove the debt sooner. But if I know i won’t hold onto to it that long then there is no benefit of removing the debt sooner.
So just trying to see if there is something I’m missing in the thought process.
Appreciate all the help!!

The benefit is you have more in equity when you sell...

Throw it in the spreadsheet and see what has the most net profit. Excel isn't just for work.

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