Monday, August 28, 2006

an interesting discussion on 15 yr vs. 30 year (plus prepayment of principal) mortages

Jonathan over at MyMoneyBlog has an interesting discussion comparing 15 year loans vs. 30 year with the prepayment of principal. Most of the 40 commentators trend toward 30 years with prepayment. You can read it here.

JLP at AllThingsFinancial had a wonderfully interesting comment comparing the benefit of prepaying yoru mortgage versus investing it for an annualized 8% return (long term investment). Here is the calculator he created. Quit interesting, though some may argue that future stock market returns will be lower than the past (and an 8% return possible, but less likely than in the past).

I personally have always sought 30 year mortgages and liked the flexibility of prepaying.

People use different formulas, such as paying the difference between 15 and 30 year p&i monthly payments, which brings the payment close to 15.5 years. Others double the principal payment, which brings you down to about 22 years.

Have a wonderful day,

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