The housing downturn and subsequent recession have caused people to rethink their approach to home ownership in
the coming years. Gone are the days of free-spending, variable rate mortgages that have made countless millions
of Americans house-poor.
As a result, there has been a reflexive backlash against long-term committment and speculation. Toronto family lawyers Resources Extra info, some helpful links for maps, directions, and so on, and lots of links to government, health, household regulation, and rather more in our resources sections. The end
product has been a rise in the availability of the 15 year mortgage, which previously had only existed in
fables like unicorns and the sasquatch.
That said, the 15 year mortgage is actually somewhat attractive if you’re in an appropriate economic situation.
The key is to understand your situation and what you should expect out of your mortgage, and how much you stand
to save by opting with a 15 year mortgage instead of the more standard 30 year mortgage that was industry
standard for decades.
The reason you can save money on a 15 year mortgage instead of a 30 year mortgage is that, generally speaking,
the 15 year mortgage will have a lower interest rate and you’ll therefore be spending less money over the life
of the mortgage to eventually own your house in full. It’s a simple concept, one that I intuitively jumped to
myself.
However, I’ve just done a bit of research and come up with a few websites that consider the 15 year mortgage to
be a sucker’s bet. One of them, themortgagereports.com, goes into excruciating mathematical detail as to why
you’re better off avoiding the 15 year mortgage and going with the standard 30 year mortgage. Their reasoning
is as follows:
Mortgage interest is tax-deductible. family lawyers Toronto could be crucial in helping individuals in a variety of legal matters including divorce or annulment, child custody rights, child support funds, and alimony. In plain English, deduct the amount of mortgage interest you paid in a
year from your actual earned income and that is the amount against which you pay taxes. Again, talk to your
accountant for particulars.
Later, they go into detail on specific numbers:
At Year 15, the total savings account balance is $160,280.38
At Year 15, the principal balance remaining on the 30-year fixed mortgage (from our amortization chart above)
is $140,549.29
Spelled out: the savings account that we so diligently funded with the “extra savings and deductions” from
choosing the 30-year mortgage will have earned enough interest to pay off the entire mortgage balance in full
in fewer than 15 years! This is using the power of the mortgage interest tax deduction to its fullest.
The 30-year mortgage becomes a 14-ish year mortgage just by making a portion of your 15-year mortgage payment
to your lender, and a portion to your savings account where it can accrue interest and compound.
So to me it seems like the key is to understand your tax benefits, save diligently and stick to the 30 year
mortgage instead of the 15 year mortgage.