Although, you wouldn't want to just put all you money on the house at once but here is what I am saying.
Please comment your thoughts and I am very interested in what you think also.
Here is an example:
2 loans at $434,000 one at 30 year and one at 15 year.
respectively without taxes and insurance and same rates
their monthlies payments are: $1,753 and $2,660
Most people would consider the first option right.
It does make sense they would do and I would do that too.
But we don't consider the interest.
Here are the interest paid at the end of each loan respectively and they are:
$280,959 and $128,732.
Figure below is from Numbers app and the template loan comparison from an apple computer.
You can plug in car loans and credit cards and they are the same type of calculations.
Base on the difference of $152,000 about that you would paid for the interest, I would rather pay toward owning the house versus paying that much in interest.
Would you rather pay more in principal toward the house?
The banks wants you pay 30 year to keep you payment low and less risky.
It is so true you could still get 30 year and pay it down in 15 year.
If you have to rent the house for some reason, you could have the bank recalculate your payments.
That is where it is beneficial to you also. You paid half the house in 7 years with a low interest and now instead the rent just covering your mortgage, you can now earn a positive cashflow even if the value of the home remain the same.
If in seven years and six months, you paid half your principal down. You now have options.
1. Recalculate your morgage and lower payments.
2. Continue paying down principal for the remainder.
3. With the lower payment rent your house and make an income as well as buying another house.
What do you think?
Here is video by an inspiring investor, his name is Graham Stephan.
Do you agree with him on its owning a Realestate with zero out of pocket?
Click below to view video:
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