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30 year vs 20 year loans

June 29th, 2009 at 04:12 pm

My divorce is chugging along - (whee!!!!!), and I'm refinancing my house.

I am told if I get a 20 year loan opposed to a 30 year loan, that I could pay it off by making 2 extra payments a year. This seems wonderful.

My concern here is the economy. If I get a 30 year loan at a much lower rate, I can pay it as though it were a 20 or 15 year loan currently, but if I lose my job, then I could fall back to the lower rate.

What do you think guys? I'm literally starting over again here, and I want to think out my solutions.

Miz Pat

6 Responses to “30 year vs 20 year loans”

  1. gamecock43 Says:

    I opted to go for the 30 yr mortgage and I make 2 extra payments a year. I thought it was better safe than sorry in case I suddenly had a decrease in cashflow. But I don't know if I did the right thing financially.

  2. whitestripe Says:

    well - i have always gotten the longest amount of time to pay it. here, they calculate interest on that term. so if you pay it off sooner on a longer term, rather than paying it off on time with a shorter term, you save more money. but it could be different over there...

  3. Broken Arrow Says:

    Take care on the divorce. Hope that things are going as smoothly as it can be....

  4. monkeymama Says:

    I'd do 30 years and prepay.

    We started out with a 15-year-loan on our home and switched to 30 years when we owned two homes for a while. Could only reasonably afford the 30-year when I refied in pregnancy (dropped one income). So we had a 30-year-loan for about 8 years.

    We just refied (absurdly low rates) and considered the 15-year, but with time we feel so much safer financially with the 30-year. If I can keep my job 15 more years, the mortgage will be paid in that time, but I have come to prefer the flexibility of a 30-year loan. If I lose my job, or if something terrible financially happens, I can probably keep my house. Phew!

  5. Caoineag Says:

    We went 15 year but we also got a cheaper rate with that so it was only the difference of $100. If you have a huge mortgage, 30 year is better, if you have a little one, 15 year tends to be cheaper in the long run.

  6. miz pat Says:

    Thank you so much for your thoughts. I am going to end up (at this point it appears to be anyway) financing 100K. While it looks huge to me - the difference between 30 and 15 years may be $200 a month in payments. That might be $850 a month, which is easily affordable now that I have worked on reducing debt. I just worry about losing my job, just like everyone else does.

    I'm going to keep this all in mind with I talk to my mortgage banker. You guys know you are all huge blessings.

    Thank you.

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