I'm 50 years old and thinking of buying a house. Should I avoid 30-year mortgages because I don't know if I'll be alive in 30 years?
Answers | 11
That's a bit of a loaded question, but an essential one for someone in your situation. It really depends on your lifestyle, retirement plans, assets, and of course, health. I do think it is a broader question that should include your financial adviser and accountant, however here are a few tips from a mortgage professional...
A 30-year fixed-rate mortgage will provide you the most stability and comfort. True, you may be paying more in interest, however depending on all of the factors above, this may be a good choice. Furthermore, though you may pay higher interest, you can generally deduct a higher amount from your taxes (talk to your qualified tax adviser).
A more aggressive loan such as an ARM or a line of credit will provide you with a lower payment and more interest savings, however they come with more volatility.
The good news is that you can always look to refinance out of any of these suggestions and into the other if you see it is not working for you.
From a purely economical stand-point, you should choose the mortgage option that affords you the lowest payment and here are two reasons why:
1) Your debt-to-income ratio will be more favorable, which also impacts your credit score, and
2) You'll have more money left over at the end of the month to invest into long-term savings, retirement, etc. The more money you put into a house, the more you lose the opportunity to earn interest on that money forever (time value of money and loss opportunity costs). However, in the end, it really depends on your future plans, and I would encourage you to reach out to a qualified mortgage professional who also understands financial and estate planning or will happily work with your financial planner. Best of luck to you!
If you choose a 15 year loan, which has a higher monthly payment, and you run into unexpected financial difficulties, you will need to continue making that payment even if you cannot afford it. Having a 30-year loan payment, you can pay it off in 15 years if you like, except if you have some financial difficulty you can stop making the higher payment and not lose your home, thus having more flexibility and control of your money.
I have no idea if I will be alive in 30 years either but I do know that I have lived responsibly and my family is taken care of financially to the best of my ability. Ask me in 30 years and we can compare stories.
Do you need a house? Many of our clients own them and others rent using the cash flows from their investments. Every situation is different. So, rather than give you the pros and cons to renting vs owning, I will just share my insight on cash flows that you can use to buy or rent.
With $300,000 portfolio, we can generate cash flows of $60,000 per year or higher. The amount varies and this is on a yearly basis. Will this work for you? No idea. We can customize something for you. Just let us know what you have to work with. Give us a call to discuss your situation in greater detail. No obligation. Our focus is on equity financing -- this gives you wealth creation not wealth redistribution. Many folks find it very difficult to afford debt financing after they have refinanced the debt and created more debt.
It's not what you make; it's what you keep that determines your lifestyle.