Would you like free college tuition with that mortgage?

It’s that time of year when college choices have to be made – and financing decisions also – and so I would like to update an article I first wrote a couple of years ago.

What is the difference in interest payments between a 15-year and 30-year mortgage on a $500,000 loan?

Go on, guess. $25,000? $50,000? That sounds like a lot, but it’s not even close.

Total interest payments on a 30 year loan at 3.75% come to over $330,000. With a 3% rate on a 15 year loan total interest would be just……$120,000. That’s a saving of $210,000 !!! Yay, Harvard for free!

I have written before about the advantages of making extra payments on a standard mortgage, but the really big savings are made when a lower interest rate is coupled with shortening the life dramatically.

Now, of course, 15 year mortgages are not for everybody and they do have some disadvantages. The main ones are higher monthly payments ($3,453 vs $2,316 on the $500,000 loan above) and a lower tax deduction ( interest is $1,250 vs $1,560 a month to start).

Many, many years ago the first credit card, Access, was introduced in the U.K. with the slogan “it takes the waiting out of wanting”. Ever since, we have been on a borrowing binge. Recent years have shown us that too much debt is not such a good idea.

We are now faced with the fact that student loan debt is larger than credit card debt. There are couples who can’t buy a house because of the cost of paying off student loans. For parents who plan to pay for their children’s college education a 15 year mortgage should be considered as part of their overall financial planning.

If you – or somebody you know – are considering buying or selling a home and have questions about the market and/or current home prices, feel free to contact me on 617.834.8205 or Andrew.Oliver@SothebysRealty.com.

Andrew Oliver is a Realtor with Harborside Sotheby’s International Realty Sotheby’s International Realty® is a registered trademark licensed to Sotheby’s International Realty Affiliates LLC. Each Office Is Independently Owned and Operated
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