If I could go back and do it all over again, I would have originally taken out a 20-year mortgage. A 20-year mortgage would have allowed us to own our home free and clear by our mid-50s without having to worry about calculations and extra payments. According to a recent CNBC article, the 15-year mortgage is especially popular with baby boomers who want to pay off their homes in time for retirement. A member of Generation X, I don't want to have mortgage debt when I'm retired either. I'd get rid of my mortgage debt tomorrow if I could, but I have to be realistic.
Becoming a serial refinancer
Having a 20-year mortgage right from the beginning would have simplified our finances and given us a lower interest rate from the start. Our first mortgage was a 30-year fixed which we took out when we bought our new construction home eight years ago. Although we didn't mean to become "serial refinancers," we took our mortgage company up on an offer to do a free refinance during the housing crisis. At that time, we refinanced from the 30-year to a 15-year fixed. When interest rates on the 15-year mortgage hit 2.75 percent, we decided to refinance a second time on our own. Again, we chose the 15-year fixed.
Spending a lifetime in debt
I regret initially choosing the 30-year mortgage because it stalled our efforts to get completely out of debt. If we had chosen a 20-year mortgage, we would have more likely purchased a home slightly more affordable. With a 30-year mortgage, I felt like any extra payments that I made barely chipped away at the principal. Even though we said we would pay extra, we didn't stick to our plan.
Being too ambitious
I don't think we could have realistically afforded a 15-year mortgage when we first purchased our home. The only reason we could handle the 15-year mortgage later was because interest rates had dramatically dropped, which lowered the interest portion of our payment. Also, we had already spent years paying down the principal. Because we refinanced to the 15-year mortgage about eight years into buying our home, it will take us 23 years to own our home outright if we pay the monthly payment due. However, if I pay just $150 extra each month, it will take us 20 years from the time we "bought" the home to actually own our home.
Timing it just right
I think I would have felt more comfortable with a 30 year mortgage if I had purchased the home in my early 20s. Since we purchased our home in our mid-30s, our timeline is a little different than a younger, first-time homebuyer or an older baby boomer. It seems to me a 30-year mortgage is suitable for people in their 20s. A 15-year mortgage works well for people nearing retirement. But as a middle aged person, 30 years is too long and 15 years is too short.
I used to dream of paying my mortgage in half the time. However, I've found that life throws us financial curveballs. The money I had intended to put toward the mortgage this month went toward an air-conditioning repair bill. Another month, I had to pay a parking ticket. We also had a medical bill that I wasn't anticipating a few months ago.
Even though I don't have a 20-year mortgage, I can still follow a more desirable timeline for paying off my mortgage debt by doing it in 20 years.
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