Thread: 15 or 30 years loan?

This is what I don't get...

Originally Posted by Callaway

planning on selling the condo after 10 or 15 years.

Then you say...

Originally Posted by Callaway

With option 2, I feel more relax but I will never pay off the loan before I die.

So are you planning to die within 10 - 15 years?

As far as which option, it depends... Are you looking for +CF or EQ? With a 15-yr note, you pay the principal faster, so you gain EQ. A 30-yr note you pay mostly interest, but gain +CF.

MY OPINION... CF is more important than EQ, because I BELIEVE that the house will appreciate faster than the interest rate, and therefore you gain +CF now, and EQ later. But that is MY OPINION, though pretty well founded.

The choice is ultimately yours!

Originally Posted by Callaway

I am buying a condo in So. Ca. for investment/rental. The value of the condo is $130k. With 20% down, the mortgage amount will be $104k. The property tax plus insurance should be around $200/month. And the average rent of this area is $1200. I can't decide if I should go for 15 yr or 30 yrs loans. I am 40 and planning on selling the condo after 10 or 15 years.

Option 1:
15yr/5%, I will be paying $822 + $250 HOA + property tax $200=> $1272 per month

Option 2:
30yr/5%, I will be paying $565 + $250 HOA + property tax $200=> $1015 per month

With option 1, I need to shell out more each month and feel pressure on my neck.

With option 2, I feel more relax but I will never pay off the loan before I die.

Advice please!

If you plan on getting more rentals then I would leverage more and go with the 30yr. You will have more income, less expenses which helps when you are trying to buy more properties. It also limits liability if you have a tenant that sues you and takes whats left of the equity you do have on it.

---Mike

Leverage, leverage, leverage! One of the keys to real estate investing is staying power. One reason we got into this mess is because people buying didn't have the ability to hold their investments (the other of course, being over leverage, but i digress). The $200/mo might seem little now, but if you keep buying more properties, those $200/mo will keep adding up.

I agreed with Steve, you have to get the 30 yr because it keeps your payments lowers. This will be handy when you are facing a crappy rental market and will have to lower the rent.