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Comment by afandian | Hacker News Reader

Does that mean fixed rate for 30 years? That would be unthinkable in the UK. From what I’ve seen, even 10 years would be unconventional.

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Yes. It means a fixed rate for 30 years. Unless you refinance the only thing that changes is your property tax. 15 years is really the way to go, as it typically isn't that much more per month. But 30 is the standard.

No clue where you are at, but my homeowner's insurance definitely goes up more often than once every 30 years.

Well, there are a bunch of things. Insurance and all the other maintenance and upkeep costs associated with owning a home. But, still, in general locking in a mortgage means locking in costs for the most part even if it doesn't eliminate spending generally.

It might've been just because I got my mortgage at a weird time, but when I refi'd there wasn't really a benefit to going 15 year. The interest rate was basically the same, so it seemed pointless.

The same interest rate for an additional 15 years is a lot more total interest paid. Example:

100k at 15yr and 6% interest with monthly payments, the total paid back is $151,894.23 - the amount over 100k was interest.

100k at 30yr and 6% interest? Total paid back is $215,838.19 - more than twice the total interest paid back.

Yeah but you can (usually) just pay the same amount with a 30yr as if you had a 15yr mortgage, but you still have the added security that if you fall into hard times, you have a lower mandatory payment with the 30yr.

Also you’re correct about the higher cost of the mortgage, and this doesn’t really work as well at 6%… but if you had a 3% mortgage, you would have better returns taking the 30 year and investing the difference each month. The amount of money you’d make from the returns on that would, on average, be greater than if you paid off the mortgage in 15, then started investing. But yeah, doesn’t work as nicely at 6%.

When I refinanced my 30 year fixed a long while back, I had a choice of 15 or 30 year terms. 15 year was a little lower, but your right that it wasn't much but it was a little lower--so that's what I took. But it was a pretty modest mortgage at that point (when I bought the house it was pretty much a fixer-upper) so I wasn't really worried about making payments. Getting a 30 year as an insurance policy is probably the right answer for many people even if it costs a bit more.

>but if you had a 3% mortgage, you would have better returns taking the 30 year and investing the difference each month

That would have been a good strategy over last decade certainly. Though that's hindsight and you're effectively taking out a loan and investing the money.

Yeah, but there's no prepayment penalty so if the interest rate was the same and you're good with money you should take the 30 year mortgage and pay double every month. That way you have flexibility to half your mortgage payment if you run into financial hardship in a decade.

Obviously it you can't control yourself with money then don't do this.

When I bought my house I went with the 30 year mortgage. The interest rates between 15 years and 30 years were not hugely different and my 30 year interest rate was so low. I ended up really glad I did.

Better yet, instead of paying double, stick the extra money in some investment.

I think people get confused sometimes that they have to pay the total interest. Nearly all mortgages in the US are simple interest loans. Interest is only paid as long as the loan balance is outstanding.

If the rates between the 10/15/20/30 are roughly the same, then the person should take the 30 and pay it back like they would the 15 (~double payments). The reason is the person is now protecting themselves from life change risk. If they lose their job they could go back to making the minimum payment.

You're still (usually) allowed to pay back a 30 year mortgage in 15 years by making extra payments against principle. So the total amount of interest paid would be equivalent.

The advantages of getting the 30 yr are

a) You don't have to keep paying that extra principle on your 30 year mortgage. If you lose your job or whatever, you can fall back to making the regular payments

b) The time value of money aspect. My mortgage is currently well below inflation. $151894 in 2035 dollars might be more expensive than $215838 in 2060 dollars. Especially if you're able to reap the tax benefits of mortgage interest.

Yes it does and yes it's wild. A few years back you could have gotten a million-dollar 30-year fixed mortgage loan at like 2% interest. Nowhere else can you get that sort of long-term locked in borrowing rate.

It's for sure present in other countries and in some places you could lock in 30 years 1.10%.

It is wild and why home ownership is such a big thing in the US. I've got a low rate locked in, and been in my house for 10+ years. The house next door rents for 2.5x my total mortgage. My mortgage has barely moved during this time period (taxes and insurance go up). With only modest raises, the relative cost of my mortgage to income has made it something I don't even think about.

(In Canada) The max my bank offers is 10 years, and it comes at a premium. The standard I see around me are 5 years.

It is a result of a government to encourage/subsidize home ownership. A few other countries do fixed rates for 20-40 years, France for instance.

That is correct. This is why home ownership is the main wealth building tool here.

Yeah, even ten years is unusual in the UK. If for no other reason than it being quite a bit risk for the bank giving the loan that interest rates won't go up for a decade.

My home mortgage interest rate is fixed at 2.2% for the entire 30 years of the loan.

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