Tuesday, September 6, 2011

balance

Recently, the mortgage interest rates have been very very low.  We decided to refinance out home loan, because the broker we know can get us a deal for no cost.  Awesome!!
There were 2 options

1) 15 yrs fixed @ 3.75%

2) 30 yrs fixed @4.125%

The total interest for the 15 years loan would be less than $100k, while the interest of the 30 yrs will be $200k+.  However, the month payment of the 15 yrs is twice the amount of the 30 yrs, which reduces the "left over" money to about $1000.  By "left over" money, I mean after all expenses, and which we put into savings.  We don't usually have a savings budget because we didn't need to budget that in. 

Other family members feel that we should get the 15 yrs loan and pay off the mortgage ASAP.  However, with only $1000 in savings every month, money can start to get tight if we need to use it for emergencies.
Along with possible pay and benefit cuts for Mr. LLF, and no promotion/pay increase for myself (because of congress, not me), inflation, rapid rise of cost of living, and possible consideration of private schooling, the $1000 left over could dwindle fast.

Another note that Mr. LLF made was "we gotta live too!"  Mr. LLF made note that while he is fine with not traveling, dinning out, or spending money on entertainment, I will want those things even if I can hold off for a couple of years.  15 years is too long to go without those things.  I know they are luxuries, but they are important to me.  I would be unhappy and burnt out on saving if that's the case.

So in the end, we opted for the 30 yrs loan for some peace of mind and a better balanced life.  In the event that we want to travel, we can afford to, though we don't do it very often.  At the same time, I could take a big chunk of "left overs" and put it in the mortgage if we're so inclined.

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