That is a hard question to give a direct answer but here are some things to consider so you can see what is best for you.
1. What are your long-term goals? Do you want to live in a paid off house or do you plan on retiring or having children in college in the next 15 years or so. Living mortgage free would give you more cash flow to pay for things like that or if your income will be less due to retirement.
2. Can you afford the payment and still maintain the lifestyle you are accustomed too? Even with the larger down payment you will have a slightly higher payment with a 15 year most likely. Make sure the payment is something you can live with based on your current and future income estimates.
3. Could you better invest that money elsewhere for a higher return. There was a good article written years ago that showed a person who paid off their mortgage earlier by paying an extra amount each month and another person who invested the same extra payment amount each month in mutual funds or other investments. The person who invested in the mutual funds was able to accumulate much more wealth and pay off the home earlier than the person who made the extra principal payments. And remember this was back when interest rates were a few points higher than they were today. Of course no investment is guaranteed so this option does have more risk but has the possibility to offer you a better return.
Remember that with tax advantages your effective interest rate is lower than the rate on your mortgage... money is very cheap these days so by paying off that very low interest mortgage you really need to think if that is the best possible use for that money?
Living in a home with no mortgage is great but you really need to look at the big picture to see what will help you accumulate the most wealth over time.
Hope this helps.
Don Groff | REALTORÂ® & Mortgage Broker | Austin Real Estate Pros & 360 Lending Group
office: 512.669.5599 | mobile: 512.633.4157 | email: firstname.lastname@example.org
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