I just question if the 50 is getting the same rate as the 30. Obviously, all else equal, math is math. Banks see that $300 savings as a potential extra $150 a month.
Comment on Bank Workers, Rejoice!
frank@sopuli.xyz 11 hours agoWhat?
Some random numbers that are of course VERY variable, but I just ran the calcs with 400k, 5% down, 6% APR for 30 and 50 years
$2648 for 30 years $2369 for 50
Now that is of course not a great deal, presumably you’d also get a little better rate for the longer loan (more points) but it’s not a dollar.
Dozzi92@lemmy.world 10 hours ago
dejected_warp_core@lemmy.world 10 hours ago
This raises questions about the opportunity cost of $300/mo. It’s not a huge amount of money, but for some budgets, it might make a car payment or groceries possible. Or, if saved or invested wisely, would it tip things in favor of the 50-year term?
MrEff@lemmy.world 8 hours ago
$300/month (at the beginning of the month) invested over 30 years, compounded annually at 6% = $198,290.40
If you kept that going for a full 50 years, the last 20 years of interest really starts to ramp up and gives you a final value of $1,084,402.22
If instead, you ONLY paid the mortgage for 30 years, then invest the full mortgage payment of $2,648 into the investment account for the next 20 years (a total of 50 years out. Same end point) you would have an investment account worth $1,215,042.49
So, even in your scenario it is still a loss to take a 50 year over the 30 year, and the 300$ difference is negligible. If $300 was the difference of someone being able to afford groceries or not for the month, then they should not have qualified for a $2,648/mo mortgage.
buddascrayon@lemmy.world 10 hours ago
Don’t forget that on top of all of that you have to pay property taxes.
frank@sopuli.xyz 6 hours ago
The calc I used for that number put $3k property tax annually amortized, good call