Check Out the Latest Dave Ramsey Poll

March 7, 2007

I found this interesting. Below is a snapshot of a recent poll on

Dave Ramsey Mortgage Poll

81% of the pollsters think a 15-year mortgage is the best choice?

Being that it is on the Dave Ramsey website, these results don’t really surprise me. And, I suppose if you are looking at just the amount of interest paid, then yes, the 15-year mortgage wins. However, I think this is an awfully simplistic way to look at things because it totally leaves out the opporunity cost of going with the 15-year mortgage.

Remember the old saying that the A. L. Williams Insurance sales guys used to say, “Buy term and invest the difference?” Well, I have a saying when it comes to mortgages:

If the rates are right,…

“Go long and invest the difference.”

According to my conservative numbers, you’ll come out about $90,000 ahead over 30 years. To compute that number, I used the following numbers:

6.08% APR for 15-year fixed mortgage (found on HSH Associates)
6.30% APR for 30-year fixed mortgage (found on HSH Associates)
8.00% Annual ROR on investments
3.00% Annual appreciation on the house

Then, I simply plugged the numbers into my Mortgage Comparison XL Calculator, and came up with the following:

Mortgage Comparison Snapshot

Oh, and my results don’t even take into account the tax-deductibility of mortgage interest. So is a 15-year mortgage really a better deal?

55 responses to Check Out the Latest Dave Ramsey Poll

  1. 30 WIns if Unemployed April 16, 2009 at 9:54 am

    Well, now that unemployment is way up, I wonder how many 15-year mortgage holders are in a crisis because they lost a job? I’m glad I have a 30-year for peace of mind. I can pay it as if it’s a 15 anytime I want, but if I lose my job, I’m not at risk of being kicked out my house or having to go without health insurance to keep my other expenses paid (has anyone seen the rates for COBRA insurance if you lose your job? For me, COBRA would cost significantly more than my entire mortgage! It’s insane! All the more reason why we need a universal health care option available from the government so these scam artists in the insurance industry will have to compete against the lower prices of a gov’t program) because of having zero flexibility on my minimum mortgage payment.

  2. In the comparison above the amount in savings is only listed for the 30 year mortgage. Where does this number come from? Multiplying $458 times 180 (months) come to $82440. Nonetheless, one really important peice is missing. If I am in the 15 year category, and I just paid off my last payment of $1696. How’s about I save $1696/mo for 15 years and then let’s compare savings accounts. At the end of 15 years of saving $1696 (as I paid off my mortgge after 15 years), my savings account reads a sweet $305,280. Did I miss something?

  3. Interesting discussion. Given the assumptions made, I agree with JLP’s numbers from a straight dollars and cents perspective.

    That said, my wife and I are aggressively paying down our debt (both school loans and mortgage). We’re also funding our Roth IRAs to make use of the tax advantages there. Our direction has been less of a focus on the mandated length of the mortgage, but on paying it off in much less time than either a 15 or a 30 year would require.

    The reason is simply that the “medium-term” flexibility of not having the payments will allow us to more whole-heartedly focus on our other goals: giving to the Church and saving for the long-term.

    Could we save the money and pay off the debt in the medium-term while having the short-term benefit of the cash on hand? Perhaps. However, the returns you can theoretically count on in the long term become less likely to match reality in the short/medium term (less than 15 years), as we’ve seen recently.

    Besides, all those years WITHOUT the debt hanging out there is far more valuable to me than the straight dollars and cents. It feels a bit strange to say that, as I’m something of a math nerd… but it’s true.

    Thanks for all the thoughtful discussion.

  4. Its low risk to have a home paid for, but making extra principal payments on a home is risky! The reason is that if one were to INVEST until one had enough to pay off the house in full, then if one loses their job (very common these days) the house, and the money put into it, is at less risk. This is because, if needed, the money saved, intended to be used to pay off the home in the future, could be used NOW to pay the mortgage payment! As they say, “Cash is King.”