Dave Ramsey takes a clear stance on the debate between 30-year mortgages and 15-year mortgages. In response to Julie’s query about the potential benefits of a 30-year mortgage versus a 15-year option, Ramsey’s response was unequivocal: “Let’s see, what do I say? No! If you buy If you can’t afford a 15-year mortgage, that means you can’t afford a house. That’s it.”
Ramsey detailed the conditions under which homeowners might consider refinancing a 30-year mortgage, such as avoiding foreclosure or bankruptcy. However, he said, “It’s no better than a 15-year mortgage. You’ll never hear me recommend a 30-year mortgage.”
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His criticism of the 30-year mortgage focused on the long-term debt maturity it entails, questioning the financial wisdom behind the decision. “Why are you in debt for 30 years? Are you afraid of winning with your money?” Ramsay asked rhetorically, emphasizing the financial inefficiency of longer mortgage terms.
Financial advisor Rachel Cruze supports her father’s sentiments, sharing her views on the Ramsey Solutions website. “Whatever you do, never buy a home where your monthly payment is more than 25 percent of your monthly take-home income,” she advises. Pay for a 15-year fixed-rate mortgage (the lowest overall cost). ” Cruz also warned against choosing “expensive loans like FHA, VA and USDA,” which are consistent with minimizing debt and interest payments.
Lenders often use the 28/36 rule as a benchmark, which means no more than 28% of your total monthly income should be spent on housing, and no more than 36% of your total debt obligations can be spent on housing.
While the Ramsey family is a strong proponent of the 15-year mortgage, there are compelling reasons to choose a 30-year mortgage. These points highlight the importance of considering one’s personal financial situation, goals and the flexibility that a longer mortgage term can offer.
in shared videos InstagramA Certified Financial Educator (CFEI) named Patrick provides an in-depth analysis, with specific reference to the cost of buying a moderately priced home following Ramsey’s advice.
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The video shows that as of 2023, the median home sales price is $431,000. With the average interest rate on a 15-year mortgage being 6.47%, the post details that a 20% down payment of $86,200 is required. This down payment results in a monthly mortgage cost of approximately $2,998.
The educator emphasized that an individual or family needs a monthly take-home income of at least $12,000 to comfortably afford such a mortgage.However, the average median household income is $6,215 per month or $74,580 per year, according to census data.
One of the main advantages of a 30-year mortgage is lower monthly payments, which can make homeownership easier or a more expensive home within your budget. Lower payments provide financial flexibility, allowing homeowners to allocate funds to other expenses or investments. The predictability of long-term fixed payments provides stability, especially in a volatile economic environment.
financial consultant Personalized guidance can be provided based on an individual’s unique financial situation, goals and risk tolerance. They have the expertise to evaluate a variety of factors, including income stability, future financial goals and current financial obligations, to recommend the most appropriate mortgage option.
Financial advisors can also help navigate the complexities of the mortgage application process, explain the long-term implications of different mortgage terms, and develop strategies for optimizing financial health while pursuing homeownership. They can provide insight into how your mortgage fits into a wider financial plan, including savings, investments, retirement planning and debt management.
*This information is not financial advice and it is recommended that a financial advisor provide personalized guidance to make informed decisions.
Jeannine Mancini has written about personal finance and investing for the past 13 years in publications including Zacks, The Nest, and eHow. She is not a licensed financial advisor and the contents of this article are for informational purposes only and do not constitute or are intended to constitute investment advice or any investment services. While Mancini believes that the information contained herein is reliable and comes from reliable sources, no representation, warranty or undertaking, express or implied, is made as to the accuracy or completeness of such information. Information.
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This article Dave Ramsey insists, “If you can’t get a 15-year mortgage to buy a house, that means you can’t afford a house. Period.” — but with his advice, you can always Take home $12,000 per month, plus $86,000 down payment Originally appeared in Benzinga.com
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