How does a 30yr mortgage make sense if you can afford the 15yr?

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My argument is to look at the current situation, if you had taken out a 15 year mortgage in 2018 or early 2019 and you had a nice paying job, but then had reduced pay or lost your job and you could fall back to only paying 975/mo while searching or collecting unemployment, you’d be a lot better off having taken the 30 year option. I’d be happier knowing that yes, I might have to pay 20k more, but in times like we’re in right now, I could save 500/mo if I were to lose my job and still keep my house.


> Spread that monthly over the life of your 16yr loan and you are paying a minimum of $99/mo for that piece of mind that comes with flexibility. You’ve nailed it right here. People pay money for peace of mind all the time in the form of insurance. If you consider this another form of insurance for what is likely to be your most valuable asset, it makes a bit more sense.


It’s not just flexibility, it’s also opportunity cost. If that money could be going to say a retirement account where you get the luxury of a reduced tax burden and historically, on average much higher roi than 3.5 percent, then over that 15 year investment horizon, you are much more likely to have a higher value of assets. That said, flexibility is still probably the more important factor. Except, I would cost it as insurance from being behind on a mortgage or flexibility to take a different job that maybe doesn’t pay quite as well in the next 15 years, etc. For what it’s worth, I don’t think it’s always true. If interest rates were much much higher and you don’t expect the market to outperform, then a 15 year has a case.


The answer is that total lifetime interest isn’t the only factor people take under consideration when opting to take a 30-year mortgage and pay it off early. Generally the reason to do this is because you can currently afford the higher payments, but you want to hedge against the risk of a reduction of income in the future.


The difference here is obviously the interest rate. But the main benefit of the 30 year is cash flow. Committing to a lower monthly payment means less commitment in case of a job loss or difficult times.