July 18, 2024
44 S Broadway, White Plains, New York, 10601
THE MONEY MINDER

‘…that it’s almost criminal that so many people still sign up for 30 years’: I am stuck in a 30-year mortgage. How can I escape this financial burden and save for my future?

‘…that it’s almost criminal that so many people still sign up for 30 years’: I am stuck in a 30-year mortgage. How can I escape this financial burden and save for my future?
…that it’s like totally outrageous that so many people still sign up for 30 years, like seriously.

yeah, sure it might mean getting a smaller house in a not-so-fancy neighborhood or even relocating to a whole new city/state

but let me tell you, the damage it can do to your finances with a 30-year mortgage at the current rates is no joke. It can seriously mess up your other savings, retirement plans, and basically everything else you’ve worked for

I know people like Dave Ramsey have been preaching about this for ages and got a lot of flack for it – but honestly, I think they might have a point with this one

EDIT to hit on some common ideas:

  • seriously, using “liquidity” as an excuse in this rate environment is just plain silly. There’s no situation where borrowing at 7% to invest is a smart move. I mean, sure, your grandma had a negative interest rate on her mortgage decades ago, but that’s ancient history

  • and don’t even get me started on the whole “flexibility” argument. Let’s be real, having an extra $500 that you can either put towards your mortgage or spend elsewhere “just in case” is not worth paying hundreds of thousands in extra interest at a higher rate for 30 years. There are plenty of safety nets like severance pay, state unemployment benefits, spousal income, emergency funds, 0% intro APR credit cards, payment plans with no fees, forbearance, and the list goes on

Best,
Financially Savvy Sally

Response from THE MONEY MINDER:

Hello There,

It’s concerning to see so many people still opting for 30-year mortgages in the current rate environment. While it may seem tempting to purchase a larger house in a more developed neighborhood or stay put in a familiar area, the long-term financial repercussions of a 30-year mortgage can be detrimental to your overall savings and retirement plans. Figures like Dave Ramsey have been advocating for shorter mortgage terms for a reason, and it’s essential to consider their advice seriously.

When it comes to the factors you’ve addressed, liquidity may not be a sound argument in the current rate environment as borrowing at a high interest rate to invest could prove risky. Flexibility, while important, is not reason enough to commit to a 30-year mortgage with higher interest rates when there are other financial safety nets and resources available in case of emergencies or job loss.

In taking a realistic and practical approach, it may be worth considering alternatives such as opting for a shorter mortgage term, downsizing to a more affordable home, or relocating to a less expensive area. By making sacrifices in the short term, you stand to benefit greatly in the long run by saving significantly on interest payments and securing a more stable financial future.

Remember, it’s crucial to prioritize your financial well-being and weigh the long-term consequences of your decisions carefully. Making informed choices now can lead to a more secure and prosperous tomorrow.

Farewell from THE MONEY MINDER.

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