I'm not a financial expert, so my 2 pennies worth of opinion is that they should not take out a loan above their comfort zone. One never knows when that supposedly secure job will evaporate, or what other surprises life will throw at you. With interest rates still historically low, I think it would be better to take out the 30 year loan and pay extra on it. If they go the 15 year loan route, and then need to refinance later, the new interest rate may be well above the current rates. Or if the bottom falls out of the market again, refinancing could be a challenge. I am also not a fan of adjustable rate loans for most people. Or interest only loans. I admittedly lean towards caution when it involves a roof over my head or sufficient food to eat.

We were in a similar situation when we purchased; we could have covered the payment amounts for a 15 year, but would have had little cushion. We went 30, paying extra every month. It ended up being a wise choice. Because we purchased close to the bottom of the bust, we would have been ok with a refinance. But if we purchased in today's market conditions, and the same thing happened five years from now, we could have been in trouble financially.

A 30 yr loan can be ok, (they can always add to the pmt) but FARRRR more important to buy the cheapest house in the best neighborhood (with good schools, low crime) and use sweat equity to fix it up. Try to have them find a house with something that sets it apart as far as desirability...ie, view, cul de sac, big lot. Avoid things that would hurt desirability like next to factory, school, anything noisy, airport flightpath, busy road. You always want to buy with resale in mind. They won't get hurt if they need to sell that way. Make sure they look past the way houses are decorated, and how clean they are. Paint can easily be changed. Don't let them fall in love with an already fixed up house, with nice furniture, and pay too much for it.

Ideally avoid multilevel/split floor plans where there are a lot of stairs to get to kitchen, living area, bedrooms. Many people avoid those due to being hard with toddlers or elderly parents that visit. If it is a 2 story, having a bdm and at least a 3/4 bath on main level will help resale. If someone ever gets hurt and can't do stairs, they can still bathe and sleep. Or it makes a good bdm for elderly parents that visit.

I agree with jserzeegirl,

My first homes all had 30 year notes and in those days I rarely was in a position to make additional payments... That said, I was in the military and knew I'd be selling in 3-4 years and paying off the note.

At that age, we took out a 30 year mortgage to buy our second home. While we considered a 15 year, we decided that the flexibility that the lower payment would give us in case income was reduced or other expenses were unexpectedly increased was worth the interest rate differential. As Gry, mentioned, the cushion made us more comfortable. Fortunately, income increased and no unexpected large expenses, so we ended up paying it off in 10.5 years and would have paid it a couple years earlier but we were accumulating cash to purchase the land for our next home.

Nothing wrong with a 30-year mortgage. A 30-year mortgage can become a shorter length mortgage at any time, and it doesn't cost anything to do it...just some financial discipline: no formal refinance is needed. I've always gotten a mortgage that is for a longer period than necessary and then paid more to principal when it wasn't a strain. Right now I have a 15-year mortgage, but I want to pay it off in 12 years, so I computed how much more I needed to add to accomplish that. And if, in the future, money gets tight, I can just drop back to the payment required by the 15-year mortgage. There are many simple online calculators that allow you to play around with the numbers and figure out the size of the extra payments if you want to shorten your mortgage, or how much extra you need to pay to figure out what the payment would need to be if you decide you want to be done by a certain date. Here is one: Mortgage calculator

The main thing to remember when paying extra on the mortgage is that you need to formally notify the bank that extra payments are to be applied 100% against principal. In the absence of that instruction, they just treat it as you making an early payment against the regular amount due. So I actually send my bank two payments a month: one is for the exact amount of the required mortgage payment, and the other is for the amount extra I am applying to principal. That way, nothing gets confused.

"The main thing to remember when paying extra on the mortgage is that you
need to formally notify the bank that extra payments are to be applied
100% against principal. In the absence of that instruction, they just
treat it as you making an early payment against the regular amount due"

I fully recognize this possibility, but because of either the terms of the note OR the bank's policy, this was NEVER an issue. I had "Allotments" of my Military Pay and also Retirement Pay automatically deducted from my pay to pay my mortgage. I did not have to concern myself with this issue after setting up the allotment... however, if I wanted to "manually" transfer funds in a give month to pay off additional principle, I would simply enter that in the Principle Box on the electronic transfer.

30 year have been the standard since the days of the Reconstruction Admin (1930s depression agency to save homes).

15 year and ARMs and all the other stuff came later.

Go with the 30 year.

They can always pay more per month and knock it down faster but they do not have to pay more if they can't that month.

Kid coming up on college age? Stay as liquid as possible and don't lock into higher payments unless they have to.

My opinion is that a 20 year mortgage would be best, that's not really a standard format offered by banks though. Maybe you can talk to the banks and see if the rates on a 20 year would be lower than a 30 year. If the rates are going to be the same or very similar, they could just go with a 30 year and try to pay off the loan sooner if possible.

When have 30 year mortgages not been a good idea? The ARMs are freaky, but as far as I know, a 30 year mortgage locks you into current super low interest rates for a long time. How is that a bad thing?

Especially with extra mouths and costs coming along, why not use a 30 year at a fixed rate to lock in payments and reduce monthly costs?

With mortgages I've had, any additional monthly amounts were automatically applied to principal. I've never had to make a special notification. That might somehow be buried as a standard and customary provision for loans.

For one mortgage I have, on both the paper bills I used to get (long since discontinued) and the web page I use now for payments, there's a space to show Extra Principal but I never use it. On another mortgage I have, I pay with a transfer from my bank and use no documentation at all. I make extra payments irregularly and in inconsistent amounts for both but both banks handle these supplementary payments correctly with no notification. I can't imagine it's necessary to send two separate payments as kudzu suggests. Both loans are with large national banks, maybe kudzu is dealing with something smaller and more local.

Nope...dealing with a very large bank. I'm sure it may varies from bank-to-bank. My point was that one should never just assume that extra payments will go where you want them to without checking with your specific lender. It's not something you need to check on each month...just make sure you know the policy at the outset.

I'm also not insisting that all lenders need two payments: I'm just a belt and suspenders guy who has had the bank misapply an extra payment in the past and I am doing it my way now to make sure it doesn't happen again.

'With mortgages I've had, any additional monthly amounts were
automatically applied to principal. I've never had to make a special
notification. That might somehow be buried as a standard and customary
provision for loans.'

Yes, a friend of mine, maybe 20 years ago now, paid extra bits and pieces whenever she had the money. I doubt she ever stated that she wanted it taken off the principal.

On the other hand, it's such an important detail that I'd feel inclined to make the desire known.

peaceofmind, I also think you should go for the 30 year loan and pay off extra whenever you can (off the principal). Makes a very big difference to amount you will end up paying and the time frame, too.

For those who think that extra payments will automatically go toward principal, you may wish to read through this thread:
Payment toward principal?

One commenter explained it this way:

Earlier payments are not automatically applied to principal in many jurisdictions. They are instead immediately applied to payments. In other words, over the life of a mortgage, many payments are scheduled, and they can even vary if the mortgage is not fixed-rate. If early payments are sent without specification in some jurisdictions, principal & interest may not even be prepaid; instead payments will be accrued, so the principal is not reduced, thus interest is still being accrued off of the unreduced principal, and the investors or processor receives an interest-free short term loan in the form of a "payments accrued" account. This serves to raise the interest rate for the borrower and lower it for the lender or processor. As payments are due, and no new payments are made, the payments accrued account funds the payment due.

Early payments must be specified to "apply to principal". They could even be applied to interest, but this would be a waste since it effectively raises the interest rate.

Paying the principal instead of a full payment or even interest alone will reduce the amount owed, substituting cash for equity assuming the value of the home doesn't fall, while keeping the interest rate constant. Paying any payment or interest early only serves to increase the investor's interest rate since that money is received faster and can be reinvested elsewhere.

Also be aware that, if real estate taxes and insurance are part of your mortgage payment, extra payments can find their way into those accounts as well, unless you specify that your extra payment is to go to principal. Again, I'm not saying this happens all the time or the majority of time, but it is something to check on when you start so you don't have a future surprise.

Lastly, I will point out that many mortgages no longer seem to have prepayment penalties or prevent extra payments, but if yours does it could make extra payments a less financially attractive option.

We have only ever had 30 yr mortgages,. We have been in our current house for 10 yrs and we paid off the mortgage last year. although we had refinanced along the way, we paid extra to principal every month, shortening of the mortgage life. And because the extra payments were optional, we didn't have to worry about being any amount out of our comfort zone.

I am a huge fan of 15 year mortgages.

But, mathematically, at our current rates, a 30 year is really better. Technically, paying extra is also not good. The bank charges you a higher rate to use their money for 30 years than 15, so use it for longer. Take the money you would have paid extra on either a 15 year or just making extra payments and invest that and you will come out ahead.

However, life isn't math, I still prefer 15 year mortgages and making extra payments. I just like the way they reduce my principle.

In yhe end, there is nothing wrong with a 30 year mortgage, I know many people, who I consider financial experts, who could pay in full 10 times over, but would never dream of less than a 30 year mortgage. So to answer your question, not only are they ever ok, they are almost always ok.

Twenty years used to be the standard when I was growing up, but pretty much 30 is the standard and has been. If the interest rates are low (as they are now) and you have sufficient equity (down payment) it's not that bad. In fact, if you intend to sell well before a loan would mature (even 15 years), then a lower interest longer term loan may make a lot of sense.

Despite what all the so-called experts will tell you one way or the other (some will say you should get the biggest longest term mortgage you can and invest the money elsewhere and others eschew debt and tell you to avoid a mortgage at all), none are universally right or universally wrong. You need to evaluate the particularly situation you are in at the time.

I've bought two houses on 30 year mortgages (and have refinanced them a couple of times). I have also bought three houses FREE AND CLEAR. So you can see, it really depends on what the situation is.

With interest rates so low it's really hard to decide what to do. On the one hand my natural inclination is to avoid debt and not have a mortgage at all, on the other it seems silly not to take as much very cheap money as the bank is willing to give me. We have a 5/1 ARM at a very low rate that will be hitting the 5 year mark soon and the question of whether to pay it off, let it ride, or refi to a conventional loan doesn't have an obvious-to-me answer. In general, depending on the differential of the interest rates, it's probably better to take the longer term and the flexibility that gives in how much to pay back when.

We bought our first house the week interest rates hit 21-1/2% back in 1981. At those rates it was pretty clear you wanted to borrow as little as possible for the shortest time possible!

I think we have to remember current history and how easy it was for people to walk away and foreclose on houses that lost value. Many of those people had very little of their money tied into the house or had even refinanced during the runup and cashed out. There was no penalty for being irresponsible. They all got bailed out and those of us who are responsible paid for it all.

Take a 30 year and have the bank hold most of the risk.

"We bought our first house the week interest rates hit 21-1/2% back in
1981. At those rates it was pretty clear you wanted to borrow as little
as possible for the shortest time possible!"

That was a terrible time to be selling also. I had a beautiful home in Charleston, SC, that I got greedy over while trying to sell. After over a year, the all-cash buyer showed up.

Thanks so much to all of you. I think you answered all the questions and the consensus is that thirty years is the way to go. I've been an avid reader of this forum for years. Even though we haven't moved in more than thirty years I am addicted to real estate matters. I read all the ads in the papers, haunt zillow and Realtor.com, and love to drive around and see what's for sale in different neighborhoods. I'd probably be moving several times a year (not really) but my husband doesn't ever want to move as long as he lives. We've only moved twice but he's helped move lots of friends and family. If he ever changes his mind, I can be ready in a week.

Thanks again for helping out my kids. They are still in negotiations. The price of the house they want had just dropped from 199,000 to 189,000 when they first looked at it. They offered 180,000 which was rejected. They are preparing a new offer at 185,000. Their real estate agent is wonderful, particularly at negotiating. She had the house they are selling under contract in ten days.

OT: Might you tell us more about how your adult 'kids' came to be adopting three children? Have they fostered them for long? Sibling group? Do they have a supportive 'network' of other foster parents? Will the state be providing assistance through the years?

This is a huge step for the parents, their natural child, and the foster children.

Thanks for asking. I love to talk about this but I didn't think it was appropriate here perhaps. Now that you've asked...My kids (M and K) had one child early in their marriage and expected to have more. After sixteen years and two miscarriages they gave up that dream. Their daughter very much wanted siblings. They felt led to get in to fostering and I'm not sure if they knew other foster parents or not. They live in Oklahoma and I can't say enough good things about the Childrens Protective Services there. Everyone they worked with were hard workers and devoted to the kids. I live in Missouri and while I have no direct knowledge of the system here it is generally criticized for being either to slow or too quick to take action in a child's behalf.

M and K took lots of classes, visited homes to talk to other foster parents and had many home visits. They were only interested in fostering and you can choose that or foster with the intention to adopt. Two of these girls were their first foster kids. In June of 2014 we took a beach vacation in Florida with several family members. The girls had never seen the ocean or been on a vacation. They just fit right in with our family. It was very hard for all of us when they were sent to live with an aunt who planned to adopt them that fall. Other children were fostered and loved very much. In Oklahoma the Cherokee Indians have quite a lot of power. They have the last word on children being adopted outside the Indian race. These kids have a trace of Indian blood through their father. The adoption with the aunt fell through in January of 2015. The aunt called M and K and asked them to take the girls plus an older sister. They took them and started trying to adopt. The Indian nation wanted every attempt made to place them in an Indian family. A lawyer was hired by M and K and the long process started. Finally in September of 2015, we were all assembled in a court room (not the girls, but my husband and I, M and K and their bio daughter, along with two lawyers, therapists, child advocates, and the Indian representative. The man from the Indian nation spoke first and admitted that they had failed to find a home for the girls. He felt if they were given more time they would be able to do that, but because the girls were happy with K and M and wanted to be adopted by them he would not fight it. This was a very huge thing. Our hearts were beating out of our chests. Everyone else in the room spoke their piece, all agreeing the girls had been through enough with living in eleven different situations in the past four years. The judge was the last to speak and it seemed to take him forever to say the words we so wanted to hear. M and K would be allowed to adopt. We had waited so long and come through so much disappointment that it took a moment for the words to sink in. M and K spoke with all the people present outside the courtroom while my husband and I sat on a bench and cried. Since then the process to adopt has been in motion and just after the first of the year we found out they would go to court on January 26 to make the adoption final. We will be there to share the happiness. The girls are ages 7, 9, and 10 and old enough to understand and stress out about the process. They are so happy and relieved to finally have a forever home although they grieve their mom and dad and other relatives. The parents lost their parental rights some time ago but the girls are still able to see their older siblings. Drugs were at the base of this terrible situation.

I know this is long but I want to say something more about the Oklahoma system. Foster parents are paid to take foster kids. The adoption process which can be very expensive was all paid by the state. M and K will receive money for the girls until they turn eighteen. The girls will have counseling and health insurance until that time. Oklahoma puts their money where their mouth is and the children are the winners.

FWIW - I'd write one check for the monthly payment and extra principle. I'd write in on the "For" line at the bottom of the check "House Payment + $XXX principle" and return with the monthly coupon. I didn't set up a bank draft so as to allow me flexibility in the amount of extra paid each month.

peaceofmind, best of luck to all involved. The girls are still young enough that having a stable and loving family will really make a difference in the rest of their lives. I hope their bio-family will all think of the children first and not interfere negatively in their new lives.

I didn't read all the comments but wanted to share this in case no one else did - if a person makes one extra payment a year on a 30 year loan, then 5 years is knocked off the loan.

Kind of like the old "Bi-weekly" payment option. Essentially, half a monthly payment every two weeks - appeals to some folks that may be paid bi-weekly.

Results in thirteen full payments per year.

I actually tried it many years ago when the Navy was paying us every two weeks... I don't remember the reasons, but my wife and I didn't like it.

A lot of people are talking about extra payments and I am not opposed to paying extra. However, the financial educator in me feels that I would be remiss if I didn't point out that paying extra isn't better than investing. This is not to say don't do it, but I advise against paying extra on your house unless you are maxing out your IRA contribution.

peaceofmind-

Thanks for sharing that wonderful story. I spent quite a few years working as a liaison between my office and several Native American tribes, and I have sympathy for how tribes want to try to preserve what little is left of their heritage, culture, and family life. And I also know how hard it is for our dominant culture to try to understand and deal with this, especially when it looks like tribes are not availing themselves of what we consider "better" options. I'm not taking sides, and I'm not idealistic about this, as I had many challenging times trying to work through mutually agreeable solutions with tribal members. However, I am glad you got the outcome you did and that, in the end, it all worked out for your family and the girls. Based on my own experience, I can only say that everyone must have done an impressive job of convincing the tribes to agree with the adoption going forward and get the result you did. That doesn't happen unless you convince a tribe that you are a person of integrity and trust, and that doesn't happen easily or quickly. I'm sure part of this is the tribe having assurance that the girls will still be connected to their siblings

Peaceofmind, I am very happy a new house and a new family is in the works. I spend Friday's in our county women's jail counseling women, too many times I sit with women who are upset about losing their children after they choose to make babies, but keep their drug habit first priority in their life. I am sad for their children.

I also agree to go with the thirty year mortgage.

The disadvantage of a 30 year mortgage is that it may have a higher interest rate than a 15 year mortgage. The advantage of a 30 year is that it allows you to make a smaller payment if it is convenient and pay extra if you can.

You are absolutely right, Kudzu. M and D's lawyer said that they could spend a lot of money and bully the Indian Nation, or let them do everything in their power to find a Native American placement which was there legal right

. In the end, the right thing was done with mutual respect to all parties.

"I'm also not insisting that all lenders need two payments: I'm just a belt and suspenders guy who has had the bank misapply an extra payment in the past and I am doing it my way now to make sure it doesn't happen again."

kudzu, you had your bank make a mistake once, and you've allowed them to inconvenience you and put you into the penalty box ever since. Try sending them one enhanced payment, sees what happens. Unless you're dealing with the world's dumbest bank (a title which most can be labeled with), I'll guess it will be handled correctly. I know you realize most people these days don't send checks to pay bills, I wonder if that might be at the root of your issue?

Your link (and quoted text) strike me as several people who don't know what they're talking about. If you like it, great.

Snidely-

When I say I send two payments, I didn't mean a check...those are electronic payments. And having actually had two screwups on the bank's part, I am playing it safe. You should do what works for you. The last screwup I had from them was a dunning letter I received because they hadn't properly credited my mortgage payment, did credit an extra payment (that was bigger than the regular payment), and thought I had missed making a regular payment. Even though I got on them and had it straightened out, there was still a potential threat to my credit rating if I hadn't caught it, so, yes, I don't trust them to always do the right thing.

Peaceofmind, I was very moved by your story and I am so glad that it is having a happy ending. Clearly those children are deeply loved and will have a wonderful family.

As far as the OP,

I have a 30 year mortgage. I'm single and having been laid off twice in the last 10 years (tech industry) I wanted the flexibility of a lower payment should something happen to my income. But I am paying extra each month. I use my bank's billpay and have set up the extra money to go to principal. No problems at all.

Nothing wrong with a 30 year mortgage. I would not go for less. One must ensure that they can pay it off early and add extra payments when possible.

I'm actually happy to read that this adoption has taken some time to play out. This is not a 'happy ending'; it's a *beginning*. These kids deserve adoptive parents who can accept the whole package of who they are -- as daughters, and as individuals with complicated childhoods. (Think of the emotional damage to a child who endured multiple placements before the age of reason. Every adoptee has lost what the rest of us take for granted: Our family of origin. These kids have lost, and lost, and lost.)

I'm glad the state will continue to pay for counseling for the new family. I'm glad there is a network of the *best* help -- other families who have lived the same experiences. These kids have a lot of baggage. It's going to need to be 'unpacked' over many years. I believe it's an advantage that the kids can choose to continue to know their family of origin. Evidence of reality trumps imagined illusions, but keeping it 'real' will require guidance from the adoptive parents.

(Glad to read the family will have their new house! How appropriate for a New Beginning!)