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From: fadoc@brl-tgr.ARPA (Capt. Terry Dougherty )
Newsgroups: net.invest
Subject: Re: Question about Home mortgages
Message-ID: <11121@brl-tgr.ARPA>
Date: Wed, 29-May-85 08:45:44 EDT
Article-I.D.: brl-tgr.11121
Posted: Wed May 29 08:45:44 1985
Date-Received: Fri, 31-May-85 05:16:01 EDT
References: <110@novavax.UUCP> <3766@alice.UUCP>
Organization: Ballistic Research Lab
Lines: 18

> Which is better, a 15 year loan as 12.25% or a 30 year loan at 12.75%?

> First, let's compare 30 and 15 years, both at 12.75%.  The 30-year
> term is clearly superior, regardless of the time value of money or
> anything else, because you always have the option of paying it
> off over 15 years and you will be in exactly the same situation
> as if you had taken out a 15-year loan in the first place.  Thus
> the 30-year term gives you everything the 15-year term does, plus
> some extra flexibility.

How can you say that the 30-year term gives you everything the 15-year term
does?  That is only true if you start from the first mortage payment paying
the additional principal payment like you were paying on a 15-year loan.  If
you do not and delay any payment then two things will happen:  1.  You will
be paying less on the loan balance and 2.  You will therefore be paying more
interest on the balance.  Most people, if given the choice will delay the 
payments and hence in the long run will be paying more than twice the amount 
of money in a 30-yr versus a 15-yr mortage.