FDX Excess bid financial dilemma
04-16-2008, 11:49 AM
#51
Gets Weekends Off
Joined APC: Nov 2006
Position: 767 FO
Posts: 8,047
Originally Posted by SeeDub
Not true. Most people who pay extra on an 30 year mortgage are paying extra on the principle. There isn't any advantage to paying early on the interest... no advantage to the payee anyway.
Although frequently (not always) a 15 year loan will have a slightly lower rate than a 30 year loan. Less risk to the bank.
04-16-2008, 12:33 PM
#52
Gets Weekends Off
Joined APC: Nov 2005
Position: 757 Capt
Posts: 2,418
The advantage to paying off a 30 yr loan as if it was a 15 yr loan is the flexibility of payments versus being locked into a 15yr loan and then trying to get a 30yr loan when you can't hack the required payments.
For example, 300k loan @ 5.75% (ball park current rates) for 30yrs
Required payment (P&I only) is 1751$
Adding 750$ in principal payments will pay the loan off in 15 yrs, resulting in a savings of 182k in interest payments as compared to the 30 yr loan.
You should get a slightly lower interest rate for a 15 yr loan
For example, 300k loan @ 5.5 (Again, ballpark rates for 15 yrs)
Required payment 2450$
Comparing the the 30 vs 15 year loan
30 yr interest payments =330k
15 yr interest payments =141k
30 yr paid off in 15 gets you interest payments 148k
So, to save 7k (500$ a year), you are locked into that higher payment for the duration.
But, back to whether you should buy the house or not. If you qual'd for a 15 yr loan on your dream house, then a 30 yr should be a no brainer. And while I don't know your situation, I would think going from a WB Capt to a NB Capt, or a NB Capt to a WB FO shouldn't push you that far over the ledge. If nothing else, minimizing your contributions to the 401k&IRA should be able to tide you over for a few years.
What you should do is sit down with CinCHaus, and flip a coin. Heads you buy, Tails you don't. Catch it in midair, and try and figure out what you were really hoping it landed as.
Caveat, if you just bought 2 new Cadillac Escalades w/ no $$ down, maxed out credit cards, just say no. And get your house in order, contract is only 2 yrs away. Not too early to start building up the bank to ride out any contract shenanigans
For example, 300k loan @ 5.75% (ball park current rates) for 30yrs
Required payment (P&I only) is 1751$
Adding 750$ in principal payments will pay the loan off in 15 yrs, resulting in a savings of 182k in interest payments as compared to the 30 yr loan.
You should get a slightly lower interest rate for a 15 yr loan
For example, 300k loan @ 5.5 (Again, ballpark rates for 15 yrs)
Required payment 2450$
Comparing the the 30 vs 15 year loan
30 yr interest payments =330k
15 yr interest payments =141k
30 yr paid off in 15 gets you interest payments 148k
So, to save 7k (500$ a year), you are locked into that higher payment for the duration.
But, back to whether you should buy the house or not. If you qual'd for a 15 yr loan on your dream house, then a 30 yr should be a no brainer. And while I don't know your situation, I would think going from a WB Capt to a NB Capt, or a NB Capt to a WB FO shouldn't push you that far over the ledge. If nothing else, minimizing your contributions to the 401k&IRA should be able to tide you over for a few years.
What you should do is sit down with CinCHaus, and flip a coin. Heads you buy, Tails you don't. Catch it in midair, and try and figure out what you were really hoping it landed as.
Caveat, if you just bought 2 new Cadillac Escalades w/ no $$ down, maxed out credit cards, just say no. And get your house in order, contract is only 2 yrs away. Not too early to start building up the bank to ride out any contract shenanigans
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