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Help me with my math, 15yr vs 30 mortgage and student loans

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  • Help me with my math, 15yr vs 30 mortgage and student loans

    My wife and I are purchasing a home and with current super low interest rates, we can get a 30yr mortgage at 3.6% or a 15yr at 2.9%. The difference in payment is $2200 or $3200 respectively. The tradeoff is that I would end up paying off my student loans slower. Currently I have consolidated all of my loans with DRB and I have a 10yr 4% with a payment of $3000 which I had planned on paying off in 4 years by making a payment of about $6500. So my question is whether I should go for the lower interest 15yr or 30yr? If I do that, it would pull $1k from loan payments into mortgage payments and I would end up paying off the student loans in 5yrs rather than 4yrs. Is there any advantage to doing it one way or another? Either mathematical or per taxes or even behaviorly? Thanks.

  • #2




    My wife and I are purchasing a home and with current super low interest rates, we can get a 30yr mortgage at 3.6% or a 15yr at 2.9%. The difference in payment is $2200 or $3200 respectively. The tradeoff is that I would end up paying off my student loans slower. Currently I have consolidated all of my loans with DRB and I have a 10yr 4% with a payment of $3000 which I had planned on paying off in 4 years by making a payment of about $6500. So my question is whether I should go for the lower interest 15yr or 30yr? If I do that, it would pull $1k from loan payments into mortgage payments and I would end up paying off the student loans in 5yrs rather than 4yrs. Is there any advantage to doing it one way or another? Either mathematical or per taxes or even behaviorly? Thanks.
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    All things being equal (and they rarely are), mortgage debt is much more preferable to student loan debt which is pretty much the worst all in. Even without considering the tax implications the sl debt rate is higher anyway so even just straight math its much better. Behaviorally the only important part is that whatever choice you make you actually stick to the using whatever is left over for said purpose of paying things down and not anything else.

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    • #3
      I think you should just run the numbers yourself and see what works out best.  Also, are you planning on paying down your mortgage aggressively after the student loans are gone?  Refinancing to a 15 year?  If you stick with the 30 year after loans are gone and pay off the mortgage in 30 years, I think you'd lose this way (admittedly haven't done the number crunching).

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      • #4




        My wife and I are purchasing a home and with current super low interest rates, we can get a 30yr mortgage at 3.6% or a 15yr at 2.9%. The difference in payment is $2200 or $3200 respectively. The tradeoff is that I would end up paying off my student loans slower. Currently I have consolidated all of my loans with DRB and I have a 10yr 4% with a payment of $3000 which I had planned on paying off in 4 years by making a payment of about $6500. So my question is whether I should go for the lower interest 15yr or 30yr? If I do that, it would pull $1k from loan payments into mortgage payments and I would end up paying off the student loans in 5yrs rather than 4yrs. Is there any advantage to doing it one way or another? Either mathematical or per taxes or even behaviorly? Thanks.
        Click to expand...


        You won't get to deduct your student loan interest after you become an attending and you are limited to only $2,500/yr now. If it really will mean you will pay off your student loans a year earlier, go for the 30-yr. After the student loans are paid either refi for a better rate (if still available and the numbers make sense) or apply the extra $3k/mo to the mortgage. Of course, I am assuming you have the 20% downpayment and no PMI. jmho, but that's a pretty big mortgage while you're still a resident with student loans. Do you plan to stay there at least 5 years?
        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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        • #5
          We have already been here 8yrs and I am now an attending. I know it would be financially better to stay in our current home but the 900sq ft just isn't enough space for us anymore. We could have gone with a less expensive house but we didn't want to get into a house that we would again grow out of as our kids enter high school in a few years. I will probably do the 30yr and dump every extra penny on the student loans. This is also after already maxing out a 401k, 403b, and govt 457 and back door personal and spouse Roth.

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          • #6




            We have already been here 8yrs and I am now an attending. I know it would be financially better to stay in our current home but the 900sq ft just isn’t enough space for us anymore. We could have gone with a less expensive house but we didn’t want to get into a house that we would again grow out of as our kids enter high school in a few years. I will probably do the 30yr and dump every extra penny on the student loans. This is also after already maxing out a 401k, 403b, and govt 457 and back door personal and spouse Roth.
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            Understand. Was just going by your status listing as Resident. Sounds like you are doing a lot of things right.
            Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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            • #7
              I agree with Johanna.  Go with the 30-year loan and consider refinancing to a 15 or aggressively paying off the mortgage once the student loan is paid off.

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              • #8
                I agree with the above recommendations. If you must move and take out a larger mortgage, go with the 30 year. Pay down the educational debt first.

                As an aside, I am distraught with the degree in which educational debt affects the lives and livelihoods of our young physicians!

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                • #9
                  I agree with above pay the loans then switch to a 15 year mortgage.  I agree with vagabond that it is amazing to me how much student loans have to factor into young docs financial decisions.  Reform in higher education costs is needed.

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                  • #10
                    I would question the premise. You say you cannot pay off the loans in 4 years AND take the 15 year. It is possible that isn't true. If you make more or spend less, you can do both.
                    Helping those who wear the white coat get a fair shake on Wall Street since 2011

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                    • #11
                      How about this for an idea to be included if "tax-reform" ever happens:

                      Professionals that take on whopping debt for higher education should be able to use it (or a percentage of it) to offset taxable income.  For example, Joe MD graduates with $400,000 of student debt and has $200,000 of taxable income year one as an attending.  Joe will be allowed to lower his taxable income by a set amount or percentage (?50% or up to $200,000) of his remaining education debt for the next X years, provided he makes minimum payments.  Let the tax wonks work out the details, but you get the point.

                      This farce of considering MDs the "rich of the rich" because of our high incomes and taxing the crap out of us totally ignores our massive debt, all the lost years of income during school and residency, all the lost retirement contributions, investing and compounding.  Not to mention the decreased social security benefits due to all the years we make minimal or no salary during school and training. It really pisses me off.  I bet we would all be shocked at the break even net worth age of a doc with high loan burder vs someone who makes $60k right out of college with no debt and saves and invests responsibly.

                      Yet someone else can inherit 100 million dollars, invest in a tax efficient manner and pay very little. This country has got to stop progressively taxing and discouraging hard work, income, and higher education.  It just makes no sense.  If it was practical to eliminate the income tax and have a straight consumption tax, I'd be all for it. At a minimum, we should a have a flat tax with credits or income offsets for higher educational debt.

                      Rant over.

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                      • #12




                        How about this for an idea to be included if “tax-reform” ever happens:

                        Professionals that take on whopping debt for higher education should be able to use it (or a percentage of it) to offset taxable income.  For example, Joe MD graduates with $400,000 of student debt and has $200,000 of taxable income year one as an attending.  Joe will be allowed to lower his taxable income by a set amount or percentage (?50% or up to $200,000) of his remaining education debt for the next X years, provided he makes minimum payments.  Let the tax wonks work out the details, but you get the point.

                        This farce of considering MDs the “rich of the rich” because of our high incomes and taxing the crap out of us totally ignores our massive debt, all the lost years of income during school and residency, all the lost retirement contributions, investing and compounding.  Not to mention the decreased social security benefits due to all the years we make minimal or no salary during school and training. It really pisses me off.  I bet we would all be shocked at the break even net worth age of a doc with high loan burder vs someone who makes $60k right out of college with no debt and saves and invests responsibly.

                        Yet someone else can inherit 100 million dollars, invest in a tax efficient manner and pay very little. This country has got to stop progressively taxing and discouraging hard work, income, and higher education.  It just makes no sense.  If it was practical to eliminate the income tax and have a straight consumption tax, I’d be all for it. At a minimum, we should a have a flat tax with credits or income offsets for higher educational debt.

                        Rant over.
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                        Thats not bad but considering that may incentivize high loan balances to be carried longer than necessary. I think a more win win tax code that serves everyones interest would be very simple.

                        Every dollar paid to student loans should be an above the line deduction on income. This not only encourages paying it off but is also limited by loan amount. At the end of paying it off they have the money, and you will certainly be paying more in taxes and consuming. Maybe some sort of chained maximum to discourage the 0.001% who may try to rack up millions to find some strange loophole, but its pretty straight forward.

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                        • #13
                          Yes, it can be done at the current income level. But as I stated earlier I am also planning fully matching my employer 401k, full 18k 403, and full 18k 457, and my and spousal back door Roth. That takes a huge chunk of income. I could decrease any of those. I have also looked at the possibility of moonlighting in order to work more as I am still young enough that I can handle it and pay things off sooner. I am definitely not averse to work. I have tried to make the debt manageable, but unfortunately I didn't get into Dave Ramsey (I know many don't agree with his principles, but generally for people who don't have much money, they work well) until I was an M3. At that point I started up a business which I eventually sold for over 100k and used what was left after taxes to pay down my debt. I even took a job in the Midwest over going "back home" in order to have a higher salary. (I literally had an offer for barely more than half of my current contract).
                          I am just trying to find the balance of a more normal life for my kids and family while also paying off the debt and saving for retirement. The problem is that we can't have everything at the same time.

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                          • #14
                            Yep. Classic case of "can't...or won't?" à la Archer. I couldn't blame you, though. I find myself engaging in a lot of cognitive dissonance with trying to nail that "X-Factor" while giving into my enjoyment of things that cost money.

                            Idk who will or won't agree with this, but imo as long as you're able to figure the math and understand its consequences, I think it's mostly OK to conclude that the best mathematical decision isn't always the best overall. Though I sure wish I didn't have my first horrendous mortgage, I sure did love the house...

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                            • #15
                              Comment removed. Aside from being ad hominem (against forum policy) it also inappropriately uses a personal name (correct or incorrect) to publicly identify someone who obviously prefers anonymity. I wouldn't have guessed I needed to cover that in the forum policy.

                              Additional posts of this type will result in banning.

                              Edited by J. Dahle

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