Dear Dave: Is there ever a time when a 30-year mortgage is better than a 15-year mortgage?
Dear Julie: Let’s see, how should I put this? No!
If you can’t afford a home on a 15-year mortgage, it means you can’t afford the house. Period.
If you currently own a house and the only way to keep from being foreclosed on or going bankrupt is to refinance into a 30-year mortgage, you’d probably do that — but it doesn’t make it better than a 15-year mortgage. You’ll never hear me recommend a 30-year mortgage. I might tolerate one in an extreme situation, but I wouldn’t tell you to go get one.
Besides, why would you want to stay in debt for 30 years? Do you have a fear of winning with money? Are you feeling so generous toward the bank that you want to just hand it piles of cash every month for three decades?
The average millionaire in this country pays off his or her mortgage in 10.2 years. Do what smart people do, Julie. Do what people who win with money do. A 15-year, fixed-rate mortgage is the only kind of home loan I recommend.
Dear Dave: At what point, where your net worth is concerned, should you consider additional umbrella insurance?
Dear Kyle: You can buy an additional $1 million in liability insurance for your home and car for around $250 a year. Why would you want that? If you were a target. Why would you be a target? If you have a net worth of $500,000 to $1 million or more. You might also be a target if you just have a really good income and make a lot of money.
In either case, you’d want to pick up a liability umbrella policy. Good question.
Dave Ramsey is a financial consultant, author and radio host.