Skip to main content
Publish date:

Ask the Hammer: Should I Use a 30-year Mortgage with Interest Rates So Low?

Jeffrey Levine, director of advanced planning at Buckingham Wealth Partners, discusses in this Retirement Daily video whether to use a 30-year mortgage now with interest rates at historic lows.

Should I use a 30-year fixed rate when purchasing a home?

That was the question posed to Jeffrey Levine, director of advanced planning at Buckingham Wealth Partners, in this episode of Ask the Hammer.

And as with most things related to personal finance, Levine says it "all depends on a variety of factors."

That said, the answer depends on your own personal plans and what you believe will happen to interest rates in the future. So, for instance, if you don't plan on living in the same home for 30 years maybe you'd be better off using a 15-year fixed, or a 7/1 or 10/1 adjustable-rate mortgage or ARM.

Another reason why you might opt not to use with a 30 year fixed rate? You believe interest rates will go even lower in the future.

There are two other factors to consider as well. You'll never know what being a homeowner is like until you own one; you'll never really truly prepare yourself for additional expenses like a leaky roof. And two, you have a lot more uncertainty when you're young, says Levine.

Levine says the same principles apply to those who are looking to refinance their existing mortgages. How long will you be in your home and what's going to happen to interest rates?

Levine also cautioned against trying to get the absolute lowest interest rate. But, he says, there's not much difference between a 3% mortgage and a 2.9% mortgage.

Two more items worth noting. With interest rates so low, you can "buy a lot more house than you used to based on the value of the mortgage," says Levine. And two, with interest rates so low more of your mortgage payment goes to principal. 

More Ask the Hammer

Ask the Hammer: How to Invest the Fixed-income Portion of Your Portfolio

Ask the Hammer: Should Parents Provide Financial Support to Adult Children?

Ask the Hammer: What's the Value of a Risk Tolerance Questionnaire?

Ask the Hammer: Tips on Selecting the Best Retirement Plan Payout Option

Ask the Hammer: What Are The Distribution Rules for Beneficiaries of Inherited IRAs?

Ask the Hammer: Should We Worry About the National Debt?

Ask the Hammer: Tax Consequences to Selling Assets in a UTMA or UGMA

Ask the Hammer: Three Tips on Buying a Used Car

Ask the Hammer: Who Qualifies for a Coronavirus-related Distribution?

Ask the Hammer: Is it Possible to Put an RMD Back Into an IRA?

Ask the Hammer: What Does Reg BI Mean for Investors?

Got questions?

Email askthehammer@buckinghamgroup.com.