You may not want to listen to these finance gurus on this issue.
- Suze Orman and Dave Ramsey both advise taking out a 15-year mortgage.
- A 15-year mortgage significantly reduces payment time compared with a 30-year loan.
- There’s a huge opportunity cost to consider with a 15-year loan.
Taking out a mortgage is a huge decision and it’s natural to turn to financial experts to get advice on how to do it right. Suze Orman and Dave Ramsey are two of the most popular finance gurus out there, and both have given a lot of advice about mortgages.
Unfortunately, some of the advice that both of these two famous personalities have given is actually not very good advice for most people. Specifically, both Suze Orman and Dave Ramsey have recommended a particular type of mortgage that may not be the right fit for the majority of home buyers.
Here’s the bad mortgage advice Orman and Ramsey have both given
Both Dave Ramsey and Suze Orman have made the same recommendation with regards to the type of mortgage loan most consumers should take out. They’ve both advised that it’s a good idea to use a 15-year mortgage instead of a loan with a longer payoff time, such as the 30-year loan most consumers consider to be standard.
“I wish more people would take out a 15-year mortgage instead [of a 30-year mortgage],” Orman said on her blog. Orman pointed out some of the benefits of a 15-year loan, including a lower interest rate compared with longer-term loans, as well as lower total costs over time.
Ramsey also made a similar suggestion. “If you decide to take out a mortgage, we recommend getting a 15-year fixed-rate conventional mortgage with at least 10% down,” the Ramsey Solutions blog reads. Like Orman, Ramsey praised some key features of the 15-year loan including the lower total costs of the loan and the fact you become debt free more quickly.
Here’s why it’s bad advice
While Ramsey and Orman are both right about the benefits of the 15-year loan, there is a key downside that the two finance experts seem to gloss over and underestimate the impact of.
The big problem with a 15-year mortgage is that it requires you to commit to much larger monthly payments …….