This is Mark Warner with propertiesandoptions.com and I wanted to comment about an email we got at askpmi@propertiesandoptions.com from a video watcher for the video that said Don’t Get a Dave Ramsey Mortgage.  Jay writes, “I believe you have proven yourself wrong in not including the following:  the cost of the interest the 2nd 15 years; that does have to be subtracted from how much you have, as well as the $1430.00/ month invested at that for again the 2nd 15 years.  The $73,771.00 “additional” does not include the interest you are paying for another 15 years while the person with the 15 year has a paid off home, and $1430.00/ month to invest.

When you include ALL of the baby steps together, you come out ahead.  You are buying the home below your means, with cash set aside for emergencies (or as you call it “when times are tough”) and you are not incurring other debts, actually paying them off.  With Dave’s plan you also are not “eating sheetrock”.   Sorry, but your plan is wrong. You are nothing more than a banker wanting people to pay the bank more money. “

My response, “First of all thank you for watching my video. If you follow the video all the way to the end I have taken into account that if you use a 15 year mortgage that you would have the $1430 a month to invest. That is how you end up with a substantial sum of money at the end of 30 years. However, if you take the difference between the payment for a 15 year mortgage and a 30 year mortgage and invest that for 30 years you end up with a bigger sum of money at the end of 30 years than doing the 15 years of mortgage and 15 years of investing with the whole payment you were making with the 15 year mortgage. Do the math and you will see.”  I do take into account the whole 30 year payment and the extra interest that is paid.  It’s all calculated into that number based on the mortgage payment that you’re making and the difference between the 30 and 15 years.

I go on to say, “You also make the assumption that I’m a banker wanting you or anyone else to pay the bank more money. That is definitely not true. I’m trying to educate people to do the same thing the banker does and recognize the time value of money! Ask yourself this question. Why does a banker try to get you to do a 15 year mortgage rather than a 30 year by offering you a lower interest rate? Is that in your best interests or the best interests of the bank? It is obviously in their best interests because they can use your money again and again. A 30 year mortgage for a bank that actually lasts for 30 years is not very appealing to them. The later years of the payment are almost worthless to them because of the time value of money.”  Which I’m trying to get Jay to recognize and anybody else out there watching this video.

“You might also consider the fact of why they lower the interest on a 15 year mortgage versus a 30 year. Day one of the mortgage their risk is the same. If you default they would have the same loan balance against the same property with the same borrower.

“The other item to consider with a 30 year mortgage if you were disciplined enough to save the difference between the 30 year payment and the 15 year payment you would have a sizeable nest egg already built up. What if you lost your job on day 15 years and one day? You would have a home free and clear but no money. With a 30 year mortgage and you lost your job at the same time you would have cash to tide you over until you found another job.”

If you’d like to comment again you can write an email to askpmi@propertiesandoptions.com.  Rewatch the video and do the math, Jay.  This is Mark Warner with why you don’t want a Dave Ramsey mortgage and with propertiesandoptions.com.  Thank you for listening.

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