Following Up On The 15-Year Mortgage As A Sucker’s Bet

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A year ago, I called the 15-year fixed mortgage a "sucker's bet" in one of my most popular posts ever.

There was a fair amount of debate around the subject and some of you posted legitimate economic discourse on the subject.  It made me feel good about my audience, actually.  What is a "safe" investment anyway?  In what investment vehicles can returns be maximized?  How do tax deductions apply, or not apply, to certain Americans.

There were a ton of interesting comments.

Only one person, however, went so far as to create a spreadsheet to uncover the heart of debate.  Using pure mathematics, an Air Force veteran in Virginia dissected the argument and drew the most logical conclusion of anyone.

Thank you, Dave Goodridge.

Dave put his dual degree in economics and electrical engineering to work in building an Excel spreadsheet.  You can download the file and test your own scenarios with the usual caveats and qualifiers (i.e. borrower itemizes his interest tax deductions, interest payments are within the bounds of the top marginal tax bracket, invested refunds are paid into a 100% tax-deferred account).

In the end, it appears that the better of the options -- 15-year fixed versus 30-year fixed -- comes down to the likely investment return on the payment delta.

Dave made a terrific case that it's not the 15-year mortgage that's for suckers -- it's the failure to manage your own mortgage and finances that is. 

If we can learn anything from Dave, it's that math never goes out of fashion and to always question what you read.