Re: Help me settle this 20 yr fixed vs 30 yr fixed mortgage debate
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Does this calculation take into account the extra money paid out over the life of the 30 year loan so that at the end of year 30 one would have paid more for the 30 year loan and still come out with more cash if returns after fees avg. 5.1%?
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Yes. If your investment after tax returns beat your mortgage after tax returns, your investment will be larger than the extra mortgage balance, which includes the extra interest you didn't pay in order to invest.
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Even if I may lose some value by not choosing the longer option and investing the difference, I'm more content with the safety/convenience of paying off the loan earlier than having to discipline myself and spend extra time to invest the difference each month. Somewhat results oriented thinking I guess, but it makes life simpler for me.
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This is a very valid approach. Also, to get good returns from investments requires accepting volatility risk, i.e. bad years. Paying down your mortgage faster has no volatility risk. You have some small risk of trapping equity in your loan that you might need in a emergency, but in todays world it's trivial to get a second mortgage to borrow that cash back again.
Unless it's a huge difference in profitability, being able to sleep well should be a very important factor.
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