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Sorry this is a bit long. Novice homebuyer here…We just put an offer in on a house at below estimated value. It was accepted today. We qualified for an FHA loan. We have closing costs covered and the seller is contributing to the closing costs. We are not using a realtor-it’s a private sale with a real estate attorney/title company.
My question is do we do a 15 year Loan of $295k at 3.75% or a 30 year loan at 4.5%. Our plan is not to stay in this house forever. Minimum 2 years probably maximum 5 years. Just looking out 26-28 months I did some amortization numbers ( not a math person so this could be wrong!)
The amount of the loan balance in June 2020 with a 30 yr loan is $287,921 with a payment of 2151 a month. With a 15 year it is $262,295 with a $2791 payment per month (+$640/month or $16k for the timeframe noted) That a difference of $25,626 in equality over the next 27-28 months.
The house needs some updates. We’re not rolling in discretionary income but can do the $2791 payment but it would make us feel cash/house poor. We have $100K in savings, but don’t want to touch that. But perhaps the equity we’re building outweighs the inability to make those potential updates? (Or do much else fun) Or no?
Considering we know we got the house for pretty much below market and appraisal value ($335K range), even if the value drops are we better served getting the 30 year at a slightly higher rate and using the $650 difference for house updates that should make it more marketable? Or do we do the 15 year, be a bit house poor, not make as many updates and build equity in a house we may not be in more than 2-3 years or so?
We’ve been renting and renting is not an option. I understand lots of different costs are associated in moving after only a few years etc. I just want to know which mortgage is the most bang for our buck in our situation?