Ultimately, if you remove the emotional factors in owning a house (typical more pronouncedly displayed by most female species), it is just an investment return issue. So if you are responsible with your money and you can find some magical 20% fixed return on your investment, then by all means invest your money and use your proceeds to rent, you don’t want to tie any of your money into the house unless you can use it as an ATM machine to get more cash out for your investment.
But if you are stuck with the investment choices that most of us have, then you should make the buy v.s. rent trade and it is just pure mathesmatics. Note that since the real useful life of a house is generally much greater than 30 years (even the government allows 39 years for depreciation purpose). When buying (factor in 30 years mortgage) is less than renting on a monthly basis, it is no doubt a steal. Many people on this board are waiting because they want to a bigger steal, not that they consider homeownership a bad trade for long-term.
I think the other concept you hung up on is the pre-payment concept. You think “a 15 year loan is generally a ripoff”, because “you don’t get the full value of having your loan balance get obliterated by inflation”. I argue that this is not the case. Whether or not to pay off the loan (despite all the emotional factors and risk management factors) really depends on the rate of the return of your other investment. If you are like most savers on this board, every month, you run a surplus cashflow and you have to do something with it. Paying off mortgage early (e.g. via 15 year loan) gives you a fixed return (although that is currently only around 5%). But ignoring tax benefits which is applicable on case by case scenario, it is still above the last century’s average inflation rate. So I would think that paying off mortgage is kind of like a bond, and as of today, the 30-year treasury is 4.2% only. So your money earns a better return with the mortgage than the government bonds.
So a rational choice of whether you should pay off the mortgage early or not, really depends on your risk appetite and your age. Having a 15-years loan makes perfect sense for your age, giving its bond-like feature. But that also depends on your other financial picture, for example, I wouldn’t want to put any extra money towards mortgage until I have the following:
1) Medical insurance (from employment now).
2) Emergency fund with 6 months of expenses.
3) Long term disability insurance (from employment now)
4) Term life insurance
5) 401K contribution up to the employer’s match.
6) Max out a ROTH IRA.
