To buy the median price home today using the Ramsey rules, you would need to bring home $170,000 after taxes and have at least $80,000 as a down payment. The national median household income is $74,580.
Get a 30, and pay on it like a 15. That said. America has been re-made. It's a nation of renters. Homeownership no more. You guys at Ramsey, need to re-do your numbers. It's long overdue. $1000 doesn't do half as much as it did when Dave came up with his numbers. Cars are 1.5x more than what they were just 4 years ago. Houses in areas that have employment opportunities cost 2 to 3x more than what they did 10 years ago. What used to be a 3% on a 400k house is now 6.5% on 900k (same house). America has been remade. Back when interest rates were 18%, the same house was $50k, if that. So, there.
@@DanielLaFave-c2c They're doing what's best to keep their show running; nothing more. Don't subscribe to their methodology like it's a religion please. They're not stupid..
There's plenty of houses out there in that range. I live next to two MAJOR cities and there's plenty of homes for sale in that price range. People have always complained about housing prices 😂
I wish George would have stated the cost of his home and his interest rate. Paying a home off in 24 months is beyond incredible. I purchased a home( 1st one ever) last year. It's a very modest home, 1400sqft (340k and 18 yrs old). I'm in TX. I was 53 and my mortgage is 50% of my take home. I work overtime and am paying extra towards my principal. I had, still have a credit score just under 800, and my interest rate is still 6.8%. I am debt free, except mortgage, and my car is 18 y/o. I am hoping to have my home paid off in 12 years. Obviously I don't forsee retirement in my future. I pray for good health and strength.
I live in Ireland. To me it’s crazy that at 53, somebody gave you a mortgage that’s half your income. It would simply not be allowed here, as it puts you into poverty.
Or get a 30 year mortgage and pay it off like it’s a 15 year mortgage. You will be able to qualify for the loan more easily and if someone loses a job, you can drop down to the minimum payment. The 30 year is a safety net for when life happens.
until life happens and you need that extra cash for one month. Whats one month? Can't hurt right? But then it feels good having extra cash and bam! you stop throwing that additional money, and your well thought out plan has failed
Step 1, get a 30 year mortgage Step 2, use Ramsey mortgage calculator to find out what you need to pay to get it paid in 15 years or less. Boom, 15 years but wiggle room if life kicks your butt.
@@ychongyso what happens if I get hurt at work or get sick/ laid off for 6 months? What if I could afford the 30 yr mortgage for those 6 months but not the 15 yr payment?
@@PepeToTheMooon bro ill find you a 300k home. They are everywhere.😂 literally looking at a 4 bedroom 2 bath for 315 right now near the nation capital 🤦♂️ do some actual research it will help you in life.
@@OUTDOORS55 how much of a fixer upper is it? Condo, townhouse? If you’re saying it’s turnkey ready And a single family house, I know 1000% you’re just making things up.
To me the core principles being taught are absolutely spot on. Be intentional with your money (budget), live on less than you make (avoid consumer debt), invest and be generous. But there are a couple things that are a bit overzealous like the 15 yr mortgage. My counsel would be dont discard the entire message just because there are a couple of things that might be a bit overboard
My issue with this is the tone - it is not bad advice at all. But do they need to imply every single person is going into debt over granite counters? Not in this economy. We are going into debt for fresh vegetables.
@@vherrick if you go into debt to buy vegetables then you are paying more for those vegetables. If you can't pay for everything then you need to earn more or spend less. Taking credit increases your outgoings. It doesn't solve the problem, it makes it worse.
In your scenario, if you took the 30 year mortgage and put that extra $570 per month into an investment with an annual return of only 8%, after 30 years you’d have a paid off house and $775,000. If you took the 15 year mortgage and after it’s paid off you put $1716 into an investment account yielding 8%, after 30 years you’d have a paid off house and $560,000. You guys don’t like paying the bank which is fine, but you also don’t like money to give up on $215,000.
@@kevinrtres that’s a 9 year period brother go ahead and find me a 30 year period of stagnation where the s&p500 averaged under 10%. 8% is conservative as all get out.
The one thing you miss is that I can afford 1100 but not 1700. I could not afford 1400 when I bought my house but I could afford 850. Today, I would have been renting an apartment at 1600 (which I cannot afford). So I am happy to have a 30 year and 150,000 in equity even though I will pay much more interest.
@@johnmcho yeah, find that option for me in Tucson today. My buddy just bought a 1,000 square foot home. Nothing special. 2 bed 2 bath. 30 year mortgage. Excellent credit. 225,000 - $1400 per month. At 15 years, close to 2k. It simply isn’t realistic 🤷🏽♂️ (That house is now 240k)
Ramsey's formula is the same regardless of the home price. House you can afford = house payment no more than 25% of your take home pay for a 15 year mortgage. So with your example of a loan amount of $480k with a 15 year mortgage and a 6.75% interest rate, your payment would be around $5,200 (with estimated taxes/fees). That would mean your household income needs to be around $350k/yr to afford this home with their calculations. That's a tough pill to swallow because most households can't afford that. It doesn't change the math though.
You'd do a 15 year until you realize a bank will only approve you for almost a 1/4 of your monthly income. You can't just do what you want to do. Most are only able to buy a house period with a 30 year.
@@cashcow4383 Naw, that's stupid advice dipsh1t. Get the 30 year, invest the extra, pay off more at times if you choose. It allows you more house with more retirement investment opportunity. Or, like the real baby says get a crappy house
You don't have to follow their guidelines. However, you'll "risk" having an uncomfortable portion of your income going to your home. I don't think the numbers they're using have ever been easy (although they used to be easier for sure), and it requires a mindset of sacrificing things now, so you can live better in the long run. To be honest I'm not following all of their advice, but have used it as a guideline to change our financial situation and spending habits. The bottom line is no matter how much you make, it's easier to spend all your money and have fun all the time, than it is to save money now and lower your expectations today so you can have a better future. It's a sacrifice
I love how you guys are digging in your heels on this 15 yr mortgage thing. Many people need a 50 (or 75 year lol) mortgage for any chance to own a home
With housing prices skyrocketed, people can only afford a mortgage payment if it’s on a 30 year plan, otherwise they will fall behind on payments and lose their home.
Not true. Plenty of affordable homes if you actually take the time to look. Been in real estate since 2005 and houses now are not more expensive then they were in 2006. The problem is people don't like what 2-300k buys them. People's expectations have gone up due to social media. Ill bet 100k i can find you a house for 250k that is exactly the same price it was in 2006-2007. Otherwise stop complaining and save some money.
@@austinluepkes5484 Uhh, no. 30 year fixed is ~7.9% today. 15 year is ~6.8%. Assume a $300K loan. 30 year costs $2,180/month. 15 year costs $2,663/month. It's 22% more in that scenario. 22% is a lot, not a little.
I would say Dave Ramsey is a good financial education to start with but realistically now using your method I would never be able to qualify to be a home owner and will be a forever w-2 slave and I am glad I don't know you guys before pandemic and purchased the house.
Yeah i would have been priced out of the market had i used Dave's rules. But instead we are onto buying our second home. The 15 year mortgage is just gatekeeping against anyone who isn't rich.
@@Bertuzz84 my first was a 10 years mortgage and I bought when I was 32, paid off 42. but that was 15 years ago (2009) I hold an entry level job and have my part time MBA, one paycheck goes to tuition the second goes to mortgage, But I am not sure if you can afford that today with an entry level job pay.
They always say the math is the math.. In that case getting a 30 year with the numbers they provided is better if you invest the 570 a month over 30 years is 560K at 6% if you take the market average you'd have 1.7 million. If that is the case you wouldn't care you spent a extra 100K in interest. If you did the 15 year then invested the 1716 per month for 15 years you'd only have 800K. The math is the math.. invest the extra over the life of the mortgage and you'll be ahead. I do like Ramsey and they help people which is great. I stoped using my CC a few years ago after hearing Dave say you spend more and ran a experiment and found I did spend more per month using a card and not cash.
I'm a homeowner in a major city and I am still waiting for them to explain where affordable houses that only cost 25% of your take home pay while on a 15 year mortgage are.
@@freedomring3022 why do I need to grind when I already have an affordable home on a 3% mortgage rate? U must be one of those "pull yourself by your boostraps" guys. I'm asking where these affordable homes that the Ramsey folks champion are located?
One thing to consider is that purchasing power of dollar in 25 years will be just about worthless. Having debt on appreciating assets is a good thing in my opinion as long as you don’t get over your head.
My supervisor 28 yrs old, $10.6K/mo mortgage 2 year, 0% interest Clearing ~$20K/mo She was a slave but only for 2 years. The company provided Dorms, so housing was free. "Just buying a house".
"Math doesn't have emotion" and "math doesn't care". Unless, of course, you're talking about "muh baybee step" #2, then Ramsey folks are like "ignore the interest, ignore the math, math doesn't matter". Ramsey folks flip flop on math like a fish out of water.
They're not ignoring the interest, they're placing more value on the psychological power of paying off loans completely. Starting small gives 'weaker' minded people the will to keep going. I paid our loans off by interest rate, so I get what you're saying. There is meaning behind their strategy, though.
People that have multiple debts already have issues with delayed gratification. That's how they got into so many debts to begin with. The psychology of the debt snowball, provides earlier gratification (paying off smaller debts first). Early gratification allows the person to overcome the inertia and not give up. It is critical to form the pay-off-debt habit, so the cycle isn't broken. As more debts are erased, the habit strengthens. Shoot, you have people buying $600 televisions for $800 because they made the purchase on credit. That's a math problem, but it's more of a delayed gratification problem.
Step #2 is about psychology. Paying off one small debt helps build the reward centers of the brain to make you feel good. Doing it multiple times in a short period reinforces that behavioral change. Statistically the Ramsey method works better, far more people get out and stay out of debt using his model even though the math is actually inferior. Considering that even low-interest payment plans often mean you part with more of your money, it's probably a great thing that you don't use even them. A quick example-- a local "discount furniture" place had a small small dinner table and 2 matching chairs for $900. They'd finance for 18 month at 0% APR financing so a low $50/mo. An identical set was available for order online (all specs matching including style and color numbers) for $200 for the table and $160 for a 2-chair set, but it'd arrive flat-packed for about $360. [It was International Concepts-- stained solid parawood (rubberwood) from South America. The listed dimensions were within 1/4", the style number and color numbers matched too, though the local place had a different brand name and called it something like "Mocha Brown" instead of online's "Mocha" color.) So that's the real math-- say no to debt, find another way.
People complaining about housing prices and availability, yet im sitting here literally looking at a 4 bedroom 2 bath house for 330k and new town homes in the lower 200k. In a MAJOR east coast city. And driving's distance to the capital. So stop complaining. Houses have always been expensive. If you think they are expensive now look at what they were selling for in 2006-2007 and remember to adjust income for inflation. Sorry but it just take work and time to save for one.
I like how they brushed over the income needed to afford that 15 year mortgage at no more than 25% of your take home pay. Unrealistic for basically everyone. The housing market is depressing and it's easy to see why the youth of our country doesnt see much of a future. Things are supposed to get better over time but things have only gotten worse.
If we did a 15 year mortgage there would have been zero room in budget to pay for IUI's, IVF's, and adoption. 30 years give you room unless your life plan is going to go perfect
We had every intention of doing a 15 year mortgage but the lender had a weird promotion and we got a better interest rate on the 30 year. (It is a smaller local mortgage company.) We are still on track to have it paid off in a total of 9 years. (Side note - we qualified for our mortgage using manual underwriting and not a credit score.)
15 year mortgages are no longer feasible for the average person because schools matter neighborhoods matter, neighbors matter. Why don’t you say “hey go buy $1000 property in Detroit or Newark or Chicago “.” there are plenty of cheap properties , but you won’t because you won’t live there because lifestyle matters.
Neighborhoods in metro Detroit are very nice, wonderful weather, great outdoors and city life, and on top of that my house I bought in 2016 for 125k is now worth 220k.
I did a 30 year loan at 8.5% back in the day...yes, our payment was low, but that didn't matter to me because I put extra principal on EVERY payment, as much as I could, and paid off my first house in 7 years. I did the same with the second home, and ended paying that one off in 5 years. As long as you are disciplined and have no other debts, you can do it.
Why not get the 30yr and make extra payments just to be able to afford a lower monthly payment and not be REQUIRED to pay more each month. This seems like the best of both worlds
Another problem with the housing market is builders are not building modest homes. When I lived in Maryland and even when I moved to Georgia, the new build started as 4 bedrooms, formal living/dining and family, some have upstairs lofts . I think 3 bedrooms, family room and kitchen would fit some families fine, especially as starter homes.
The hidden gem. NO affordable NEW build Condos. The desired profit margin of builders precludes a "reasonable" sale price. Developers over-charge for the lot, and "profit" drives the bus right over our heads. It will take the Fed Gov acquisition of land and building the homes to turn this mess around. We need "affordable" condos to allow the Boomers a path out of single-family homes.
Here I am, minding my own baby steps 4, 5, & 6 business, taking strays over having manual crank windows in my 16 year old truck. I wouldn’t have it any other way.
You work for 40yrs to have $1M in your retirement, meanwhile some people are putting just $10K in a meme coin from just few months ago and now they are multimillionaires.❤️
The real winners are the developers making new coins and running away with all the money when the coin becomes popular. It's like a casino. The house always wins. Lottery companies always win. They give pennies to that one person to keep people hoping. That's all they sell. Hope. Vain hope.
It’s getting to the point where you have to put 50% (200k) down on an average home (400k) to meet the monthly numbers the Ramsey crew advise. For the average person (60k/year) it’s going to take easily a decade to save that much money, and by that time the average home price is going to be triple what it is today. A renter’s nation is where we’re heading.
The lowest priced homes in my area and the neighboring town is aroubd $220k and those houses were built in the 40's. When they talk about saving 5, 10, or 15% for the down payment, i laugh. Id have to save closer to 33% down to get the lowest priced house on my engineer salary for a 15 year fixed. A decade ago when we moved to this area, that price range for a house would have gotten me a heck of a lot more. Its just disheartening. Im going to be going through the math of the 15, 20, and 30 year mortgages yo see how much I'd pay in interest if i put in the same amount that i know i can for all options rather than "pay max on 15 year vs pay minimum on 30 years"
I paid a 10 year mortgage (needed to buy out my wife's equity in {what was} our home on separation) in 2 years, 6 months and 13 days. Even though the banks had started shifting the interest rates up, I saved 83% of the originally projected interest I would otherwise have paid. *PAY IT OFF!* You don't need a bank - a bank needs you!
One other thing, can we stop using the word "hack" to describe a normal use of an established product? A hack is when you modify and use something for other than its intended purpose. A 15 vs 30 year mortgage is merely deciding between two financial products.
Sadly, my career had so many moves and relocations, I never even thought about buying a house. No one ever explained to me things like equity or the simple idea of one day never having a rent or mortgage payment again. Now here I am in my mid 50s, trying just to set aside that 15% for retirement (which will probably never come). I just shelled out over $4K in unexpected hospital bills. Now I'm back at Baby Step 3, trying to rebuild my 6 months of expenses. I can't even wrap my head around a down payment for anything, never mind the crazy costs and interest rates. *sigh*.... Young people, don't be stupid like I was for 30ish years. 😢
I think the lesson here is to make a purchasing decision with a long-term financial plan in mind, not just based on what the monthly payment is. Same with car buying. Look at total cost of ownership! No loan terms or contract gimmicks will magically solve for a lack of planning or budgeting. If you’re not good at those things, home ownership and all its unexpected expenses will only make matters worse.
@numberfortyone Your long-term financial plan better keep in mind that down the road you may have a hard time coming up with the higher payment. Wives tend to have babies.
I used to want bigger and bigger homes, then I had an epiphany. I wanted a bigger home to house all my stuff, If I didn't have all that stuff, I wouldn't need a big house. Then I realized that a lot of stuff in the house was just 'stored.' It was seasonal things or recreational things in closets or back rooms that did not need to be stored in temperature-controlled spaces. In preparation for retirement, we bought property in a rural area with a small house and added an outbuilding to store all the stuff that didn't need to be in temperature-controlled storage. On four acres, the house is 600 square feet, the outbuilding is 450 square feet, my heating/cooling bill is less than $100 a month for the house and it took us three years to pay it off, so it was paid for before retirement. The only thing I changed in the plan was I added a sewing/hobby area in the outbuilding.
Rachel my house has brown carpet… but my wife and I are on track to pay our house off in under 3 years from the date we purchased. We do have a 30 year because we didn’t know at the time you could do 15. But with the 30 out mortgage is about 15% of our take home. Livening within or below your means is the hack most can’t stomach.
I have a covid rate, 2.75% on a 12 year note, was paying all ‘extra’ monthly money on the mortgage. Now I am taking that same extra money and putting it in a 5% money market and making interest arbitrage of 2.25%, assessing every quarter to dump the ‘extra’ money on the mortgage. Bank is paying me more money In a MM account than what I am paying to borrow it.
You can even hear in their voice that they're struggling to go along with the bit because how off the house prices are in the example. Average home price across the US is $425k. On a 15 year loan that'd be ~$3,400 per month. That means you'd need a household income of ~11.5k per month to follow their rule of keeping your rent at or under 30%. Average HOUSEHOLD income is ~65k, which is ~5.4k per month, you would need to make DOUBLE this to get close to the income needed. Their advice makes sense and would be great of this was your situation but I just don't think the average household is making double what the average household makes.
As soon as the example started at 300,000 it was out of touch. You even noted it and just kept rolling. 1,700 payment seems super doable, but thats what happens when you skew the numbers
I have six kids. Our house was so tiny we were on top of each other. Serious anxiety and behavioral problems in kids from the lack of space and severe depression in my husband. We had initially chosen to stay to pay off that house and save. But at some point you have to look at your situation and bite the debt bullet. We bought a new house- a modest home with an unfinished basement and non landscaped yard. The useable portion of the house before we finish the basement is the same as our tiny previous house. The yard has less fun and is the same useable space. We moved 30 minutes north to a small town that had cheaper prices. This is by all definitions a modest home for our family of eight. We had to opt for the 30 year because no bank would mortgage us for a 15 year loan on my husbands income- which is SIX FIGURES btw. Our mortgage is over $4000 a month! I share this not for pity- but just to say- the numbers you’re using as examples in these videos are so far from reality for the current homebuyer that I can’t even relate anymore. My husband just got a raise, and at $148,000 we have around $1400 in monthly cash flow. But we can’t throw all of that at our house because we have children we homeschool and medical needs. We have car repairs and unforeseen expenses. Please show me in our not so unique situation how I can pay off this house so it doesnt crush us. Our loan started on 1/1/24, at 6.75% interest (with a VA loan) and is $570,000. Thank you 🙏
There is no difference between a 15 vs a 30 year loan. If you paid the difference and included it in your 30 year payment both loans amortize the same. Actually banks love writing 15 year loans because there is a much lower chance of default vs a 30.
Why not do a 20 yr mortgage? Solit the difference. And add payments when its available to you. Tax refund checks ect.. Also, the 100,000 difference between the 30 year and the 15 yr mortgage over 15 years is 6,6 00 per year. As I mentioned if you add a tax refund check and other monies you cut that difference significantly.
My aunts gran daughter came to live with her and the girls dad and CPS Said she couldn’t share a room with even her grandma ! I’m like America used to share rooms with tons of people-not now . She was a child not even a teenager.
I live in New Zealand. You Americans don't realise how good you have it. The housing market in NZ is now unaffordable for most young New Zealanders, with median housing prices now over 7 times the median income in NZ. Two generations ago that difference was only 3 times.
Overall I like Ramey's program but I can tell you, my goal is not necessarily to be an everyday millionaire, it is to be comfortable with my life and finances is one part of that! I know lots of people who are comfortable in retirement and they don't have anything close to a million. You can refinance from a 30 to a 15. Since Dave teaches keeping your PITI at no more than 25% of your monthly take home pay, I would not let the additional interest you'd pay on a 30 yr mortgage stop you from getting the house. Get it at 30 and at some point in the future, refinance it to a 15 and of course in either instance try and pay it off as soon as you can.
@horacepierce9210 I disagree. Maybe it depends on where you live. But hey, I'm not going to argue with you on this point. I know people in retirement with far less than a million and they are fine. Do they live modestly, yes. And they are fine living modestly.
@@horacepierce9210 I'm British (and live in the UK). I gross only about £450 a week but because I have no debt can live and pay my taxes & utilities and I easily manage to save about £150 a week. £1,000,000 would give me an income of £961.53 a week for 20 years (this is before we factor in any interest which would be still be being paid on a diminishing savings pot). I'm currently 60 years old. I have a life expectancy of around another 25 years. If I retire at the end of the decade, I won't need a million nor half a million; two hundred and fifty grand should suffice. I know that a pound is worth more than a dollar on paper but not that much, my 250 grand is probably your 300 or 325. Saving for the future is not rocket science, is it?
You'll actually have more money in the end if you get a 30 year plan and invest the difference between the 15 and 30 year plans in mutual funds. My husband and I are buying a home and we ran the numbers between the scenarios: 1) 30 year mortgage while investing the difference between the plans over that time 2) 15 year mortgage then investing the full payment equivalent during the following 15 years For a $500,000 home with 20% down, you will end up with about $45,000 more with the first scenario than the second.
With that type of logic, if your house was paid off, would you take a reverse mortgage to invest your home’s equity into the stock market? No. Because of the risk.
What are you investing in? The market goes up, but the market also goes down. Real estate goes up, but real estate also goes down. Paying off your mortgage is guaranteed to improve your financial situation, since you are reducing your liability.
They don’t take into account the opportunity cost of paying it off faster than 15 years. If you have a 2.5% 30 year it’s not smart to pay that off when the risk free 30 year treasury is over 4%. You’d be much better off investing in 10 year or 30 year treasuries.
As someone who applys the Dave Ramsey principles to my life debt free, have an emergency fund, home is on a 15 year mortgage, max out retirements with our 15% each year I wanted to do the math. I follow his principles but do believe that housing market is tough for some and the prices are high so I looked at if you just invested the difference of the $570 between the 15 year and 30 year mortgage payment and invested it each month for 30 years you would have an ending balance of almost $700,000 but the problem is people won’t apply the extra $570 each month but fun to do the math as it outweighs the mortgage principle you pay.
Your rule doesn't apply in all the scenarios. My mortgage rate is 2.25% fixed for 30 yrs. Why should I pay it off early if I can invest those extra payments to an index fund, say Vanguard S&P 500 with 30-plus years of track record of 8% average return?
@@todd2456 I've been doing it for many years and have no plans of stopping for the rest of the term of the mortgage 🤷 just because you can't doesn't mean others can't
Do it if you want to. The people calling into the show are not already millionaires. So what they're currently doing is not putting a bunch of money in their pocket. I don't do every single thing they say to do on the show. But I listen to why they say it. Then I apply the principles and put together the best plan I can for my household. We're not debt free but we do all right and my kids want for nothing while I pay things down. And what am I going to do, call them up and tell them they're bad and wrong and dumb because I do things a little differently? There's no benefit to that, it won't make my finances better, and I got the value from their show that we needed. So just do what works best for you, and love the life you've built.
What about selecting a 30yr mortgage so your payment is lower allowing you to pay extra and any extra goes to principal. A 1500 payment on a mortgage of 1300 on a 15 yr vs 1000 on a 30yr, you pay an extra 500 on the 30yr example. This is what i do. Not sure if its the best but i already have a 30yr
15 year? At this rate we will start seeing 40-50+ year mortgages unless either prices come down or the average household income starts rising significantly.
Also, making some extra payments on a 30 year will have a similar effect, so if you have a 30 year, you aren't prevented from saving a little interest.
We were stupid! We could have, and should have paid our house off quickly, but we were young and just sort of fell into that trap of thinking we would just make our mortgage payment every month for the life of the loan, not realizing that we could have paid it off way quicker. We built a brand new home in 1990 with property for 60k. we paid our last payment in 2015 so 25 years. it was a 38 year loan, yes 38 years (gov loan) at 8.75%. 5 years in we re financed from 33 to a 20 year loan at 4.75% then 5 years later we refinanced for a lower interest rate 4.25%. when I think about our payments and how low they were, we really didn't manage the money well. $411.75 then $517.20 then $447.25 our payments did not include home owners ins or property taxes. We paid those separately. We still live in that house
I have been in my home for about 12 years now, so it doesnt really apply to me any more, but I am wondering how the young people are going to do it. How does a young couple save 20% down when the prices (and the 20%) is going up so fast? Are they better to buy the home before inflation makes the price go higher. Not to mention trying to do all this with kids, life, etc happening all around you.
I don't know how to quantify it, but there's value to getting onto the property ladder. Existing homeowners can risk waiting and withstand prices/rates rising further. Renters can't. I'm willing to endure some short-term pain to at least get on the ladder.
When we first bought our home 12 years ago, it was a stretch for a few years, but fast forward to today. Inflation has happened and my mortgage is cheaper than rent in my area. I have also gotten a few raises with my job so the mortgage payment is not painful at all at this point. I would tell a young couple to save up and put down some amount of money, but don't wait forever and let life pass you by.
They haven't even talked about property taxes, insurance, repairs, renovations, emergencies, and so on. So imagine you have a $1200/month mortgage and then you need a new roof, new windows, or a new kitchen and get a HELOC on top of that. I think the entire cost of owning a home is important to discuss before people start looking.
I appreciate that this content is more applicable for folks in LCOL cities/states, but 1) buying a home for 300k is a joke, 2) people in HCOL areas like me aren't signing up for a 15 year on our first house, and 3) current rates are not going to allow for that type of scenario to play out any time soon
I have a 30 year fixed rate 3.25% mortgage. No sense in refinancing to a 15 year with more than double the interest rate. I just pay extra each month and throw my tax return at it each year and I should have it paid off in like 14 years. House is worth about $450K and growing each year.
Genuine question as we are looking to buy a house in 1-2 years: I love the 15-year mortgage, I want the 15-year. Our budget will probably land us at ~$300k budget and this seems like the “average” for a decent starter in our area. We probably cannot afford a 15-year, it just stretches the monthly budget too far. How would we make the 15-year work? I find the 30-year a good compromise between our budget, interest rates, and home costs in 2024. If we can work out the 15-year, we 100% will, but to push it as the only option is not accurate these days. George’s math is off as well. In his calculator he is looking at a $270k loan, but seems to completely ignore the taxes, insurance, etc. that the Ramsey team also insists be in the 25% or lower budget. Sure, “math doesn’t have emotion.” But when home costs AND taxes are rising, monthly budget is 25% of income, and down-payment is 20%, something has to give. We’re going to put 20% down, and still the 15-year is difficult, the 30-year seems like a good compromise.
You have the right idea, and this video's advice is reductive. Although interest rates are high right now, your returns in the stock market should keep pace, so you're really not paying more to do the 30-year. Plus, you can (and should) refinance if the rates take a dive.
I am on track to pay mine off in 5 1/2 years. I did a 30 year instead of a 15 to secure a low monthly payment just in case things go bad and loose my job. Secure a variable I have control of. I’ve been making cuádruple payments to pay it off as soon as possible.
Considering that OUTDATED example, you should have gotten a much better interest rate for a 5yrs difference. Second, depending what you do with them, those $600 per month ($1800 yearly) could be renting way more than 3%-4%.
Love how Rachel says you always have to go back to the math. But when you ask them about investing at a higher interest rate to make more money than you are paying an interest, they start talking about emotions and peace of mind. The contradictions are hilarious. They've drank so much Kool-Aid they don't even know what the hell is going on.
We are "Baby Steppers" (2:16), and we are going to take 11.5 years to pay off our mortgage at our current pace, not 7. But - we are a single income household, so that factors in I'm sure.
Most homes 75 years ago we under 1,000 sq ft and the family size was over 5. Now most homes are 2,500 sq ft for a family of 3. Smaller homes make for closer families.
300k for a house back in the day? Shouldn't be getting a lot of push back from folks on house price. Can still find decent houses under 250 in my area and better ones for less if head west a little further into the sticks. All depends on location :)
The answer appears to be don't get a mortgage. To emphasize a debt free life, should include mortgage debt as also debt to avoid, not by paying it off, but by not getting one in the first place.
Or you could take the difference of payments and invest in the SP500... I get that they will say that you won't or its risky, but the facts are the facts you could. in 30 years that will buy you 4 other houses and your house will be paid off..
Hi Rachel and George. We bought house 2016. Started as 30yr loan with PMI. We refinanced on 2021, to 20yrs with lower interest rates and paying extra payments every month, that it’s down to 15yr remaining. Can you explain to people that it’s still possible to target the mortgage as 15 years, even if it’s 20-30yrs. Our mortgage paid 40k down in last 2.5yrs. We have paid off 20k credit card debts, saved up 6 months emergency as well.I believe it’s worth it, since we are forced to pay, if something happens we still can do it next month better. What is your opinion on this situation?
March of 21 I got a1200sf double wide on a half acre outside of the city.. 45 min run to and from work.. I put 20% down, and got 3% loan...had NO other debt... HAD to get a 30 because it was still COVID time and I work commission. So there was NO way I was going to lock into a 15 with an uncertain money situation.. Happily I am making plenty now and have built in an extra $100 a month into my automatic payments and any bonuses I get go straight to principal... At this point I am already 26 months ahead of schedule.. and not a chance I'm gonna refi to a15 now at 7%. 30yr was the only way I COULD go being single and 56... or homeless . Sorry it doesn't fit the best plan, but it's all I have.
However in you example if you took the $570 difference and put it into the market at 9% average you end up with $217,000 at the 15 year mark. This more than pays off the remaining capital at 15 years, and leaves you money remaining to keep invested
I could not afford a 15 year loan. I wish I could but that’s my personal situation. I ended up closing in 2021 with 30 year 3.25 and it the best decision I ever made. Every situation is different. We love our home and we have about 130K in equity.
If money doesn't have emotions then you should all face reality and tell people that its okay to rent forever. Because that is where we are headed anyway. Maybe instead of trying to take Dave's old system and try to force it into the modern reality, you should all look at how the Baby Steps need to be tweaked. Maybe look at how the baby steps would look different for a forever renter.
If I don't have to pay 2k to day care monthly for my 2 kids I can definetly pay off the house in 10 years but what can I do? I already work too much but daycare takes big chunk of my take home pay. Also where did you all bring average now is 2600sqft because that us definitely incorrect.
As risk adverse as the Ramsey group is, a 15 year mortgage adds significant risk to someones personal finances. The mortgage company doesnt care if you lost your income. They still want their payment. People being irresponsible isnt a justification for bad advice. If having a paid off home is your goal, commit to the extra payments on a 30 year. Stop saying a paid off house is the fastest way to wealth. Its not, its generally a bit safer but not faster. Dont talk about the math unless you are willing to apply it to everything, not just to attempt to justify your opinions.
If you don't plan on living in your house for 15 years, does it make since to pay it off early? We bought our house 3 years ago. I don't think we will be here more than 5 years. How beneficial is it to me to start forking over more money towards my mortgage?
The real question is: How much do you think $172,000 USD will be worth in 30 years? Haha, it's even better to invest in an index fund than to pay down a loan like that. If you invest the difference at $570 USD for 30 years in an index like the S&P, assuming you get an average return of 7%, you will have $695,383.47 in the bank. Paying down that loan quickly is just foolish.
Im still wheeling down windows that are manual in a 2007 Ford Ranger. its all good though because my friends with AC seats and moon roofs are paying 1200$ a month + insurance to have something new and I have no payments for the past 5 years and $54 a month for insurance. Ill stick to my manual windows. have you ever started your vehicle and felt like its throwing money at you?
To buy the median price home today using the Ramsey rules, you would need to bring home $170,000 after taxes and have at least $80,000 as a down payment. The national median household income is $74,580.
Which is why they won't do a video with the current numbers 🤣
thank you! this whole thing is ridiculous. Who pays off a mortgage in 26 months?
Yes totally tone deaf video
@@sarahbennett7235 Yeah I'm a fan of Ramsey but this one's just ludicrous -- they are disconnected. The math aint math'n.
I just checked your numbers. You're not far off, maybe even spot on. Yeah, 15 years doesn't work for just about anyone.
Get a 30, and pay on it like a 15. That said. America has been re-made. It's a nation of renters. Homeownership no more.
You guys at Ramsey, need to re-do your numbers. It's long overdue. $1000 doesn't do half as much as it did when Dave came up with his numbers. Cars are 1.5x more than what they were just 4 years ago. Houses in areas that have employment opportunities cost 2 to 3x more than what they did 10 years ago.
What used to be a 3% on a 400k house is now 6.5% on 900k (same house). America has been remade. Back when interest rates were 18%, the same house was $50k, if that.
So, there.
@@DanielLaFave-c2c They're doing what's best to keep their show running; nothing more. Don't subscribe to their methodology like it's a religion please.
They're not stupid..
Why not have someone at Ramsey Solutions make a fresh graph with real 2024 numbers?
Because if someone used up to date numbers they’d probably show that their guidance is completely asinine for most of their audience.
With showing the 1.3 million you would be out, by investing that $600 difference every money.
@@tcgtpl 💯
@@tcgtpl They'd choose a location that's dirt cheap where no one lives and the house is like $200k.
There's plenty of houses out there in that range. I live next to two MAJOR cities and there's plenty of homes for sale in that price range. People have always complained about housing prices 😂
I wish George would have stated the cost of his home and his interest rate. Paying a home off in 24 months is beyond incredible.
I purchased a home( 1st one ever) last year. It's a very modest home, 1400sqft (340k and 18 yrs old). I'm in TX. I was 53 and my mortgage is 50% of my take home. I work overtime and am paying extra towards my principal. I had, still have a credit score just under 800, and my interest rate is still 6.8%. I am debt free, except mortgage, and my car is 18 y/o. I am hoping to have my home paid off in 12 years. Obviously I don't forsee retirement in my future. I pray for good health and strength.
He & his wife were able to put an additional 6k a month into paying off their mortgage early. That’s some serious margin.
I think he said he put like 60 or 70% down, on the iced coffee hour.
I live in Ireland. To me it’s crazy that at 53, somebody gave you a mortgage that’s half your income. It would simply not be allowed here, as it puts you into poverty.
Does the 340k justify itself? At 6.8%, maybe a 200k condo is more reasonable?
They paid off 165k in 26 months.
Or get a 30 year mortgage and pay it off like it’s a 15 year mortgage. You will be able to qualify for the loan more easily and if someone loses a job, you can drop down to the minimum payment. The 30 year is a safety net for when life happens.
I agree with this wholeheartedly - but one has to have self discipline to instigate and keep up with the "overpayments"
Do a 30 year, pay 400-500 extra towards the principle every month.
No one does that
Do 15 year, pay only the principle. You'll still pay less and build wealth decades earlier
@@Papawforreal we do that and more. But sure, most folks don't. But most folks also have a car payment.
until life happens and you need that extra cash for one month. Whats one month? Can't hurt right? But then it feels good having extra cash and bam! you stop throwing that additional money, and your well thought out plan has failed
@@Papawforrealspeak for yourself. I do that and it works fine except I put an extra 1k in monthly. I only have 4 years to go instead of 16.
Step 1, get a 30 year mortgage
Step 2, use Ramsey mortgage calculator to find out what you need to pay to get it paid in 15 years or less.
Boom, 15 years but wiggle room if life kicks your butt.
Thats nice until you keep spending the extra cash vs putting it towards the house like you planned.
Bingo! That's what I would do.
More wiggle room but still can pay it off in 10 or 15 years. But one has to be intentional and disciplined.
@@ychongydefinitely most people will not put the extra cash on the mortgage
@@ychongy You have to do it right from the first payment, put it on auto-pay. I agree, if you had to do it manually, wouldn’t happen.
@@ychongyso what happens if I get hurt at work or get sick/ laid off for 6 months? What if I could afford the 30 yr mortgage for those 6 months but not the 15 yr payment?
Who can qualify for a 15 year mortgage with the current rates and mortgage lending standards?
According to the Ramsey plan, only people taking home over $100k, and then buying a $300k home.
@@1timothydillon right lol. They’re still stuck in 2014 not 2024.
@@PepeToTheMooon bro ill find you a 300k home. They are everywhere.😂 literally looking at a 4 bedroom 2 bath for 315 right now near the nation capital 🤦♂️ do some actual research it will help you in life.
@@OUTDOORS55 how much of a fixer upper is it? Condo, townhouse? If you’re saying it’s turnkey ready
And a single family house, I know 1000% you’re just making things up.
@@OUTDOORS55300k in the dc area? I live here, it must be a small condo or a foreclosure. Post the link.
To me the core principles being taught are absolutely spot on. Be intentional with your money (budget), live on less than you make (avoid consumer debt), invest and be generous. But there are a couple things that are a bit overzealous like the 15 yr mortgage. My counsel would be dont discard the entire message just because there are a couple of things that might be a bit overboard
They are very cultish
My issue with this is the tone - it is not bad advice at all. But do they need to imply every single person is going into debt over granite counters? Not in this economy. We are going into debt for fresh vegetables.
@@vherrick if you go into debt to buy vegetables then you are paying more for those vegetables. If you can't pay for everything then you need to earn more or spend less. Taking credit increases your outgoings. It doesn't solve the problem, it makes it worse.
In your scenario, if you took the 30 year mortgage and put that extra $570 per month into an investment with an annual return of only 8%, after 30 years you’d have a paid off house and $775,000.
If you took the 15 year mortgage and after it’s paid off you put $1716 into an investment account yielding 8%, after 30 years you’d have a paid off house and $560,000.
You guys don’t like paying the bank which is fine, but you also don’t like money to give up on $215,000.
Thats the extremely conservative number. If you use Dave’s 12% you end up with $1.7mil with the 30 year or $800k with the 15 year.
Did you mean 15 years after paying the 15 year mortgage? These guys with the absolutely no debt mentality seem to be in a cult.
You are assuming a constant 8% increase of course. Stock market was basically stagnant from around 2001 till about 2010.
@@kevinrtres that’s a 9 year period brother go ahead and find me a 30 year period of stagnation where the s&p500 averaged under 10%. 8% is conservative as all get out.
Don’t you mean they would have $1716 to put in investments after 15 years, which adds an extra 15 years of investing on top of your first example.
The one thing you miss is that I can afford 1100 but not 1700.
I could not afford 1400 when I bought my house but I could afford 850. Today, I would have been renting an apartment at 1600 (which I cannot afford).
So I am happy to have a 30 year and 150,000 in equity even though I will pay much more interest.
well said
👏🏾
A 30 year loan is so much better, if you have extra money invest it
They would tell you to buy a smaller house and pay 1100 on a 15.
@@johnmcho yeah, find that option for me in Tucson today.
My buddy just bought a 1,000 square foot home. Nothing special. 2 bed 2 bath. 30 year mortgage. Excellent credit. 225,000 - $1400 per month. At 15 years, close to 2k.
It simply isn’t realistic 🤷🏽♂️
(That house is now 240k)
What about when interest rate is 6.75% on a 480k starter home? 😅 i can't imagine choosing a 15 year loan.
Ramsey's formula is the same regardless of the home price. House you can afford = house payment no more than 25% of your take home pay for a 15 year mortgage.
So with your example of a loan amount of $480k with a 15 year mortgage and a 6.75% interest rate, your payment would be around $5,200 (with estimated taxes/fees). That would mean your household income needs to be around $350k/yr to afford this home with their calculations.
That's a tough pill to swallow because most households can't afford that. It doesn't change the math though.
@@dougversion2.0 thank you for the calculations. Yeah I'm not quite there yet 😅
I can’t imagine buying a $480k home as a starter.
When I live it’s around $170k or even less if you want.
About $65k for a condo.
@@blackworldtraveler3711 welcome to the Bay area.
@@blackworldtraveler3711 Bay Area prices. Where do you live?
You'd do a 15 year until you realize a bank will only approve you for almost a 1/4 of your monthly income. You can't just do what you want to do. Most are only able to buy a house period with a 30 year.
if the THE BANK tells you that's all it can afford to lend you, take its word
Most ppl buy too much house.
Then you buy a smaller cheaper home and and stop acting like a grown baby in public
Then you need to save more for a down payment.
@@cashcow4383 Naw, that's stupid advice dipsh1t. Get the 30 year, invest the extra, pay off more at times if you choose. It allows you more house with more retirement investment opportunity. Or, like the real baby says get a crappy house
It’s funny how the dude acknowledges that prices and rates are way up more than when they came up with this plan. That’s the main issue.
Don’t give up man.
You don't have to follow their guidelines. However, you'll "risk" having an uncomfortable portion of your income going to your home. I don't think the numbers they're using have ever been easy (although they used to be easier for sure), and it requires a mindset of sacrificing things now, so you can live better in the long run. To be honest I'm not following all of their advice, but have used it as a guideline to change our financial situation and spending habits. The bottom line is no matter how much you make, it's easier to spend all your money and have fun all the time, than it is to save money now and lower your expectations today so you can have a better future. It's a sacrifice
The logic is the same though….. the point is to get the 15 vs 30 year
Except they are not. Do some research into what houses we're selling for in 2006.
@@OUTDOORS55 unless you’re living in a Time Machine from 2006, no. Prices and rates are way up.
I love how you guys are digging in your heels on this 15 yr mortgage thing. Many people need a 50 (or 75 year lol) mortgage for any chance to own a home
Most people in America simply don't deserve to own a home.
Then live like most Americans and be in debt your whole life and waste piles of money on interest to the banks.
@@amireallythatgrumpy6508
Why?
With housing prices skyrocketed, people can only afford a mortgage payment if it’s on a 30 year plan, otherwise they will fall behind on payments and lose their home.
Then they can’t afford a home…
Nah when interest rates are higher the 30 year is barely less per month than the 15 year
Not true. Plenty of affordable homes if you actually take the time to look. Been in real estate since 2005 and houses now are not more expensive then they were in 2006. The problem is people don't like what 2-300k buys them. People's expectations have gone up due to social media. Ill bet 100k i can find you a house for 250k that is exactly the same price it was in 2006-2007. Otherwise stop complaining and save some money.
@@austinluepkes5484 Uhh, no. 30 year fixed is ~7.9% today. 15 year is ~6.8%. Assume a $300K loan.
30 year costs $2,180/month. 15 year costs $2,663/month. It's 22% more in that scenario. 22% is a lot, not a little.
@@austinluepkes5484"per month" is the language of the poor. You're paying a slightly smaller amount over a much longer period of time.
I would say Dave Ramsey is a good financial education to start with but realistically now using your method I would never be able to qualify to be a home owner and will be a forever w-2 slave and I am glad I don't know you guys before pandemic and purchased the house.
Yeah i would have been priced out of the market had i used Dave's rules. But instead we are onto buying our second home. The 15 year mortgage is just gatekeeping against anyone who isn't rich.
@@Bertuzz84 my first was a 10 years mortgage and I bought when I was 32, paid off 42. but that was 15 years ago (2009) I hold an entry level job and have my part time MBA, one paycheck goes to tuition the second goes to mortgage, But I am not sure if you can afford that today with an entry level job pay.
They always say the math is the math.. In that case getting a 30 year with the numbers they provided is better if you invest the 570 a month over 30 years is 560K at 6% if you take the market average you'd have 1.7 million. If that is the case you wouldn't care you spent a extra 100K in interest. If you did the 15 year then invested the 1716 per month for 15 years you'd only have 800K. The math is the math.. invest the extra over the life of the mortgage and you'll be ahead. I do like Ramsey and they help people which is great. I stoped using my CC a few years ago after hearing Dave say you spend more and ran a experiment and found I did spend more per month using a card and not cash.
I'm a homeowner in a major city and I am still waiting for them to explain where affordable houses that only cost 25% of your take home pay while on a 15 year mortgage are.
Not in a major city.
I can tell you they aren't in the youtube comments, so stop bitching and moaning and get out there and grind.
@@freedomring3022 why do I need to grind when I already have an affordable home on a 3% mortgage rate? U must be one of those "pull yourself by your boostraps" guys. I'm asking where these affordable homes that the Ramsey folks champion are located?
One thing to consider is that purchasing power of dollar in 25 years will be just about worthless. Having debt on appreciating assets is a good thing in my opinion as long as you don’t get over your head.
Best advice my parents ever gave me was "Don't become a slave to your house payment."
My supervisor 28 yrs old, $10.6K/mo mortgage
2 year, 0% interest
Clearing ~$20K/mo
She was a slave but only for 2 years.
The company provided Dorms, so housing was free.
"Just buying a house".
She sacrificed but it was worth it. She has some serious investment money. Might be retireable from a regular job by 40.@@aolvaar8792
I wouldn’t pay more than 150 thou for a house
"Math doesn't have emotion" and "math doesn't care". Unless, of course, you're talking about "muh baybee step" #2, then Ramsey folks are like "ignore the interest, ignore the math, math doesn't matter". Ramsey folks flip flop on math like a fish out of water.
Double standards Dave at his finest.
They're not ignoring the interest, they're placing more value on the psychological power of paying off loans completely. Starting small gives 'weaker' minded people the will to keep going.
I paid our loans off by interest rate, so I get what you're saying. There is meaning behind their strategy, though.
People that have multiple debts already have issues with delayed gratification. That's how they got into so many debts to begin with. The psychology of the debt snowball, provides earlier gratification (paying off smaller debts first). Early gratification allows the person to overcome the inertia and not give up. It is critical to form the pay-off-debt habit, so the cycle isn't broken. As more debts are erased, the habit strengthens. Shoot, you have people buying $600 televisions for $800 because they made the purchase on credit. That's a math problem, but it's more of a delayed gratification problem.
YEP
Step #2 is about psychology. Paying off one small debt helps build the reward centers of the brain to make you feel good. Doing it multiple times in a short period reinforces that behavioral change. Statistically the Ramsey method works better, far more people get out and stay out of debt using his model even though the math is actually inferior. Considering that even low-interest payment plans often mean you part with more of your money, it's probably a great thing that you don't use even them.
A quick example-- a local "discount furniture" place had a small small dinner table and 2 matching chairs for $900. They'd finance for 18 month at 0% APR financing so a low $50/mo. An identical set was available for order online (all specs matching including style and color numbers) for $200 for the table and $160 for a 2-chair set, but it'd arrive flat-packed for about $360. [It was International Concepts-- stained solid parawood (rubberwood) from South America. The listed dimensions were within 1/4", the style number and color numbers matched too, though the local place had a different brand name and called it something like "Mocha Brown" instead of online's "Mocha" color.)
So that's the real math-- say no to debt, find another way.
People complaining about housing prices and availability, yet im sitting here literally looking at a 4 bedroom 2 bath house for 330k and new town homes in the lower 200k. In a MAJOR east coast city. And driving's distance to the capital. So stop complaining. Houses have always been expensive. If you think they are expensive now look at what they were selling for in 2006-2007 and remember to adjust income for inflation. Sorry but it just take work and time to save for one.
I like how they brushed over the income needed to afford that 15 year mortgage at no more than 25% of your take home pay. Unrealistic for basically everyone. The housing market is depressing and it's easy to see why the youth of our country doesnt see much of a future. Things are supposed to get better over time but things have only gotten worse.
Most people don't live in $300K houses.
If we did a 15 year mortgage there would have been zero room in budget to pay for IUI's, IVF's, and adoption. 30 years give you room unless your life plan is going to go perfect
We had every intention of doing a 15 year mortgage but the lender had a weird promotion and we got a better interest rate on the 30 year. (It is a smaller local mortgage company.) We are still on track to have it paid off in a total of 9 years.
(Side note - we qualified for our mortgage using manual underwriting and not a credit score.)
15 year mortgages are no longer feasible for the average person because schools matter neighborhoods matter, neighbors matter. Why don’t you say “hey go buy $1000 property in Detroit or Newark or Chicago “.” there are plenty of cheap properties , but you won’t because you won’t live there because lifestyle matters.
Neighborhoods in metro Detroit are very nice, wonderful weather, great outdoors and city life, and on top of that my house I bought in 2016 for 125k is now worth 220k.
Of course what you meant to say is that mortgages in general are no longer feasible for the average person.
I did a 30 year loan at 8.5% back in the day...yes, our payment was low, but that didn't matter to me because I put extra principal on EVERY payment, as much as I could, and paid off my first house in 7 years. I did the same with the second home, and ended paying that one off in 5 years. As long as you are disciplined and have no other debts, you can do it.
Absolutely agree 100%
Why not get the 30yr and make extra payments just to be able to afford a lower monthly payment and not be REQUIRED to pay more each month. This seems like the best of both worlds
Because 99% of the population does not have the intelligence and discipline required to di this.
I absolutely agree. Underpromise and overdeliver is far better then overpromising but underdelivering.
I got a 30 yr mortgage. Made extra payments as I could. Paid it off in 19yrs.
Most people are not disciplined enough to do that
Another problem with the housing market is builders are not building modest homes. When I lived in Maryland and even when I moved to Georgia, the new build started as 4 bedrooms, formal living/dining and family, some have upstairs lofts . I think 3 bedrooms, family room and kitchen would fit some families fine, especially as starter homes.
The hidden gem. NO affordable NEW build Condos. The desired profit margin of builders precludes a "reasonable" sale price. Developers over-charge for the lot, and "profit" drives the bus right over our heads. It will take the Fed Gov acquisition of land and building the homes to turn this mess around. We need "affordable" condos to allow the Boomers a path out of single-family homes.
Here I am, minding my own baby steps 4, 5, & 6 business, taking strays over having manual crank windows in my 16 year old truck. I wouldn’t have it any other way.
I love a lot of what Dave teaches but the idea that somebody is getting a 15 year mortgage with rates at 7% and homes at 300k is delusional.
You work for 40yrs to have $1M in your retirement, meanwhile some people are putting just $10K in a meme coin from just few months ago and now they are multimillionaires.❤️
FOMO is strong with this one
The real winners are the developers making new coins and running away with all the money when the coin becomes popular. It's like a casino. The house always wins. Lottery companies always win. They give pennies to that one person to keep people hoping. That's all they sell. Hope. Vain hope.
Hardly anyone gets rich from meme investing. Most actually lose their shirts
*BEWARE: THIS IS THE USUAL PRAISE THE BROKER SCAM!!!!*
It’s getting to the point where you have to put 50% (200k) down on an average home (400k) to meet the monthly numbers the Ramsey crew advise. For the average person (60k/year) it’s going to take easily a decade to save that much money, and by that time the average home price is going to be triple what it is today. A renter’s nation is where we’re heading.
The lowest priced homes in my area and the neighboring town is aroubd $220k and those houses were built in the 40's. When they talk about saving 5, 10, or 15% for the down payment, i laugh. Id have to save closer to 33% down to get the lowest priced house on my engineer salary for a 15 year fixed.
A decade ago when we moved to this area, that price range for a house would have gotten me a heck of a lot more. Its just disheartening.
Im going to be going through the math of the 15, 20, and 30 year mortgages yo see how much I'd pay in interest if i put in the same amount that i know i can for all options rather than "pay max on 15 year vs pay minimum on 30 years"
Lower mainland BC…townhouse $1,200,000 plus. Forget a house.
I paid a 10 year mortgage (needed to buy out my wife's equity in {what was} our home on separation) in 2 years, 6 months and 13 days. Even though the banks had started shifting the interest rates up, I saved 83% of the originally projected interest I would otherwise have paid. *PAY IT OFF!* You don't need a bank - a bank needs you!
One other thing, can we stop using the word "hack" to describe a normal use of an established product? A hack is when you modify and use something for other than its intended purpose. A 15 vs 30 year mortgage is merely deciding between two financial products.
Sadly, my career had so many moves and relocations, I never even thought about buying a house. No one ever explained to me things like equity or the simple idea of one day never having a rent or mortgage payment again. Now here I am in my mid 50s, trying just to set aside that 15% for retirement (which will probably never come). I just shelled out over $4K in unexpected hospital bills. Now I'm back at Baby Step 3, trying to rebuild my 6 months of expenses. I can't even wrap my head around a down payment for anything, never mind the crazy costs and interest rates. *sigh*.... Young people, don't be stupid like I was for 30ish years. 😢
I think the lesson here is to make a purchasing decision with a long-term financial plan in mind, not just based on what the monthly payment is. Same with car buying. Look at total cost of ownership! No loan terms or contract gimmicks will magically solve for a lack of planning or budgeting. If you’re not good at those things, home ownership and all its unexpected expenses will only make matters worse.
@numberfortyone Your long-term financial plan better keep in mind that down the road you may have a hard time coming up with the higher payment. Wives tend to have babies.
30 year all day and maxing out my HSA, Roth and TSP. When i have leftover ill throw a bit on the house. But i definitely invest first.
I used to want bigger and bigger homes, then I had an epiphany. I wanted a bigger home to house all my stuff, If I didn't have all that stuff, I wouldn't need a big house. Then I realized that a lot of stuff in the house was just 'stored.' It was seasonal things or recreational things in closets or back rooms that did not need to be stored in temperature-controlled spaces. In preparation for retirement, we bought property in a rural area with a small house and added an outbuilding to store all the stuff that didn't need to be in temperature-controlled storage. On four acres, the house is 600 square feet, the outbuilding is 450 square feet, my heating/cooling bill is less than $100 a month for the house and it took us three years to pay it off, so it was paid for before retirement. The only thing I changed in the plan was I added a sewing/hobby area in the outbuilding.
Rachel my house has brown carpet… but my wife and I are on track to pay our house off in under 3 years from the date we purchased. We do have a 30 year because we didn’t know at the time you could do 15.
But with the 30 out mortgage is about 15% of our take home. Livening within or below your means is the hack most can’t stomach.
I have a covid rate, 2.75% on a 12 year note, was paying all ‘extra’ monthly money on the mortgage. Now I am taking that same extra money and putting it in a 5% money market and making interest arbitrage of 2.25%, assessing every quarter to dump the ‘extra’ money on the mortgage. Bank is paying me more money In a MM account than what I am paying to borrow it.
You can find a 200 or 300k house all day long as long as u dont live in California or some of the higher priced states.!!
I really felt George's comment about the crank windows😂😂😂 Currently driving a 2000 corolla that I paid $500 for as I work on baby steps 1+2
You guys are living in 2005. Please use 2024 numbers with median house price being $400.0K and interest rates hovering around 7%
You can even hear in their voice that they're struggling to go along with the bit because how off the house prices are in the example.
Average home price across the US is $425k.
On a 15 year loan that'd be ~$3,400 per month.
That means you'd need a household income of ~11.5k per month to follow their rule of keeping your rent at or under 30%.
Average HOUSEHOLD income is ~65k, which is ~5.4k per month, you would need to make DOUBLE this to get close to the income needed.
Their advice makes sense and would be great of this was your situation but I just don't think the average household is making double what the average household makes.
Except over 30 years you have your money in index funds making 10%/year (Even more according to Dave Ramsey)
Reason why most people do 30 years is because most people don’t keep their house for 30 years
That's a stupid, illogical reason.
As soon as the example started at 300,000 it was out of touch. You even noted it and just kept rolling. 1,700 payment seems super doable, but thats what happens when you skew the numbers
I have six kids. Our house was so tiny we were on top of each other. Serious anxiety and behavioral problems in kids from the lack of space and severe depression in my husband. We had initially chosen to stay to pay off that house and save. But at some point you have to look at your situation and bite the debt bullet. We bought a new house- a modest home with an unfinished basement and non landscaped yard. The useable portion of the house before we finish the basement is the same as our tiny previous house. The yard has less fun and is the same useable space. We moved 30 minutes north to a small town that had cheaper prices. This is by all definitions a modest home for our family of eight. We had to opt for the 30 year because no bank would mortgage us for a 15 year loan on my husbands income- which is SIX FIGURES btw. Our mortgage is over $4000 a month! I share this not for pity- but just to say- the numbers you’re using as examples in these videos are so far from reality for the current homebuyer that I can’t even relate anymore. My husband just got a raise, and at $148,000 we have around $1400 in monthly cash flow. But we can’t throw all of that at our house because we have children we homeschool and medical needs. We have car repairs and unforeseen expenses. Please show me in our not so unique situation how I can pay off this house so it doesnt crush us. Our loan started on 1/1/24, at 6.75% interest (with a VA loan) and is $570,000. Thank you 🙏
They thing they never mention is what all that extra money would end up being invested... 30 year plus investing more is the way to go
There is no difference between a 15 vs a 30 year loan. If you paid the difference and included it in your 30 year payment both loans amortize the same. Actually banks love writing 15 year loans because there is a much lower chance of default vs a 30.
Why not do a 20 yr mortgage? Solit the difference. And add payments when its available to you. Tax refund checks ect..
Also, the 100,000 difference between the 30 year and the 15 yr mortgage over 15 years is 6,6 00 per year. As I mentioned if you add a tax refund check and other monies you cut that difference significantly.
My aunts gran daughter came to live with her and the girls dad and CPS Said she couldn’t share a room with even her grandma ! I’m like America used to share rooms with tons of people-not now . She was a child not even a teenager.
Seem like a domestic issue your family member create.
I live in New Zealand. You Americans don't realise how good you have it. The housing market in NZ is now unaffordable for most young New Zealanders, with median housing prices now over 7 times the median income in NZ. Two generations ago that difference was only 3 times.
Overall I like Ramey's program but I can tell you, my goal is not necessarily to be an everyday millionaire, it is to be comfortable with my life and finances is one part of that! I know lots of people who are comfortable in retirement and they don't have anything close to a million.
You can refinance from a 30 to a 15. Since Dave teaches keeping your PITI at no more than 25% of your monthly take home pay, I would not let the additional interest you'd pay on a 30 yr mortgage stop you from getting the house. Get it at 30 and at some point in the future, refinance it to a 15 and of course in either instance try and pay it off as soon as you can.
A million isn't what it used to be. If someone can't accumulate a million over a working lifetime, they probably will have difficulty retiring at all.
@horacepierce9210 I disagree. Maybe it depends on where you live. But hey, I'm not going to argue with you on this point. I know people in retirement with far less than a million and they are fine. Do they live modestly, yes. And they are fine living modestly.
@@horacepierce9210 I'm British (and live in the UK). I gross only about £450 a week but because I have no debt can live and pay my taxes & utilities and I easily manage to save about £150 a week. £1,000,000 would give me an income of £961.53 a week for 20 years (this is before we factor in any interest which would be still be being paid on a diminishing savings pot). I'm currently 60 years old. I have a life expectancy of around another 25 years. If I retire at the end of the decade, I won't need a million nor half a million; two hundred and fifty grand should suffice. I know that a pound is worth more than a dollar on paper but not that much, my 250 grand is probably your 300 or 325. Saving for the future is not rocket science, is it?
You'll actually have more money in the end if you get a 30 year plan and invest the difference between the 15 and 30 year plans in mutual funds.
My husband and I are buying a home and we ran the numbers between the scenarios:
1) 30 year mortgage while investing the difference between the plans over that time
2) 15 year mortgage then investing the full payment equivalent during the following 15 years
For a $500,000 home with 20% down, you will end up with about $45,000 more with the first scenario than the second.
With a low interest rate, invest the difference. You'll end up with more money in the end.
Math doesn't lie.
You have to understand, it's about psychology, not math. He's addressed that in the past.
Neither does risk.
@@marshalliize isn't that what the emergency fund is for
With that type of logic, if your house was paid off, would you take a reverse mortgage to invest your home’s equity into the stock market? No. Because of the risk.
What are you investing in? The market goes up, but the market also goes down. Real estate goes up, but real estate also goes down. Paying off your mortgage is guaranteed to improve your financial situation, since you are reducing your liability.
They don’t take into account the opportunity cost of paying it off faster than 15 years. If you have a 2.5% 30 year it’s not smart to pay that off when the risk free 30 year treasury is over 4%. You’d be much better off investing in 10 year or 30 year treasuries.
I'm sorry but 25% of my take home income with 20% down gets me a 180K.
UNREALISTIC in Northern AZ.
So home ownership in generalis unrealistic.
@@amireallythatgrumpy6508 What you meant to say is that homeownership is out of the question for those who don't already own one.
As someone who applys the Dave Ramsey principles to my life debt free, have an emergency fund, home is on a 15 year mortgage, max out retirements with our 15% each year I wanted to do the math. I follow his principles but do believe that housing market is tough for some and the prices are high so I looked at if you just invested the difference of the $570 between the 15 year and 30 year mortgage payment and invested it each month for 30 years you would have an ending balance of almost $700,000 but the problem is people won’t apply the extra $570 each month but fun to do the math as it outweighs the mortgage principle you pay.
Your rule doesn't apply in all the scenarios. My mortgage rate is 2.25% fixed for 30 yrs. Why should I pay it off early if I can invest those extra payments to an index fund, say Vanguard S&P 500 with 30-plus years of track record of 8% average return?
Because there is zero chance you would invest the actual difference every single month for 360 months.
@@todd2456 I've been doing it for many years and have no plans of stopping for the rest of the term of the mortgage 🤷 just because you can't doesn't mean others can't
Do it if you want to. The people calling into the show are not already millionaires. So what they're currently doing is not putting a bunch of money in their pocket.
I don't do every single thing they say to do on the show. But I listen to why they say it. Then I apply the principles and put together the best plan I can for my household. We're not debt free but we do all right and my kids want for nothing while I pay things down.
And what am I going to do, call them up and tell them they're bad and wrong and dumb because I do things a little differently? There's no benefit to that, it won't make my finances better, and I got the value from their show that we needed. So just do what works best for you, and love the life you've built.
What about selecting a 30yr mortgage so your payment is lower allowing you to pay extra and any extra goes to principal. A 1500 payment on a mortgage of 1300 on a 15 yr vs 1000 on a 30yr, you pay an extra 500 on the 30yr example. This is what i do. Not sure if its the best but i already have a 30yr
15 year? At this rate we will start seeing 40-50+ year mortgages unless either prices come down or the average household income starts rising significantly.
Also, making some extra payments on a 30 year will have a similar effect, so if you have a 30 year, you aren't prevented from saving a little interest.
We were stupid! We could have, and should have paid our house off quickly, but we were young and just sort of fell into that trap of thinking we would just make our mortgage payment every month for the life of the loan, not realizing that we could have paid it off way quicker. We built a brand new home in 1990 with property for 60k. we paid our last payment in 2015 so 25 years. it was a 38 year loan, yes 38 years (gov loan) at 8.75%. 5 years in we re financed from 33 to a 20 year loan at 4.75% then 5 years later we refinanced for a lower interest rate 4.25%. when I think about our payments and how low they were, we really didn't manage the money well. $411.75 then $517.20 then $447.25 our payments did not include home owners ins or property taxes. We paid those separately. We still live in that house
I have been in my home for about 12 years now, so it doesnt really apply to me any more, but I am wondering how the young people are going to do it. How does a young couple save 20% down when the prices (and the 20%) is going up so fast? Are they better to buy the home before inflation makes the price go higher. Not to mention trying to do all this with kids, life, etc happening all around you.
Speaking from experience it's terrible and even more depressing to think it won't be getting better any time soon
I don't know how to quantify it, but there's value to getting onto the property ladder. Existing homeowners can risk waiting and withstand prices/rates rising further. Renters can't. I'm willing to endure some short-term pain to at least get on the ladder.
When we first bought our home 12 years ago, it was a stretch for a few years, but fast forward to today. Inflation has happened and my mortgage is cheaper than rent in my area. I have also gotten a few raises with my job so the mortgage payment is not painful at all at this point. I would tell a young couple to save up and put down some amount of money, but don't wait forever and let life pass you by.
Lol! A 300,000 dollar home is available all over the country. Most have to do a 30 year. The payment on a 15 year is not feasible for the majority.
They haven't even talked about property taxes, insurance, repairs, renovations, emergencies, and so on. So imagine you have a $1200/month mortgage and then you need a new roof, new windows, or a new kitchen and get a HELOC on top of that. I think the entire cost of owning a home is important to discuss before people start looking.
I appreciate that this content is more applicable for folks in LCOL cities/states, but 1) buying a home for 300k is a joke, 2) people in HCOL areas like me aren't signing up for a 15 year on our first house, and 3) current rates are not going to allow for that type of scenario to play out any time soon
I have a 30 year fixed rate 3.25% mortgage. No sense in refinancing to a 15 year with more than double the interest rate. I just pay extra each month and throw my tax return at it each year and I should have it paid off in like 14 years. House is worth about $450K and growing each year.
Genuine question as we are looking to buy a house in 1-2 years: I love the 15-year mortgage, I want the 15-year. Our budget will probably land us at ~$300k budget and this seems like the “average” for a decent starter in our area. We probably cannot afford a 15-year, it just stretches the monthly budget too far. How would we make the 15-year work? I find the 30-year a good compromise between our budget, interest rates, and home costs in 2024. If we can work out the 15-year, we 100% will, but to push it as the only option is not accurate these days.
George’s math is off as well. In his calculator he is looking at a $270k loan, but seems to completely ignore the taxes, insurance, etc. that the Ramsey team also insists be in the 25% or lower budget. Sure, “math doesn’t have emotion.” But when home costs AND taxes are rising, monthly budget is 25% of income, and down-payment is 20%, something has to give. We’re going to put 20% down, and still the 15-year is difficult, the 30-year seems like a good compromise.
Do the 30-year.
You have the right idea, and this video's advice is reductive. Although interest rates are high right now, your returns in the stock market should keep pace, so you're really not paying more to do the 30-year. Plus, you can (and should) refinance if the rates take a dive.
tons and tons of houses in tn, north and south carolina and ga. 250's. brand new at 325k
I am on track to pay mine off in 5 1/2 years.
I did a 30 year instead of a 15 to secure a low monthly payment just in case things go bad and loose my job. Secure a variable I have control of.
I’ve been making cuádruple payments to pay it off as soon as possible.
Nepo baby probably had daddy Dave pay of her mortgage, if she ever had one.
I’ll be sharing this with my daughter and son in law. 😊 Such a good perspective and information!!
Considering that OUTDATED example, you should have gotten a much better interest rate for a 5yrs difference. Second, depending what you do with them, those $600 per month ($1800 yearly) could be renting way more than 3%-4%.
Love how Rachel says you always have to go back to the math. But when you ask them about investing at a higher interest rate to make more money than you are paying an interest, they start talking about emotions and peace of mind. The contradictions are hilarious. They've drank so much Kool-Aid they don't even know what the hell is going on.
Great point
We are "Baby Steppers" (2:16), and we are going to take 11.5 years to pay off our mortgage at our current pace, not 7. But - we are a single income household, so that factors in I'm sure.
Most homes 75 years ago we under 1,000 sq ft and the family size was over 5.
Now most homes are 2,500 sq ft for a family of 3.
Smaller homes make for closer families.
Interesting comparison, good information -- but it simply won't work for *everyone!*
300k for a house back in the day? Shouldn't be getting a lot of push back from folks on house price. Can still find decent houses under 250 in my area and better ones for less if head west a little further into the sticks. All depends on location :)
The answer appears to be don't get a mortgage. To emphasize a debt free life, should include mortgage debt as also debt to avoid, not by paying it off, but by not getting one in the first place.
Or you could take the difference of payments and invest in the SP500... I get that they will say that you won't or its risky, but the facts are the facts you could. in 30 years that will buy you 4 other houses and your house will be paid off..
Hi Rachel and George. We bought house 2016. Started as 30yr loan with PMI. We refinanced on 2021, to 20yrs with lower interest rates and paying extra payments every month, that it’s down to 15yr remaining. Can you explain to people that it’s still possible to target the mortgage as 15 years, even if it’s 20-30yrs. Our mortgage paid 40k down in last 2.5yrs. We have paid off 20k credit card debts, saved up 6 months emergency as well.I believe it’s worth it, since we are forced to pay, if something happens we still can do it next month better. What is your opinion on this situation?
March of 21 I got a1200sf double wide on a half acre outside of the city.. 45 min run to and from work.. I put 20% down, and got 3% loan...had NO other debt... HAD to get a 30 because it was still COVID time and I work commission. So there was NO way I was going to lock into a 15 with an uncertain money situation..
Happily I am making plenty now and have built in an extra $100 a month into my automatic payments and any bonuses I get go straight to principal... At this point I am already 26 months ahead of schedule.. and not a chance I'm gonna refi to a15 now at 7%.
30yr was the only way I COULD go being single and 56... or homeless .
Sorry it doesn't fit the best plan, but it's all I have.
However in you example if you took the $570 difference and put it into the market at 9% average you end up with $217,000 at the 15 year mark.
This more than pays off the remaining capital at 15 years, and leaves you money remaining to keep invested
I could not afford a 15 year loan. I wish I could but that’s my personal situation. I ended up closing in 2021 with 30 year 3.25 and it the best decision I ever made. Every situation is different. We love our home and we have about 130K in equity.
But how much interest is thirty year is you pay the additional principal of 570 a month for the same payment?
If money doesn't have emotions then you should all face reality and tell people that its okay to rent forever. Because that is where we are headed anyway. Maybe instead of trying to take Dave's old system and try to force it into the modern reality, you should all look at how the Baby Steps need to be tweaked. Maybe look at how the baby steps would look different for a forever renter.
It's sad that the dollar has lost so much buying power that a single-family home is unattainable for many Americans...
That’s not how it works
People been saying that same thing for 50 years. Doomsayers
Then why are legal immigrants outpacing native born americans? Nah mate, the lack of drive and attention is the problem
And it has been coming true. Which is why housing and the cost of living continues to grow at alarming rates. Simple economics...@@Papawforreal
It's exactly how it works, it's called economics.@@AnonN-sr6uu
If I don't have to pay 2k to day care monthly for my 2 kids I can definetly pay off the house in 10 years but what can I do? I already work too much but daycare takes big chunk of my take home pay. Also where did you all bring average now is 2600sqft because that us definitely incorrect.
As risk adverse as the Ramsey group is, a 15 year mortgage adds significant risk to someones personal finances. The mortgage company doesnt care if you lost your income. They still want their payment. People being irresponsible isnt a justification for bad advice. If having a paid off home is your goal, commit to the extra payments on a 30 year. Stop saying a paid off house is the fastest way to wealth. Its not, its generally a bit safer but not faster. Dont talk about the math unless you are willing to apply it to everything, not just to attempt to justify your opinions.
If you don't plan on living in your house for 15 years, does it make since to pay it off early?
We bought our house 3 years ago. I don't think we will be here more than 5 years. How beneficial is it to me to start forking over more money towards my mortgage?
I have a 2.25 percent interest rate a 15 year mortgage. Locked the interest rate. Not selling
The real question is: How much do you think $172,000 USD will be worth in 30 years? Haha, it's even better to invest in an index fund than to pay down a loan like that. If you invest the difference at $570 USD for 30 years in an index like the S&P, assuming you get an average return of 7%, you will have $695,383.47 in the bank. Paying down that loan quickly is just foolish.
30 year fixed at 4% is a dream guys, it's free fiat money.
Im still wheeling down windows that are manual in a 2007 Ford Ranger. its all good though because my friends with AC seats and moon roofs are paying 1200$ a month + insurance to have something new and I have no payments for the past 5 years and $54 a month for insurance. Ill stick to my manual windows. have you ever started your vehicle and felt like its throwing money at you?