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Column

Want to give the bank more money? Get a 30-year mortgage

Dear Dave,

Is there ever a time when a 30-year mortgage is better than a 15-year mortgage?

– Julie

Dear Julie,

Let’s see, how should I put this? No! If you can’t afford a home on a 15-year mortgage, it means you can’t afford the house. Period.

If you currently own a house, and the only way to keep from being foreclosed on or going bankrupt is to refinance into a 30-year mortgage, you’d probably do that – but it doesn’t make it better than a 15-year mortgage. You’ll never hear me recommend a 30-year mortgage. I might tolerate one in an extreme situation, but I wouldn’t tell you to go get one.

Besides, why would you want to stay in debt for 30 years? Do you have a fear of winning with money? Are you feeling so generous toward the bank that you want to just hand them piles of cash every month for 3 decades?

The average millionaire in this country pays off their mortgage in 10.2 years. Do what smart people do, Julie. Do what people who win with money do. A 15-year, fixed rate mortgage is the only kind of home loan I recommend!

– Dave

Net worth and umbrella insurance

Dear Dave,

At what point, where your net worth is concerned, should you consider additional umbrella insurance?

– Kyle

Dear Kyle,

You can buy an additional $1 million in liability insurance for your home and car for around $250 a year. Why would you want that? If you were a target. Why would you be a target? If you have a net worth of $500,000 to $1,000,000 or more. You might also be a target if you just have a really good income and make a lot of money.

In either case, you’d want to pick up a liability umbrella policy. Good question!

– Dave

Follow Dave on Twitter (@DaveRamsey), or go to daveramsey.com.

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