Best Loan term when evaluating a deal?
Hello all,
I have a question on what term to use for a loan? I have heard 15 years with a Cash on Cash of at least 10%. However, last night Brandon in his webinar used 30 years for his deal he analyzed. Is there a discussion or some rules of thumbs on this at all? I am a little confused and looking at a couple of deals that make no sense using the 15 years, but start looking OK at 30 years.
Thanks!
Most Popular Reply
Erik Powell Maybe start by asking the person who told you to use 15 years. I'd always take a longer term for the loan. If interest rates go up, I've locked in a low cost of capital. If they go down, I can likely refinance. And you get extra cash-flow and barring a pre-payment penalty there's nothing to stop you from paying extra principle. The only argument I could make for a 15 year mortgage is if the interest rate was materially better than a 30 year. It's been a long time since I've seen a big enough spread to contemplate it.