Should you take out a 15-year mortgage? Here’s what Dave Ramsey thinks

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Here’s what Dave Ramsey has to say about getting a mortgage.


Key points

  • Dave Ramsey thinks the best way to buy a house is with cash.
  • For those who need to borrow, he suggests taking out a 15-year mortgage.
  • He also urges homebuyers to keep their mortgage at 25% of their income or less.

If you’re considering buying a home, Dave Ramsey thinks the best way to do it is to pay cash. The financial expert called the cash payment for a house a 100% plan.

However, Ramsey acknowledges that this may not be financially within the reach of many interested in homeownership. Accordingly, he also talked about the type of mortgage he recommends if a home loan is absolutely necessary.

For Ramsey, there’s only one clear answer when it comes to which mortgage to use to buy a property: it’s a 15-year mortgage. It’s an alternative to the 30s that other financial experts, including Warren Buffett, recommend.

Here’s what Ramsey has to say about borrowing for a home, so you can decide to take his advice and limit your repayment term to just 15 years.

Here’s what Ramsey thinks about 15-year mortgages

Ramsey is well known for his opposition to borrowing money. He has taken a strong anti-debt stance, arguing that debt is a barrier to getting rich in almost every situation.

“The shortest path to wealth isn’t through debt,” he explained on his show, to a caller who asked him about borrowing for a home or paying cash. He indicated that borrowing just wouldn’t be an option for him personally, even if getting a loan was necessary to buy a house.

However, unlike other types of borrowing, such as credit card debt, Ramsey is not adamantly opposed to taking out a mortgage. The only catch is that he thinks a 15-year loan is the only type of loan you should consider.

“Having said that, I’m not yelling at people for getting a mortgage — a 15-year fixed rate mortgage and pay it off as fast as you can,” Ramsey continued, telling the caller. However, he went on with another caveat, reiterating that “between us, the shortest path to wealth is without debt.”

Ramsey also reiterated his belief that a 15-year mortgage is the best choice both on Twitter and in several blog posts. He tweeted, “Never buy a house with a 15+ year mortgage” and explained on his blog that there are three main reasons he recommends a 15 year loan, including the possibility of save tens of thousands of dollars in interest. , a faster path to building equity and the ability to become debt-free 15 years earlier.

Why Ramsey’s advice may not be right for you

Although Ramsey thinks a 15-year loan is the best option, the reality is that many borrowers would be better off with a loan that has a longer repayment term. The simple reason is that you can often get a better return on your money by investing it in other things rather than paying off your loan sooner.

This is because mortgages have very low interest rates – usually much lower than what you could earn investing – and interest charges are subsidized by the government for those who detail and are eligible for the interest deduction. mortgages.

So while Ramsey thinks a 15-year mortgage is unequivocally the best choice, homebuyers should do their research carefully before taking his advice.

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