Tim McIntyre

Graph A

It is a common misconception among borrowers that a 15-year mortgage is a better use of their money than a 30-year mortgage, but for the disciplined borrower, that is not necessarily true. Take the example illustrated in Graph A.

At the end of 15 years (180 months), the borrower with the 15-year mortgage, will have paid off his mortgage in full. At the end of the same period, however, the borrower with the 30-year mortgage will still owe $217,677. On the surface, it appears that the 15-year borrower is in a much better financial position.

But let's look a little closer. The 15-year borrower has been paying $676 more every month than the 30-year borrower. If the 30-year borrower were to invest that same $676 and, over the long term, earn an average of 10% interest, at the end of 15 years (180 months) that investment would be worth $280,207. Taking this into account, the 30-year borrower, who still owes $217, 677, actually comes out $62,529 ahead of the 15-year borrower.

Graph B

Now, let's look at the second 15 years to see the true opportunity cost of the 15-year mortgage. Let us assume that the 15-year borrower begins investing the entire $2,572 he has been spending on his mortgage payment and the 30-year borrower continues making his mortgage payment and investing $676.06 a month. In Graph B you can see that by the time the 30-year borrower pays off his mortgage his investment account will be valued at $1,528,225 while the 15-year borrower's account will be valued at $1,066,130. Due to the 15 years of missed investment opportunity the 15-year borrower ends up missing out on a potential $462,995 in growth.

This article was written by one of the Mortgage Bankers I work with, Robert Reilley of Vision Mortgage. You can visit Robert's website by clicking here.

I know many people have different opinions regarding paying off a mortgage as quickly as you can afford, or using the above strategy. I wanted to share with you that I believe that the above strategy is a real option, and it's something that makes sense.

Everybody's situation is different, and everyone feels differently about the mortgage interest deduction. It's important, though, to consider all of the options you have available when making a decision about your financial future. I'm always available to talk to you about your situation, and your options. Right now, 10% would be a really great return, and returns fluctuate, so the above information is just an example of what is possible. For a complete discussion, give me a call.

Thank you to everyone who participated in my contest.

Congratulations to the winners - Kevin and Sue Hartman! $150 to Ship's Cafe in Catonsville, MD - Enjoy!

You may or may not know that I manage my own rental properties. Yesterday I had an altercation that is a lesson in doing things the right way - and in following your gut instincts.

I received a phone call from a prospective tenant about one of my rentals. The first things I tell my propsects when they call are:

• I perform background checks, including criminal and credit
• I require references
• There's no pets / no smoking on the property

This particular tenant tells me he doesn't want to spend money on an application fee. He says his credit is a problem, but he has references and letters of recommendation from his attorney (who is also his employer) and his current landlord.

I decided to meet with him against my better judgment because I believe in considering a person's entire circumstance. I could be willing to overlook the bad credit and give the guy another chance.

When I met him at the apartment, I immediately had a bad feeling. His head was shaved, he holes in his jeans, his hat was on backwards, and he had a pathetic limp handshake.

We went into the apartment together and immediately he began to pick the place apart, telling me it needed painting (it didn't), and that he couldn't live with the 1970's paneling, and that it was dirty (it wasn't). He then began asking me questions as though he was interviewing me, about what I do for a living and how long I've been a landlord.

I answered his questions, but said it didn't really matter because it sounded like the place just wasn't for him. He replied that he would consider it - he was also looking at two others.

As we were walking out of the apartment, I had a thought that since he didn't want his credit pulled, he may have a criminal record. I asked him and he said, "No, why do you ask?" I told him that it was because he didn't want his credit report pulled for privacy reasons. If he has a criminal record, it may be cause for me not to rent to him. When he asked me what that meant, I explained that if his record was, for example, for stealing a car, I may be willing to consider the circumstances of the crime. However, if the crime was more serious, such as being on the sex offenders list, that's a completely different matter.

His reply: "Well then you wouldn't rent to me." He admitted that he was on that registry. Mincing no words, I said "You just told me you didn't have a criminal record. If that's true, then how are you on that list?"

He answered he was on that list for having sex with a 15 year old prostitute.

I told him that I would certainly consider that a criminal offense. (wouldn't you?)

When I told him that I would absolutely not be able to lease to him, he launched into a rant, screaming "Let me tell you something: it's people like you, a f-in Republican, that are going to end up getting screwed!" He didn't listen when I told him it had nothing to do with my political affiliation, which was none of his business, and he continued, "If people like me aren't able to get a job or find a place to stay, they have to resort to stealing." He said that he might have to resort to ripping people like me off.

(What? I went there, against my better judgment, to give him a chance.)

At that point he was pointing in my face, and I just walked to my car to avoid having to physically defend myself. I told him to get off my property and go back where he came from.

What's important about this experience? Two things:

1. When you have a process for making decisions, stick to it.
2. It is now very evident to me that the value a neighborhood has in terms of what homes are selling for is just as important as the value of a neighborhood in terms of the people that are living there.

After the incident, I went on the website, http://dpscs.md.gov/onlineservs/socem/default.shtml, and there he was - a Sexually Violent Offender. Much to my astonishment, there were many, many other offenders living right there in our community. That's their right, although I may not like it, or want to tolerate it.

Check the site and tell me what you think - are you surprised by how many registered sex offenders are living in your neighborhood?