Disagreement Between Husband and Wife on Loan Length

[Brooks Rembert]

My wife and I are under contract to purchase our first "on purpose" rental property. We have a rental property in Northern Virginia, but that was due to a transfer and we chose not to sell in 2010 when things were still a little rocky in the market.

Fast forward to today and we're ready to fire up an honest to goodness real estate business, but we're running into a bit of a disagreement on whether we should go with a 15 or 30 mortgage.

I'm all for the cash flow and using extra money to pay down principle more quickly, yet have a buffer when things arise. She simply wants to get it paid off more quickly, which I totally get also.

We are getting a good price, so the positive cash flow will either be approximately $500 vs. $300 per month.

Maybe the compromise is to go with a 20 year...I'm not sure. Has anyone had this discussion with their spouse/partner and what was the solution?

[Christopher Gilbert]

@Brooks Rembert 

We started off picking up rental properties as a hedge for retirement and our initial goal was to pay them off as quick as possible to start replacing our income.  We opted to do 30 year notes figuring that we can always pay at a 15 year rate if we wanted to or if times got tough could drop it to the 30 year payment.

After we started to get a ton of appreciation in the properties over the past few years we tried to refinance to pull some of it out and were not able to because we had too many notes.  Long story short we have several hundred thousand in equity in rental properties and cannot do a thing with it unless we sell them.  The deals today are nowhere near as good as they were when I bought the properties so it does not make much sense doing rollover's into a worse investment.

In hindsight I have turned into a fan of having as many properties as possible with as much 30 year debt as possible.  You never know what financing options will be available in the future but everyone pretty much agrees that rates are only going to go up.  Cash in hand is always better than equity tied up in a property.  With cash you always have options to do whatever you want in the future, pay off your current houses or buy more.