Monthly principal payments 30 year vs 15 year conventional

[Garvin Yu]

We're looking into conventional mortgages for rental properties. Our business strategy is to buy 2-3 per year, and have them be paid off through rental income in 10-15 years max. Meanwhile we'll rehab and sell as many houses as possible each year to use for down payments and also to pay down the mortgage principals. 

Our goal is to be retired from our current full time jobs in 10-15 years once enough rental properties are paid off to bring in more passive income.

Our question is: If there are no early pay off penalties, can you think if any negatives with using a 30 year fixed at 3.675% and sending in monthly principal payments from rent income to psy down the loan? Unless we're not understanding correctly, this makes more sense than getting a 15 year fixed at 3%, since the earlier payments will be mostly interest without the extra principal payments.  With the 30 year we'll pay less interest overall and monthly as long as we pay additional payments.

Any advice would be greatly appreciated!

[Wayne Brooks]

The majority of your early payments for either loan will be mostly interest, more so with the 30 year.  This is when extra payments make the biggest difference.  No, getting a 30 year and paying extra is Not cheaper than a 15 year fixed.  Both/any mtg.s are constantly reamotized every time yoy make an extra payment.  At the end of the day, your annual yield is exactly whatever your underlying interest rate is.  If the interest rates were the same, paying the same total amount each month, either loan would be paid off at the exact same time.....interest charged each month is purely about the total outstanding principal, at that time.