30 vs 15 and paying early vs saving for rental property

[Travis Provin]

I’m 31 and will be buying my first house in the next 6 months. Since the interest rate environment has changed dramatically over the last 6 months I’m torn with what to do.

I am hoping to be able to house hack to help with the mortgage. In the long run I’d like to purchase a rental property to diversify my investment portfolio. Right now I'm planning to purchase a $375,000 home with 20% down ($75,000)

The three options I am kicking around are:

1. Take out a 15 year mortgage at 6.2% and pay it off early. This leaves me with net income of $1,000 after maxing all retirement accounts and paying all expenses (maybe more if house hacking is an option). Putting an extra $1,000 towards the mortgage means paying it off in 9 years. Once the primary home is paid off  I would be able to save the mortgage plus the extra $1,000 for a down payment on a rental. This is the option I am leaning towards as it means a paid off primary home and then quickly saving for a rental. The downside is that it means not obtaining a rental for about 10 years but having plenty of cash to purchase and get it up and running once I do purchase it.

2. Take out a 15 year mortgage at 6.2% and do not pay it early. This is the middle ground approach. It means being able to save $1,000 per month for a rental down payment and obtaining a rental in 5 years. I would then put the $1,000 towards paying off the primary mortgage.

3. Take out a 30 year mortgage at 6.8%. The longer loan term leaves me with an extra $500 per month which means saving $1,500 per month for a rental down payment. It would mean obtaining a rental in about three years but it would also mean paying the most in interest and having a mortgage on the primary residence and the rental.