Warren Buffett Calls 30-Year Mortgages 'The Best Instrument' But Dave Ramsey Says Smart People Opt For 15-Year Loans – So, Who's Right?

When you're faced with the decision between a 15-year and a 30-year mortgage, you might find yourself caught between two financial heavyweights with very different outlooks: Warren Buffett and Dave Ramsey. Their contrasting advice offers a glimpse into the broader world of personal finance, where the right choice depends as much on your situation as on the experts’ wisdom.

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Warren Buffett, the legendary investor known for turning money into more money, once opted for a 30-year mortgage on a $150,000 seaside property. That might seem surprising for someone with his wealth, but Buffett had a plan. He believed the money saved on monthly payments could be better invested elsewhere – like in Berkshire Hathaway shares, which, as it turns out, was a pretty good idea. Those shares are now worth around $750 million. Buffett saw the 30-year mortgage as "the best instrument in the world" particularly because of its flexibility; if interest rates drop, you can renegotiate. The lower monthly payments also free up cash to invest in potentially higher-yielding opportunities.

On the other side of the spectrum is Dave Ramsey, the financial advisor known for his no-nonsense approach to debt. Ramsey is all about the 15-year fixed-rate mortgage and makes no bones about it. For him, it's the only mortgage worth considering. His reasoning? A shorter mortgage means you're out of debt faster and save a boatload on interest. Ramsey has a straightforward philosophy: if you can't afford a home on a 15-year mortgage, you can't afford the home. He's all about getting people to financial freedom sooner rather than later and a 15-year mortgage is one way to make that happen.

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When a caller asked if a 30-year mortgage made sense, his opinion was clear: "Do what smart people do, Julie. Do what people who win with money do. A 15-year, fixed-rate mortgage is the only home loan I recommend.”

So, who's right? Well, that's where things get personal. A 15-year mortgage typically offers a lower interest rate, which means less interest paid over the life of the loan and faster equity building. It's a great option if you want to be debt-free quicker and don't mind the higher monthly payments. It aligns perfectly with Ramsey's goal of reducing debt and achieving financial independence sooner.

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But a 30-year mortgage has its perks too. With lower monthly payments, you have more flexibility, just like Buffett did when he chose to invest the difference in other ventures. This option might be appealing if your income is variable or if you want to keep some financial wiggle room for other goals.

Which path do you choose? It comes down to what you value more: the security of paying off your home sooner with a 15-year mortgage or the flexibility and investment potential of a 30-year loan. Both strategies have their strengths and neither is universally right or wrong. It's all about what fits your financial goals and personal comfort level. Whether you're drawn to Buffett's investment-focused strategy or Ramsey's debt-free push, the choice is yours – and it's a big one.

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