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Ok quoting Dave Ramsey is never a good idea. Coming from the financial advisor world (not sure if you work just in investments or are CFP certified) there's a lot mroe that goes into planning than just trying to pay off debt. At 2.8%, there's plenty of opportunity to earn more than that off investing the additional money. I agree with paying off high interest debt (5.2% or higher in today's market). There's no reason to pay off low interest debt when there's more money to be made out there.
One of the hardest things I have trouble helping clients understand when planning is opportunity of maximizing your savings. It is usually they want to have everything paid off and stick it in a mmkt (which is earning less than the inflation rate in today's mkt) or they want to take on as much debt as they can and let their savings ride in the stock market. Taking either extreme is not a wise decision and really sitting ddown and working out a plan will help them become more financially responsible.
In terms of the 15 vs. 30 yr mortgage, if they paid both of them off in 15 years, the additional interest would be 378,734.89, which would equal a difference of 19089.65 in FV, which in today's dollar at an avg. inflationary indexed rate of 4% (being conservative) is $10,599.81 in today's dollars. So being able to have the flexability of paying $624.23 less each month if needed for future lifestyle changes can be an important option for many people.
Average home price also varies by markets. I live in the midwest. I didn't change the numbers because both of you live in CA. I imagine the disparity would be larger around you, but even some of the higher nw clients I work with around this area, most of the ones purchasing homes more than 300k are doing it in a 5/1 ARM, with having the cash invested in cashlike instruments and pay off the loans when the adjusted rate outpaces the interest they are earning.
Median income here in the Midwest is much lower than CA.
Ultimately, you have to consider multiple things when it comes to your choices. You need to look at your retirement plan and taxes. You should also be looking at estate planning and insurance. You should determine if an insurance policy would be needed in case something would happen to you (LT disability vs. short term, also term vs. whole life, in case you pass).
Sauve, pm me. I'd like to see what type of planning you do. I'm always willing to pass on different perspectives and am always willing to listen to other planners and how they help their clients. It's neat to be able to pick up a few other options for the people I work with on a daily basis.
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