Dave Ramsey says that 97% of people who say they will do this personal finance “hack” don’t actually do it

In a recent interview with Tucker Carlson, Carlson asked finance expert Dave Ramsey to discuss some of the ways in which people fail to live up to the financial promises they make to themselves. Specifically, he addressed one particular financial “hack” that many people say they are going to do — but that virtually no one actually follows through with. 

Here’s what the hack is that so many people end up not doing.

Ramsey says most people don’t make this money move even if they have good intentions

According to Ramsey, the financial hack that many people promise they will do, but then don’t follow through on, involves taking out a 30-year mortgage and paying it off in 15 years. 

See, Ramsey recommends that when you purchase a home, you only take out a 15-year mortgage so you become debt-free sooner and pay less interest over time. However, 30-year mortgages are far more popular than 15-year mortgages, in large part because the payments are obviously much lower since you have double the time to pay down your balance.

Ramsey says people routinely say they are going to take out a 30-year mortgage to keep their payments low so they have more wiggle room in their budget, but they also tell themselves they are just going to make extra payments so they can become debt-free in 15 years. Sadly, Ramsey has indicated that 97% of people who take a 30-year home loan do not end up systematically paying it ahead of schedule. In other words, even though they promise themselves they’ll regularly pay extra to be debt-free in half the time, they simply don’t follow through. 

Should you listen to Ramsey and take out a 15-year loan?

Since Ramsey is really anti-debt, he doesn’t believe that taking out a 30-year loan and trying to pay it off in 15 years is the right move. Instead, he has urged people to take out the 15-year loan in the first place. He thinks this is better because it forces people to make payments. Most people will do everything possible to pay their required mortgage payment, even if that means skipping out on fun spending or perhaps picking up some extra work hours. They usually won’t go to these lengths to make an “extra” payment, even if they believe they would. 

Ramsey is right about that. If you are really committed to being free of your mortgage in 15 years, he’s probably correct that you shouldn’t opt for a 30-year loan instead. However, there is a very real risk that committing to a shorter loan with bigger payments could make it harder for you to cover the bills. This means you take a greater chance of finding yourself in foreclosure if something goes wrong when you have a 15-year loan. You will need to buy a much less expensive house to mitigate this risk, or make very sure you have a larger emergency fund.

It’s also worth asking whether paying off your mortgage in 15 years even makes good financial sense.  You can often get a better ROI by investing in the stock market than paying off a home loan early — especially when you factor in the mortgage interest deduction you can claim if you itemize on your taxes. When you have a 30-year mortgage, you also have a fixed payment that lasts for decades, so paying off the loan effectively gets cheaper over time due to inflation. And, you can refinance at any time if rates decline. 

Since there are benefits to investing instead of early mortgage payoff, your best bet is going to be to talk with a financial advisor to decide what makes sense for you. Your advisor can help you determine if you should opt for a 15-year loan as Ramsey suggests, or if you’re better off with a 30-year loan that you don’t try to pay off early, so you have more money to invest for your future.

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