‘An absolute bloodbath’: Dave Ramsey told his viewers never to buy a home on more than a 15-year mortgage — and he was roasted on social media for it. But does Ramsey have a point?

Doing the math on American mortgages

Checking up on the figures in the video, the math on mortgages more or less works out. According to Zillow, the current average home price in the U.S. is $367,711. Assuming a mortgage rate of 7.04% — the current national average — and a standard 20% down payment, your monthly mortgage payment would be $2,651 on a 15-year loan, according to Bankrate’s mortgage calculator. A down payment that’s smaller than 20%, or $73,542, would net out to monthly payments around $3000 per month.

In terms of income, the figures for what makes a high-income individual vary widely by state, but across the board, an income of $335,891 per year puts you in the top 5% in this country. The @FinancialPhysics video also correctly reports the real median household income in the U.S. — $80,610 as of 2023, according to the Federal Reserve Bank of St. Louis — which is well below the income levels for 15-year mortgages that we detailed above.

In terms of the cheapest states to buy a house, West Virginia tops the list from Rocket Homes, with a median selling price of $208,968 in 2024.

So while the video from @FinancialPhysics may not be perfectly accurate, it paints a fairly clear picture of the state of home buying in the U.S. today — a place where old-fashioned advice on finances may no longer be relevant.

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Ramsey’s take on mortgages

Ramsey warns his followers who want to get ahead with their finances that opting for a 30-year mortgage can see you flushing money down the drain. The longer your mortgage term, the more you pay in interest, which means it takes longer to pay down the principal of your loan.

While Ramsey’s advice is perfectly sensible — a shorter loan means less spent in interest — it’s just not practical for many potential homebuyers who are already struggling with inflation and depressed wages.

With the median price of a home having increased 220% in the last thirty years — from $130,000 in 1995 to $416,900 today — it’s no surprise that Ramsey fans feel gaslit by his advice and are making jokes about his baby boomer mentality.

The social media uproar

With @FinancialPhysics captioning their video with the phrase “Boomerism linked to dementia” — and others on X leaving comments ranging from “Yeah, I’ve just accepted I’m never owning a home” to “I was happier in my blissful ignorance” — commenters had plenty to say about the realities of affording a mortgage in the U.S. today.

The person behind the @FinancialPhysics account further stoked the flames with comments that the new reality of homeownership has been destructive to birth rates and overall quality of life, and that many of America’s most affordable homes have been bought up by investors specifically to “destroy American birth rates.”

However, some commenters came out in support of Ramsey, pointing out that first-time homebuyers are probably not aiming for the median-value homes in the market.

“I feel that this data is being misrepresented by using average house prices rather than median house prices,” said one. “Came here to point this out and add that a typical first-time home buyer should not be buying a house that is anywhere near the average or median price,” said another.

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The verdict on 15-year mortgages

According to Investopedia, a 15-year mortgage is a major advantage to those who can afford it, as it lowers the overall cost of the loan. But buyers who cannot comfortably afford the higher monthly payments risk defaulting on their loan.

While the total interest you'd pay for a 15-year mortgage will likely be half of what you’d pay for a 30-year mortgage — since you're borrowing the money for half as long — it’s critical to have a 360 degree view of the true cost of a 15-year mortgage. Not only do you have a higher monthly bill, but you should also consider your insurance, maintenance fund and any additional loan or homeownership fees as part of the true cost of your mortgage.

However, a 15-year mortgage has the benefit of lower fees for the loan. Government sponsored lenders such as Fannie Mae often charge loan-level price adjustments, and according to Investopedia, these fees often apply only to 30-year mortgages. It’s also worth noting that these fees are usually for those with lower credit scores, or those who make a small down payment.

Finally, future homeowners considering a 15-year mortgage should consider their potential earning capacity in the future. While you can save substantially with a shorter loan term, the higher monthly payment may prevent borrowers from building up savings for retirement or putting money away for a child’s college tuition.

When considering the true cost of your mortgage, you should also calculate the potential value of investments in your 401(k), which are compounded by your employer contribution. You can also consider how much any potential investments in stocks and bonds would appreciate over the 15-year term.

No matter how you choose to finance your home purchase, it can be well worth your time to speak to a financial advisor who can help you map out these future scenarios and make the most informed decision possible about your mortgage.