[QUOTE]Originally posted by erik
under-rated,

You would do fixed, interest only on a non-investment purchase of a home?

 

Hmm, I guess I didn't do enough homework on this. So what under-rated is saying is we have these options:

1. ARM (interest only or not)

2. 15/30 fixed (interest only option for the 1st few years)

3. 15/30 fixed (traditional)

 

^^ Rich, another important factor, loan/terms is to make sure there's no pre-payment penalty. Other than this, what you qualify for is what's available. You mentioned your wife was a broker. Brokers, most of the time have 100 different lenders, you have to shop rates, like a finance on a vehicle. I got my lenders lined up like cash cows. Like I said you need a finance, and you can't get the desired rate let me know, I'll get you approved. Interest only, fixed 30 years, the longer the duration, the lower the monthly. Security is where it's at, I like to know that my lake view house in million dollar neighborhood is comfortably secured for 30 years. I don't have to worry about it. Lemme know

 

I refied (twice) last year. But if you look around you can find places that offer 20yr mortgages. They are becoming more popular. They generally offer a higher interest rate than a fifteen but lower than a thirty. It was perfect for me because I got a 5% rate for 20 yrs and shortened then term but I could not quite afford the payment on a fifteen. Saves a ton of interest over the course of the loan when compared to the thirty, but the payment is less steep than the fifteen. Best of both worlds.

 

We (the company my wife and I own) offer "ZERO CLOSING COST" refinancing.... which is where your interest rate is usually .25% worse than the best rate, but that pays us back enough "yeild spread" to pay all of your closing costs.

A typical refinance for a $250k house would cost about $3k in closing costs (title insurance, recording the deed, appraisal, etc......).... the monthly savings you would get varies, but 4.75% vs 5.0% on a 250k loan is $40.00 per month.... $3000/40= 75 months until the "closing costs" loan is better than the "zero closing costs" loan......plus if you move in 1 year, the "traditional" refinance way would have you in the hole by some amount.....

Fixed vs adjustable - depends on your situtation... you can get (don't quote me 100%) 3% mortgages on a 3-5 year ARM...... if you know you are most likely moving in 3-4 years, take advantage of the low low interest and actually pay the loan down..... if you know for sure you aren't moving ever then get a fixed......

15 year mortgages offer lower interest rates, but make sure if your job situation changes that you can still afford it easily.... you can always pay extra on almost any mortgage (there are actually prepayment clauses in some mortgages) and you will be knocking down the principal much quicker.

We have written a fair amount of "no closing cost" refinances for people.... most people don't beleive it is true until we actually show them..... you can refinance every year if you want by doing this and it won't cost you a dime and won't add a dime to your loan.....

 

$250k @ 360 months (30 years) @ 6% (lets just say that is your current interest rate) = $1,498.88 / mo

refinance - you paid closing costs
$250k @ 360 months (30 years) @ 5.00% and you pay $3000 in closing costs, etc... = $1,342.05/ mo (but you also out of pocket $3,000 or you tacted it onto your loan balance)... so you would save $ 156.83 per month.

refinance - zero closing costs
$250k @ 360 months (30 years) @ 5.20% and you pay ZERO in closing costs, etc... = $1,380.51/ mo.
Now you saved $118.37 per month, but have zero out of pocket.....

You move 2 years later....or interest rates get even better so you want to refinance again........

After 2 years @ 5% you have a balance due of $242,434.47 and you have paid $ 32,220 in payments plus $3k out of pocket to refiance

After 2 years @ 5.25% you have a balance due of $242,760.15 and you paid $33,132.24 in payments, and ZERO in closing costs.

So, after 2 years, you would be ~$1762.08 smarter by chosing the slightly higher interest rate and not paying closing costs......

 

It's too simple to complicate. What you qualify for is what you're limited to choose from. Figures mean nothing until they are exact. The longer the life of the loan the lower your monthly payment. 15 and 20 year mortgages are fine yeah, but why not take advantage of a 30 year plan if the interest is low. Don't let people complicate a simple matter. You want the lowest rate, fixed for as long as possible. Again, figures mean nothing until they are exact. Why pay principle and interest if it's only going to be a rental property anyways. Until you have exact figures, and until you plan your monthly budget, then calculate where you want to be with your mortgage. Lowest rate for the longest duration.

 

reply about just paying interest, or stretching loans to 30 years........

too many variables.... if the market can get you 30% return on your investment, sure... get the longest mortgage at the lowest interest rate possible and never pay it off....... but... as we all know, the stock market, etc... is not a guaranteed thing..... I am paying off my rental houses instead of investing in the market..... whether that is smart or dumb, I know for sure that I won't be losing $...

some people will never pay off their home and others will try to pay off their mortgage as quickly as possible.... I take the less risky (and guaranteed approach).... if I pay off all of my rental houses I can retire......... or i could gamble on the market... get big loans on my rental houses and have the market suck ass and i would then need to work forever.......

a friend of mine gave me a book about "never pay off your mortgage"... i thought it was stupid since it is too risky..... now he is trying to pay off his house in 7 years instead of dumping all of his extra $ into the market.....the market is scary... could get 30% return or could lose 30%...

 

Stocks and real estate two seperate investment vehicles. Exactly, Rich said he's already made a 20% return in 4 months. I've experienced this also buying in distress sale sitautions, "million dollar neighborhoods" and being able to rent these properties and cover the mortgage being that they are interest only loans. They will be appreciating for 30 years, by this time they'll be near unaffordable.

I don't know Rich's financial situation, if he can afford P&I and the rent not cover the mortgage, well again I don't know his financial status. I prefer interest only, he'll have the appreciation sounds like he's in a prime location. Interest only will cover that estate for 30 years. Location is the key, sounds like he was wise enough to buy location.

I don't touch regressed property, and if so I at least make sure the type of financing I secure will generate positive cashflow. That's it. He has to qualify first. No need to argue, read what I suggested slowly. I've never lost money. You'll lose big if you cannot afford the high monthly. Regressed areas have never been good investments unless they generate income.

 

[QUOTE]Originally posted by under-rated