Real estate opinion

[Yax]

Anyone who has a 15 year fixed mortgage or is trying to pay off their home faster, why are you doing it?
The two week payment plan, why do that? What is the benefit in having your home paid off over using that money to invest in mutual funds or some other investments?


I think a 30 year loan would be the best approach during this time when interest rate is so low.

 

[Ameesh]

i diagree, i evaluated a 15 year and 30 year fixed, and decided to get a adjustable and and make more payments on my own so if i was light one month it wasnt a big deal because my obligation was always low.

 

[Ameesh]

ohh i decided on an adjustable 7 year over a 30 year fixed because im only 24 and when im 31 i will be buying my mansion in newport so i wont need my small home any more

 

[Yax]

Originally posted by: Ameesh
i diagree, i evaluated a 15 year and 30 year fixed, and decided to get a adjustable and and make more payments on my own so if i was light one month it wasnt a big deal because my obligation was always low.

I agree with adjustables too, I didn't mention that the 30 years had to be fixed. Just wanted to note that one should get the longest term they can.

 

[Yax]

Originally posted by: Ameesh
ohh i decided on an adjustable 7 year over a 30 year fixed because im only 24 and when im 31 i will be buying my mansion in newport so i wont need my small home any more

do you mean 7/1 Arm?

 

[Maetryx]

It's probably psychological more than mathematical. A person with an extra $100/month due to a 30 year (vs. a 15 year mortgage) probably won't invest the extra money. It's likely they'll spend it on unnecessities and then find themselve paying an extra 15 years and wishing they had done it the other way.

 

[Yax]

Originally posted by: Maetryx
It's probably psychological more than mathematical. A person with an extra $100/month due to a 30 year (vs. a 15 year mortgage) probably won't invest the extra money. It's likely they'll spend it on unnecessities and then find themselve paying an extra 15 years and wishing they had done it the other way.

I thought about that too, my response would be to simply contribute more to the 401K. That way the $100 is deducted pretaxed and can grow much faster in the fund.

 

[faZZter]

You'd probably save more money by paying off your loan quicker than you'd make by putting the extra money in other investments.

Besides, wouldn't you feel more secure if you owned your home? What if you lose your job or something? The sooner you own it the more secure you'd feel.

 

[Yax]

Originally posted by: faZZter
You'd probably save more money by paying off your loan quicker than you'd make by putting the extra money in other investments.

Besides, wouldn't you feel more secure if you owned your home? What if you lose your job or something? The sooner you own it the more secure you'd feel.

Actually, you'd save less money by paying off your loan quicker. If you put your money in a mutual fund, like fidelity health funds, you'd get 10-14% return over 10 years. Put that money in your home and you get 0% return over 10 years. (Note: the equity in your home will rise whether your home is paid off or not).

If you lose your job after 10 years, your bank will not let your refinance your home so you'd have to sell to get your money out. If you had that money in a mutual fund and you lost your job, you'd be able to use the money to make your monthly payment till you find another job. I'd feel more secured with my money in the mutual fund where its liquidable.

By paying your home off in 15 years instead of 30, lets say at 6% interest rate, you're saying you can't invest that money over the next 15 years and make a return greater than 6%. Also, paying principle doesn't result in tax breaks so if you consider the tax break when you make a mortgage payment, the 6% looks more like 3% or less after 15 years of inflation.

I don't know why people don't think about these things, but I guess people take the easiest route eventhough its not the best one.

 

[richardycc]

I went from a 30yr 5/1 arm @ 5.25% apr to a 12yrs 4.5% apr fixed mortgage, my monthly payment went UP from $800 to $1000ish, but I am saving over 100k over the life of the loan.