I'm moving due to a new job, and wanted to get some feedback on how everyone feels about these new interest only mortgages. The only reason Im thinking about doing an interest only loan is that I'm fairly sure I wont be in the same house in 7 years and on a tradition mortgage you end up paying nothing but interest for those years anyway. Also in NJ anything reasonable is $250k+ and even being in the "lucrative" (give me a break) IT field thats stretching it a bit. I really feel like the housing market is overpriced right now, but I have no choice as I refuse to go back to renting (I currently own a condo). Any thoughts?
If you were only paying toward the interest who makes out on the value of the property appreciating in the next few years.It sounds like you would just be paying them to build equity on their property.Kind of like renting.o No:
RivBuilder, The way I understand it, I make out on the appreciation. I technically own the property and when I go to sell it the balance on my loan will be the price I payed to purchase it. So if it goes up $10k in 3 years (possible) I walk away with the extra 10k in my pocket. Unless you know something I dont... (quite possible) James
Yo James... My wife works in Princeton. I seriously suggest you look at owning in Bucks county, PA. The commute can suck, but real estate taxes in PA are 1/3 what NJ is, and car insurance in NJ is a freaking joke. Real estate taxes in NJ alone can cost you upwards of $500 a month (ON TOP of your mortgage!)! LOTS of people live in my area and commute to NYC and Princeton/Cranbury every day. Just a thought.
Variable rate mortgages and balloon mortgages are a thought if you are sure you won't be in the house past 5 years or so.
Your payment for the first 10 years on a 30 year mortgage is mostly interest anyway. So for me, I'll pay the little extra and reduce my prinicipal. Another way to go is a bi-weekly mortgage. It pays off in 22.5 years. You do end up making 26 smaller payments instead of the traditional 12 per year, but things do get paid off quickly. If you don't plan on staying where you are long, just get a 3-year adjustable. It should have a lower initial rate. Points are another thing to watch out for. Generally speaking, it takes 2 years to reap the benefits of each point. Just some numbers to chew on.
Your payment for the first 10 years on a 30 year mortgage is mostly interest anyway. So for me, I'll pay the little extra and reduce my prinicipal. Another way to go is a bi-weekly mortgage. It pays off in 22.5 years. You do end up making 26 smaller payments instead of the traditional 12 per year, but things do get paid off quickly. If you don't plan on staying where you are long, just get a 3-year adjustable. It should have a lower initial rate. Points are another thing to watch out for. Generally speaking, it takes 2 years to reap the benefits of each point. Also, where ever you shop for your mortgage, make sure and ask them for a "Good Faith Estimate". This is a detailed list of all their fees they're charging to give you a loan. These fees can vary greatly from lender to lender. Don't settle for "It'll be about $$$$". Get it in writing, it the law if you ask for it. Just some numbers to chew on.
Your payment for the first 10 years on a 30 year mortgage is mostly interest anyway. So for me, I'll pay the little extra and reduce my prinicipal. Another way to go is a bi-weekly mortgage. It pays off in 22.5 years. You do end up making 26 smaller payments instead of the traditional 12 per year, but things do get paid off quickly. If you don't plan on staying where you are long, just get a 3-year adjustable. It should have a lower initial rate. Points are another thing to watch out for. Generally speaking, it takes 2 years to reap the benefits of each point. Also, where ever you shop for your mortgage, make sure and ask them for a "Good Faith Estimate". This is a detailed list of all their fees they're charging to give you a loan. These fees can vary greatly from lender to lender. Don't settle for "It'll be about $$$$". Get it in writing, it the law if you ask for it. My wife works for the Treasury Department as a Bank Examiner. We've gotten a number of loans over the years and it's worth the effort to shop around. Just some numbers to chew on.
I think you're plan is a great one. So many folks are hung up on fixed mortgages. Greenspan recently commented on the amount of money American's have overspent managing mortgage interest risk. If you are not buying the family homestead to grow old in ,IMO, limit the downside (negative cashflow) while maintaining the upside (capital gain and deductability). Good Luck with your decision!
You are correct when you say the "housing market is overpriced right now", but you're on the Wrong Side, if you're "BUYING" a house!:Smarty: SELLING them is where you SHOULD be!:Smarty: As Phil mentioned, a Bi Weekly payment is the BEST solution for a Mortgage, AS LONG as the Mortgage Company you go with DOESN'T "CHARGE" you for MAKING the "Bi Weekly" PAYMENTS, which could end up COSTING YOU MORE, in the long run, too!:Smarty: I don't know about "22.5" years, though.o No: My own mortgage went From 30 years to "12", when I made BiWeekly!:TU: The KEY is to use the money that you SAVE, from the Interest, and HOW you use it! Instead of BUYING other things (new cars, home improvement, whatever), you should INVEST it, to come out AHEAD!:Smarty:
