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house buying question...

Lex

Monkey
Dec 6, 2001
594
0
Massachusetts
Lex: I believe your interest is calculated based on the standard 30-yr ammatorization, but you only pay down the interest.
Interesting. I've never heard of that one before. I wouldn't have imagined a lender allowing you to break the link between principle and interest. In a normal 30 year mortgage the percentage of your payment that is interest goes down as you pay down the principle. How do they figure out what your monthly payment should be?
 

dante

Unabomber
Feb 13, 2004
8,807
9
looking for classic NE singletrack
Interesting. I've never heard of that one before. I wouldn't have imagined a lender allowing you to break the link between principle and interest. In a normal 30 year mortgage the percentage of your payment that is interest goes down as you pay down the principle. How do they figure out what your monthly payment should be?
I'd guess that he has a 10-year fixed, interest only loan. THen he may have a traditional 30 year loan tacked onto the end of that? Or they may have scrunched the entire repayment into the following 20 years, so, technically he'll have it payed off at the end of 30 years (but his payments will SKYROCKET at the end of the 10 year intro period).
 

CBJ

year old fart
Mar 19, 2002
12,862
4,159
Copenhagen, Denmark
We chose interest only and have used the rest of the money to renovate the apartment. This is one of the situations where I think it works out well that is of course if you do a good job renovation. So the money you save still goes into the apartment and will even increase as the renovated apartment becomes more desirable. We also saved money by choosing fixed for only 10 years as I don't expect to stay here for that long and hopefully much shorter time.
 

G-Cracker

Monkey
May 2, 2002
528
0
Tucson, beatch!
I'm not really sure I understand how you can have an interest only loan where the interest gets paid off in ten years. If you never pay any principle how is the interest ever going to go down?
I didn't explain it very well, sorry. As far as I understand it, we pay ONLY interest for 10 years and no principle, and after the 10 year mark we pay interest AND principle. Rate is locked in, too. Does that make sense? (Looking at my paperwork right now). According to my payment schedule I make 120 payments at the current amount ($1240), 41 payments at $1135, 198 payments at $1106 and a final payment of $1107 (in September of 2037 LOL). I think what Dante said is correct... the remainder is scrunched into the final 20-years, but according to the above payment schedule, our payments will NOT skyrocket.
 

SPINTECK

Turbo Monkey
Oct 16, 2005
1,370
0
abc
All the more reason to buy. The best thing is to buy in a sh*tty market and sell when it gets hot to move up. The market isn't going to be like this forever, I don't know why everyone thinks the the real estate boom is done. We've had this happen before in the late 80's and of course it rebounded a few years later. Price will rise again therefore you'll build equity over time. It's all a matter of timing. For first time buyers it's a perfect time, they can be choosy and don't have to worry about selling a property. I've been involved in the real estate transactions for the last 12 years and new construction 10 years before that. So I've seen what's happened over the last 20+ years.
How many properties do you own?
 

greenchris

Turbo Monkey
Jun 24, 2005
1,381
0
DA BEARS.
THank you all for the great information...

Bluebug- yeah my SO recently accepted a great promotion at work hence the idea of staying a bit longer. Although I really, really want to move away we are trying to make the smartest decisions. Unless I get drunk and make some quick decisions...

maybe I could just go out Easy Rider style...
 

douglas

Chocolate Milk Doug
May 15, 2002
9,887
6
Shut up and Ride
I didn't explain it very well, sorry. As far as I understand it, we pay ONLY interest for 10 years and no principle, and after the 10 year mark we pay interest AND principle. Rate is locked in, too. Does that make sense? (Looking at my paperwork right now). According to my payment schedule I make 120 payments at the current amount ($1240), 41 payments at $1135, 198 payments at $1106 and a final payment of $1107 (in September of 2037 LOL). I think what Dante said is correct... the remainder is scrunched into the final 20-years, but according to the above payment schedule, our payments will NOT skyrocket.
thats awesome, after paying the bank $148,800 you still owe them the same(full) amount that you borrowed.
 

jimmydean

The Official Meat of Ridemonkey
Sep 10, 2001
40,941
13,135
Portland, OR
One thing I am doing next time I buy a house (next year when the market is done crapping the bed) is a 2 week payment rather than a monthly payment. I get paid every 2 weeks, it would come straight out of my check, and you end up making a full payment (or more if you pay more than the minimum) straight to the principal.

It seems little, but my brother-in-law paid his house off in 10 years and didn't even notice until he had about a year left to pay.
 

SPINTECK

Turbo Monkey
Oct 16, 2005
1,370
0
abc
One thing I am doing next time I buy a house (next year when the market is done crapping the bed) is a 2 week payment rather than a monthly payment. I get paid every 2 weeks, it would come straight out of my check, and you end up making a full payment (or more if you pay more than the minimum) straight to the principal.

It seems little, but my brother-in-law paid his house off in 10 years and didn't even notice until he had about a year left to pay.
I'm doing the same thing simply by paying an extra 100/month on the principle.
 

SPINTECK

Turbo Monkey
Oct 16, 2005
1,370
0
abc
http://www.real-time-rates.com/r/help/extra_payments.asp

it's pretty crazy the numbers you get when plugging that type of stuff in... :shocked:
That's a nice calc, good summary at the bottom of the pages.

paying $100 extra/month per 100g at 7% the calculator (http://www.real-time-rates.com/r/help/extra_payment_calculator.asp) gave the folowing, basically saving 50g and 9.5 years, which I could take another loan out (home equity or mortgage) and use the tax deductable interest to finance a car, business, education or additional property, which I would be pissing away on the same property w/out the additional principle payment.

Term of the loan: 30 Years | Loan amount: $100,000.00 | Interest rate: 7.000%
Starting date of the loan: January, 2008
Monthly mortgage payments: $665.30
Prepayments
Monthly prepayments of $100.00 beginning from January, 2008

Calculation Results
Total interest paid over the life of the loan (no pre-payment): $139,508.90
Total interest paid over the life of the loan (with pre-payment): $89,001.74
Your Savings:
Total interest saved: $50,507.16
9 years and 5 months shorter loan
 

SPINTECK

Turbo Monkey
Oct 16, 2005
1,370
0
abc
I own 2, a primary residence and a vacation rental.
Well, you're better at managing them than me, so make sure you give the kid good advice b/c I'm thinking about cashing out of one of mine and simplifying my life. Like I said, there are times that I envy the young people who rent from me b/c they have freedom and cash in the pocket. Equity and responsibility- signs of my old age, wishing I had cash and no headaches.
 

geargrrl

Turbo Monkey
May 2, 2002
2,379
1
pnw -dry side
One thing I am doing next time I buy a house (next year when the market is done crapping the bed) is a 2 week payment rather than a monthly payment. I get paid every 2 weeks, it would come straight out of my check, and you end up making a full payment (or more if you pay more than the minimum) straight to the principal.

It seems little, but my brother-in-law paid his house off in 10 years and didn't even notice until he had about a year left to pay.
We've got 11 months left on a 15 year. Dang, that went fast.
 

G-Cracker

Monkey
May 2, 2002
528
0
Tucson, beatch!
true, but I'd bet they'll end up paying well over triple
Well, yeah we would if we stayed in it that long. It's not a loan for someone wanting to keep that home and we are taking a chance that the house will not increase in value by the time we DO sell. But I'm betting it will. This is our "starter" house and when we upgrade to a larger home, you can bet that I'll be getting a traditional loan.

I know many of you still think this was probably a stupid move, but for us right now, this works. On top of that we ARE paying one extra payment per year, which will also help us out.
 

narlus

Eastcoast Softcore
Staff member
Nov 7, 2001
24,658
63
behind the viewfinder
housing market still declining in the northeast:
http://www.boston.com/business/personalfinance/articles/2008/01/09/forecasters_no_quick_end_to_housing_ills/

experts agree:
Forecasters once saw housing prices beginning to recover by the end of 2006, the middle of 2007, then the end of 2007, and the middle of 2008. The latest pushback in projections follows the release of federal data last week showing unemployment climbed to 5 percent in December - a sign at the very least that the economy won't help the housing market.

Mark Zandi, chief economist for Moody's Economy.com, said in a December report that prices in the Boston area would decline into the first quarter of 2009, dropping 10 percent from the market's peak in the fourth quarter of 2005. Zandi said the decline could be steeper if unemployment numbers keep climbing.

Global Insight, a Waltham company that crunches economic data, projected last week that housing prices would keep sliding well into 2009.

Daniel Mudd, chief executive of mortgage giant Fannie Mae, said in a speech yesterday that prices likely would not begin to recover until 2010.

And Robert Shiller, a Yale economist famous for forecasting the burst of the dot-com bubble, has warned this slide could last five years or more.
but wait, there's a naysayer!
There are contrarians.

The chief economist for the National Association of Realtors said the real estate market already has hit bottom. The group projects prices to hold steady in 2008, and sales to increase slightly, before the market roars back in 2009.
let's see how their track record is:
The realtors association last year predicted that 2006 was the bottom for the real estate market, and that sales volume and prices both would rise in 2007. In fact, the trade group overestimated sales by 700,000 units, and prices dropped 2 percent.
 

BurlyShirley

Rex Grossman Will Rise Again
Jul 4, 2002
19,180
17
TN
...I dont have much to add in terms of which kinds of loans and the direction of the market, but, buying a house, even a fairly crappy one has been one of the best experiences ever. It's alot of work, but rewarding in a way that Ive not found with anything else. There are tons of cheap places on the market, at least around here, because all the people with bad loans getting foreclosed on. Lots of my friends are able to afford much better homes because of these circumstances, than they would if the market were still "booming" so it's not all bad at least in my experience. Also, my brother bought a very good sized condo, probably 1500 sq. feet or more, ground level north of wrigleyville, not a wonderful neighborhood but still nice and in the city for less than 300K. Deals are there, but you might have to do dig and you might have to do some work to get the place as nice as you want.
 

Brian HCM#1

MMMMMMMMM BEER!!!!!!!!!!
Sep 7, 2001
32,119
378
Bay Area, California
Well, you're better at managing them than me, so make sure you give the kid good advice b/c I'm thinking about cashing out of one of mine and simplifying my life. Like I said, there are times that I envy the young people who rent from me b/c they have freedom and cash in the pocket. Equity and responsibility- signs of my old age, wishing I had cash and no headaches.
Actually I'd love to sell the vacation rental, wife says no way. It's in a great location though, Lake Tahoe.
 

Toshi

Harbinger of Doom
Oct 23, 2001
38,032
7,550
bump for a perspective from a year ago (and because i'm mulling over the idea of buying a condo on long island this upcoming year). i still qualify for no-PMI, no money down loans at good rates from reputable banks (BoA), the market's down significantly, i'll be there at least 4 years, maybe 5, and rates will likely be really low in 6 months given what the fed did today.

3x annual income's the rule, no?
 

greenchris

Turbo Monkey
Jun 24, 2005
1,381
0
DA BEARS.
thanks for the bump. lots of good info I need to re-read. we never bought but now that rates are continuing to go down I'm thinking more and more to just buy a place this summer rather then re-sign my lease...