Try a 50-year mortgage...
Need to keep house payments low?
- Thread starter N8 v2.0
- Start date
why bother ? you ar just paying almost nothing but interest on the 40 year , if your going to do 50 you might as well just do an interest only loan
What's a mortgage?
This is the latest newsletter from my mortgage guy:
Read it and weep...
The BLACK MARKET Letter
Fed to pause in their tightening but . . .
The Fed has started to indicate that after their next meeting they may pause and re-assess their strategy before continuing to raise interest rates. The big caveat here is that this does not necessarily mean that mortgage rates will remain constant and/or start going down. As we have seen during the last three years, the Fed controls short-term rates, but does not control long-term rates. Long-term rates are a function of perceived inflation. If the economy does not level off, and more importantly, if inflation continues to pick up, mortgage rates may continue to move up. If the economy and inflation start moving down, then mortgage rates may decline. If the economy and inflation accelerate over the next six months and the Fed has not been raising interest rates, then the markets will feel that the Fed is getting behind in controlling inflation, and they will start demanding a higher interest rate premium for longer term securities. Again, as I have said many times before, the ultimate determinate of rates will be the perceived strength or weakness of the economy and inflation.
RONS 4 FINANCIAL PRIORITIES
I will now discuss each briefly and how it is relevant to your refy.
1) Basic emergency fund -- $2,000-$4,000 in a savings account. Roof leaks, brakes go out, etc. You dont have to use a credit card. If we do a refy, you will get your escrow balance back from the old lender 2-3 weeks after closing (usually $1,000-$3,000), plus you will skip one months mortgage payment, and this money can then go towards your emergency fund, if you dont already have one.
2) No non-mortgage debt -- Mortgage debt is tax deductible and is based on an appreciating asset (your home). This is unlike a car loan, which is not tax deductible, and your car is a depreciating asset. As I said last month, with the appreciating value of your house, you should have NO non-mortgage debt. The big temptation for many of my clients (especially those with great credit scores) is to have a car loan because the rate is so low 1.7% or even 0%. It makes more sense to roll this car debt into a tax deductible mortgage and invest the savings.
3) I want all of my clients to work towards having one year of their combined salary or net income in non-retirement investments (i.e. mutual funds). -- The reason I want non-retirement investments is that I assume that my clients already have a 401K or SEP IRA at work, which they are contributing to. That is important because it is pre-tax money and is often matched by their employer. The problem I see with many of my clients is that their 401K or SEP IRA is the extent of their investments. What I want my clients to do, in addition to their 401K or SEP IRA, is to take the same amount they are currently paying on bad debt (i.e. car payments, etc.) and put that money into three good long-term mutual funds which, hopefully, will go up 8-10% in the long-term. If they save $450 a month, in 10 years that could be worth about $120,000!! All by making the exact same payment that they were previously making on their bad debt!
4) The final priority is to pay down your mortgage balance -- But you should not even think about this until the other three priorities are met, and then it becomes a function of your over-all diversification and the relative interest rate on your mortgage vs. your investment return.
Read it and weep...
The BLACK MARKET Letter
Fed to pause in their tightening but . . .
The Fed has started to indicate that after their next meeting they may pause and re-assess their strategy before continuing to raise interest rates. The big caveat here is that this does not necessarily mean that mortgage rates will remain constant and/or start going down. As we have seen during the last three years, the Fed controls short-term rates, but does not control long-term rates. Long-term rates are a function of perceived inflation. If the economy does not level off, and more importantly, if inflation continues to pick up, mortgage rates may continue to move up. If the economy and inflation start moving down, then mortgage rates may decline. If the economy and inflation accelerate over the next six months and the Fed has not been raising interest rates, then the markets will feel that the Fed is getting behind in controlling inflation, and they will start demanding a higher interest rate premium for longer term securities. Again, as I have said many times before, the ultimate determinate of rates will be the perceived strength or weakness of the economy and inflation.
RONS 4 FINANCIAL PRIORITIES
I will now discuss each briefly and how it is relevant to your refy.
1) Basic emergency fund -- $2,000-$4,000 in a savings account. Roof leaks, brakes go out, etc. You dont have to use a credit card. If we do a refy, you will get your escrow balance back from the old lender 2-3 weeks after closing (usually $1,000-$3,000), plus you will skip one months mortgage payment, and this money can then go towards your emergency fund, if you dont already have one.
2) No non-mortgage debt -- Mortgage debt is tax deductible and is based on an appreciating asset (your home). This is unlike a car loan, which is not tax deductible, and your car is a depreciating asset. As I said last month, with the appreciating value of your house, you should have NO non-mortgage debt. The big temptation for many of my clients (especially those with great credit scores) is to have a car loan because the rate is so low 1.7% or even 0%. It makes more sense to roll this car debt into a tax deductible mortgage and invest the savings.
3) I want all of my clients to work towards having one year of their combined salary or net income in non-retirement investments (i.e. mutual funds). -- The reason I want non-retirement investments is that I assume that my clients already have a 401K or SEP IRA at work, which they are contributing to. That is important because it is pre-tax money and is often matched by their employer. The problem I see with many of my clients is that their 401K or SEP IRA is the extent of their investments. What I want my clients to do, in addition to their 401K or SEP IRA, is to take the same amount they are currently paying on bad debt (i.e. car payments, etc.) and put that money into three good long-term mutual funds which, hopefully, will go up 8-10% in the long-term. If they save $450 a month, in 10 years that could be worth about $120,000!! All by making the exact same payment that they were previously making on their bad debt!
4) The final priority is to pay down your mortgage balance -- But you should not even think about this until the other three priorities are met, and then it becomes a function of your over-all diversification and the relative interest rate on your mortgage vs. your investment return.