Based on your personal views of the US economy and where it is headed what would you say is the best option for a mortgage today?
Conventional 30yr at 4%, 15yr at 3%, 5/1 ARM at 2.5%? Or something else?
What are the odds of rates staying flat for the next 5 years? Any advantage of going with 30yrs over 15yrs and enjoying the extra cash each month? I view 30yrs as basically equivalent to renting a bigger place for the same price vs 15yrs is buying a house as an equity builder.
Thoughts?
How long do you plan to stay there? Do you expect to be in a position to pay it off entirely in 5 years?
For the love of god don’t get an ARM. Seriously, you almost gave me an aneurysm.
If you can stomach the extra monthly payment, always go for the 15. If not, do the 30 and enter into one of those accelerated payment programs (or just do it yourself if you have the discipline). Basically you make one extra payment a year and it lowers your term from 30 to about 22 years.
^ Who’s going to supply inventory to the foreclosure market in 5 years if he doesn’t do an ARM?
One piece of advice I was given when getting my loan is get a 30 year loan, but pay it off as if it were a 15 year by making extra payments. That way if you hit a down time you still have the lower monthly payment.
^ I received the same advice and took it the first time I bought a house.
Thread hijack - Did anyone else notice we’re allowed to use bad words again? First we weren’t, then we were, then just a couple months ago we weren’t again and posts were being edited up the wazoo. Now people are cussing up a storm and no one seems to care. I like it. Thanks, mods, for treating us like adults.
My mortgage is a 30 year. And I make weekly payments plus an extra amount on top. The weekly payments do the extra payment a year, but then the additional on top do an extra payment or two a year as well.
How does making weekly or bi-weekly payments affect your payment due? So if my payment due on July 1st and its $1100, if I pay 550 on June 15th would the JUly 1 payment due be only 550? I guess I could find out by trying, I just wanted to see if you know.
^ My dear lord. Did you really pass L2!?
The payment due won’t change, but one will pay way less interest. Making 13 payments a year (52/4 = 13) instead of 12 will knock ~8 years off the life of your mortgage.
Making biweekly or weekly payments helps slow the interest accural.
Of course I know the mechanics of the $$ side I was just curious how it looks in online banking and how it affects your next scheduled monthly payment if you make weekly/biweekly payments.
Looking in my online banking, it only gives me 2 choices. I can either pay A) my full payment amount (with or without additional principal payment) or B) additional principal. It’s not like it gives me a choice to make a partial payment toward the next payment. Does that make sense or this all crazy talk…
My bad bro. Didn’t mean to come down that hard on you.
^ Respect ?
^ Respect! CvM doesn’t cut too deep
I re-financed a 30-year mortgage at 3.75% last year, down from 5.5% on a 30-year for a place purchased in early 2008 (great timing, huh).
One reason I went with the 30-year is I’m not confident that the US will avoid a stretch of higher inflation. And I suppose I’m paying the minimum payments because I don’t figure to be in this place for, oh, another five years or so. The place is probably slightly underwater as is, and I figure I’d be better off investing excess cash in the market than this particular home.
If this sounds like crazy talk, let me know.
if you can afford it, do 15 year
just look at the $$ you will save in interest by going from 30 to 15 years…most likely >$50K savings in interest depending on your loan amount
I like another option that I read somewhere online.
Get a 30yr, but make payments as if its a 15yr (i.e. if 30yr is 1200/mo and 15yr is 1800/mo just put an extra 600 towards the principal each month). The author’s math came out to a payoff schedule of 15yrs and 11mos resulting in $22,000 of extra payment.
Why not pay it normally and set up a sinking fund with Muni’s/Treasuries when rates go back up? Much higher liquidity.
You can do it manually. But Wells Fargo (where my mortgage ended up) allows for it to be done automatically. Just had to call them up and get it set up.
What is the plans on investing excess cash? Used in the sale to pay the rest of the loan balance?