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Mortgages - down payment size / term - Chapped3rdEye - 02-25-2012 10:15 PM

I found a house I want to buy (Odds of hiding the salam with a girl I get through the door of this place is about 99% - chix will lurrrve it). Costs ~50k. I have ~25k. Currently I could pay $400-500 a month for a mortgage payment and that number probably won't go up or down much for a couple years.

My instinct is to put down like 20k (40%) and get a 10 year loan on the rest. I end up paying 6.5k interest that way.

There's somebody on here who knows the optimal move.

RE: Mortgages - down payment size / term - jariel - 02-26-2012 12:59 AM

Are you buying based off appreciation (bad move)?

What's your holding period?

RE: Mortgages - down payment size / term - Chapped3rdEye - 02-26-2012 05:17 PM

I think the place is actually worth more than they're asking (assessment is >100k). I don't think the local real estate market is due for a boom or anything. Holding period is potentially indefinite.

RE: Mortgages - down payment size / term - Tigre - 02-26-2012 07:37 PM

My instinct is to get the highest possible loan for the longest possible term.

This is a good strategy while we have such low interest rates. I only do that because I would back myself to invest the money at a rate of return that beats the interest I'm paying.

Make sure the loan allows you to make voluntary early payments whenever you choose with no penalty. Then you can pay it back as fast or as slow as you like. Flexibility.

Stay cashed up so you can deal with closing costs, furniture etc and still have a cushion.

You will have a mortgage probably your whole life. Once you've paid off this one, you'll want to upgrade to a better property, buy an investment property or whatever.

Your home mortgage is "good" debt. Low risk, but leveraged so your net worth grows using other people's money. Get used to having it there in the background. Any surplus cash can be directed to other more high impact investments in the meantime.

RE: Mortgages - down payment size / term - kosko - 02-26-2012 09:09 PM

No debt is "good" debt. A home is one of the volatile investments one can make since so many little factors can effect it (and thus you).
Look into why the home is being priced so low, has it been sitting for a long time?

If you are in a slump market understand that home will get cheaper still in time. Rates are favorable now but if you have a considerable amount of cash sitting you can do better things with it investment wise.

If you do take the plunge lock down a flexible deal for as short amount of time as possible, why one wants a 20yr+ monthly bill is beyond me.

Make sure you factor in costs such as taxes, title/transfer costs (if applicable), costs of upkeep, and renos.

What City do you live in? IMO unless you live in places such as DC or NYC, or other Cities that have a large employment base with high demand prices will still drop or be in a comma for quite some time. estimates point to prices being in the dumpster till (at least) 2015-2017 which would be 10 yrs from when the market started to unravel and take a nose-dive.

If prices are cheap and you want in then you should have at least 50% down or just buy with cash. If that is not an option do the smart thing and rent. Owners sitting for a long time are desperate for cash, you can rent for the same if not less then a mortgage with no extra costs on your hands, no upkeep costs either. Plus you can take you 25 large and spread it around in some solid investments that would give you way better returns.