BLK03SVT10TH said:
there is no doubt the 15 year is hard to do. the key here is income. what do you bring home. i can tell you one thing if you are trying to make a house payment on 40 or 50 percent of your take home pay it just will not work.
15-year fixed vs 30 year fixed for $80,000 mortgage.
- Thread starter NeedaCobra
- Start date
there is no doubt the 15 year is hard to do. the key here is income. what do you bring home. i can tell you one thing if you are trying to make a house payment on 40 or 50 percent of your take home pay it just will not work.
80,000$?! now thats a deal. Here in Salinas if you want a nice new home it goes for about 600k-800K its freakin ridiculous you have to make like 8+ grand a month to survive if you live by yourslef! Apartments range from the 700$(crappy area)-1200$(nice apartment)
Don't do the 15 yr. With interest rates still relatively low, get the 30 yr fixed. Don't pay it off early. Why would you do that to only earn 5 - 6%? Pay the mortgage, then put the extra money into a MF to earn twice as much. At only 23 yrs old, you should be looking at investments which earn more than 5-6%
I didn't read every post, so this may have already been said, but I was told that a good trick to reduce your overall time paying your mortgage is to add an extra payment a year, and then divide that cost over the other twelve. Basically take whatever you are paying per month, divide it by 12 and pay that extra ammount each month. It won't be a big increase, but will eventually help pay down the mortgage quite a bit quicker.
NB99COBRA said:
Another little trick is to pay your monthly payment as soon as you recieve it, don't wait for the due date printed on the bill. Since interest is compounded daily, you can knock quite a bit of interest off your final payoff amount over time.
YesterdayAgain
Banned
I would do the 15. I'm 23 and knowing my house will be payed off in 8.5 years is nice.
Euphoric One said:
I am 25 and knowing my house will be paid off in 29.5 years is nice....wait....
I just recently bought a house. A small one for 60k. Payment is 575 w/ insurance and taxes on a 30 year note. Yes money is tight w/ the wife not working(just started working again this week). I say go with the 30 year note and pay extra whenever you can. That's what I am doing. I pay an even 600 monthly and in less than a year I have knocked off 3 payments by paying that much extra so far. I can always go back and refinance or pay off sooner by making extra payments. Don't put yourself in a bind by doing the 15 year note. You can still pay it off in 15 but without the stress of worrying if you can make that months house payment, car payment, utilities, gas, car insurance and food on the table every night.
BTW- I was 21 when I got the house and only plan on living there a short while, until I can afford more. I am doing upgrades to make the house more valuable though so I can either sell it or rent it for more than what I paid. House was a foreclosure so that's why I was able to get it for so cheap. Neighbors paid around 85k for about the same thing. The prices on the houses when they bought it were at 80k now it has gone up to 100k. So Im pretty sure if I take care of the house and keep it looking good I can make a decent profit If I decide to sell outright.
BTW- I was 21 when I got the house and only plan on living there a short while, until I can afford more. I am doing upgrades to make the house more valuable though so I can either sell it or rent it for more than what I paid. House was a foreclosure so that's why I was able to get it for so cheap. Neighbors paid around 85k for about the same thing. The prices on the houses when they bought it were at 80k now it has gone up to 100k. So Im pretty sure if I take care of the house and keep it looking good I can make a decent profit If I decide to sell outright.
First off, **** all of you for being able to buy a home for under $100k - you're lucky as shit to find anything nice under $250k here.
Second, skip the 15 year mortgage because this is your first house. The average holding period for a home is 7 years. The likelihood that you hold to maturity is very slim. Think about it like this, the same house that suits you at 23, probably isn't the same house you need at 38 with a wife and kids. Also, do you have the money for the downpayment?? If not and you aren't using a Government backed loan, you are going to have to pay PMI (Private Mortgage Insurance). Be sure to add up ALL the potential costs before you dive into a larger payment.
Go with the 30 year loan and make an extra payment once a year or every six months if you'd like.
Second, skip the 15 year mortgage because this is your first house. The average holding period for a home is 7 years. The likelihood that you hold to maturity is very slim. Think about it like this, the same house that suits you at 23, probably isn't the same house you need at 38 with a wife and kids. Also, do you have the money for the downpayment?? If not and you aren't using a Government backed loan, you are going to have to pay PMI (Private Mortgage Insurance). Be sure to add up ALL the potential costs before you dive into a larger payment.
Go with the 30 year loan and make an extra payment once a year or every six months if you'd like.
YesterdayAgain
Banned
Also solid advice depending on your situation. :thumbsup:BreBar21 said:
Euphoric One said:
Yeah, but you are only earning 6%! Wouldn't you want to earn 10% AND add 8.5 years of compounding?
Why does everyone work so hard to pay off a low interest loan early? Paying off your motgage early is a poor rate of return.
Guys, at these low interest rates, a 30 year fixed is a much better deal.
YesterdayAgain
Banned
99cobradave said:
I would have to crunch the numbers a bit more to really see your point, but the goal is to have one less $xxx or $xxxx bill per month.
EDIT: I still think a 15 is smarter because you will pay a TON less interest over 15 years than 30.
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This is starting to remind me of the Office episode where Micheal buys his condo....
Euphoric One said:
Nope. Do the math.
Given: $80k house. Interest at 6.5% for 15 yr and 30 yr fixed.
You: 15 yr loan. Payment at about $697/month.
Me: 30 yr loan. Payment at about $506/month. But I take the extra $190/month and put it in a Roth IRA, returning 10%.
After 15 years, you have a house which is payed off worth $80k. $0 in liquid assets.
After 15 years, I have $58k ($22k in equity) still left to pay on my house, but I have $80k (tax free! if Roth) in liquid assets.
We are both 37 years old. Now that $80 will really start to grow (it'll be worth over $1M when I retire w/o adding another cent at 10% interest), but you have to save three times as much just to catch up.
30 year is the better deal.
99cobradave said:
by mortgaging your future and investing other peoples money you are playing the real life game of risk. i know some people who have escaped this risk so far and i also know people that have lost everything.
as for me i will get out of debt(yes including the house) and start puttin 1k+ cash every month away into savings and investments to build wealth with my money! the quicker one can pay off the house the faster one can start making real money!
99cobradave said:
investing borrowed money is never the better deal!
if it is so easy how much money do you have free and clear?
YesterdayAgain
Banned
99cobradave said:
OK, I did the math assuming you get a 9% return on your IRA. This is VERY basic and doesn't factor in many variables. I'm sure anyone who even minors in economics could tear this apart, but...
Person 1 Person 2
Mortgage : $100,000 $100,000
Term : 30 years 15 years
Rate : 5% 5%
Monthly Payment : $ 536.82 $ 790.79
Interest Paid : $ 93,255.78 $ 42,342.85
Total Price : $193,255.78 $142,342.85
Investment/Month
1st 15 years : $ 253.97 $ 0
Total @ year 15
assuming 8% ret : $ 96,103.64 $ 0
Home Value : $180,094.35 $180,094.35
Investment/Month
2nd 15 years : $ 253.97 $ 500.00
Total @ year 30
assuming 9% ret : $464,953.56 $189,202.88
Home Value : $324,339.75 $324,339.75
Total $ from
investing : $464,953.56 $189,202.88
Total made from
house : $131,083.97 $181,996.90
Total : $596,037.53 $371,199.78
The transition from TextPad to VB obviously lost my formatting, but you get the point...and it looks like you were right over the long haul. :thumbsup:
Oh, I calculated the home value based on a modest 4% appreciation.
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Euphoric One said:
It may be to a point but in the long run, if a person got sick, lost there job or unforeseen expenses came up it is easier to pay a $600.00 a month payment than a $1,000.00 payment. Just mho.
Euphoric One said:
Yep. Good work. And that gap will grow even wider the next 15 years due to compounding. One would have to save 3 times as much, twice as long to catch up to the person who started earlier!
30 year is the better deal.
Euphoric One said:
Oops. Double post.
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