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Mortgage Questions, is it worth the rate?
Posted on 1/26/15 at 5:04 pm
Posted on 1/26/15 at 5:04 pm
Buying first home. Sale price 337,500$ with 5,000$ in closing in Lakeview. Got offered the following rates: 30 year 45 day lock at 3.625%, 20 year 45 day lock at 3.625%, 15 year 45 day lock at 3.0%. We will probably be in this home for about 5 years. I am putting 10% down, and PMI is pretty negligible (60-90/month depending on what I do).
My question is this: if I am staying in the home for 5 years, is it worth it to do the 15 year mortgage to save the 0.625% interest? I realize I would put a lot more equity into the home in that scenario, but I part of me would rather hang onto the extra money and keep it liquid. I am already maxing 401k match at work and Roth IRA, but could possibly look at some other low risk investments with the money I keep on a 30/20 year plan rather than the 15.
My question is this: if I am staying in the home for 5 years, is it worth it to do the 15 year mortgage to save the 0.625% interest? I realize I would put a lot more equity into the home in that scenario, but I part of me would rather hang onto the extra money and keep it liquid. I am already maxing 401k match at work and Roth IRA, but could possibly look at some other low risk investments with the money I keep on a 30/20 year plan rather than the 15.
7
Posted on 1/26/15 at 5:24 pm to Saint5446
That seems like a large house note for a first home, but I don't know.
You must have OT Baller Status.
You must have OT Baller Status.
Posted on 1/26/15 at 5:41 pm to Saint5446
Only staying there five years and your dropping 350k on your first home? I would seriously rethink this unless you're making 400k a year. If you are then ignore my previous statement and go with the 30 year loan
Posted on 1/26/15 at 5:46 pm to Saint5446
I was in a similar spot and chose to go 30 year because of the opportunity to invest more aggressively. I also just like keeping my debt service low.
If you really want to drop your rate and only have a 5 year horizon, you might consider an ARM. I didn't think it was worth the lower rate, but I also have a longer expected stay time.
If you really want to drop your rate and only have a 5 year horizon, you might consider an ARM. I didn't think it was worth the lower rate, but I also have a longer expected stay time.
Posted on 1/26/15 at 5:51 pm to Colonel Flagg
I'm 30. Have been saving for years and have started my own business and starting to do well. Unfortunately NOLA has become a very expensive place to live. Have the income to cover it fairly easily though and still invest pretty aggressively.
This post was edited on 1/26/15 at 5:52 pm
Posted on 1/26/15 at 5:54 pm to Saint5446
Run an amortization table. See where you end up after 5 years under the scenarios.
Posted on 1/26/15 at 6:54 pm to Saint5446
Out of curiosity. .. what's the price per Sq ft? Because the other part of only staying 5 years is you are banking on some serious appreciation to cover your selling agent in the future...
Putting away more equity might be worth it, or you could be spending a ton of money to break even, and thats if you have no major repairs
Putting away more equity might be worth it, or you could be spending a ton of money to break even, and thats if you have no major repairs
Posted on 1/26/15 at 7:00 pm to Saint5446
Do a 5 or 7 year arm if you're really confident that you'll be moving in that time frame and wouldn't consider it a rental down the line. You can always pay down additional principal.
Posted on 1/26/15 at 7:28 pm to Saint5446
You better check that PMI payment. 2.5 yrs ago I bought at $205k and put ~13% down, my PMI payment was $92 a month. This was with a conventional loan. I had it reappraised last September and got PMI removed.
Posted on 1/26/15 at 7:51 pm to LSUFanHouston
quote:
Run an amortization table.
This is the correct answer.
I suspect that if you really only stay for 5 years you'd do better with an ARM, but have you considered buying a smaller property with a 30 year, with the intention of renting it later? 30 year rates are stupid cheap again.
ETA: Or buying two smaller properties, one as an investment and one for yourself.
This post was edited on 1/26/15 at 7:52 pm
Posted on 1/26/15 at 7:57 pm to foshizzle
All good stuff. Staying 5 years at a minimum, maybe longer. Holding onto it as a rental in the future is a possibility as well. Have just about decided that we will do 10% down on a 30 year and continue to save a good bit.
Posted on 1/27/15 at 1:06 am to Saint5446
Check into lender paid mortgage insurance. Instead of a 3.625 rate, you may get 3.75% or something like that. Cheaper than paying PMI yourself though.
Posted on 1/27/15 at 7:46 am to Sho Nuff
quote:
Check into lender paid mortgage insurance. Instead of a 3.625 rate, you may get 3.75% or something like that. Cheaper than paying PMI yourself though.
Very good advice, espically if you are looking to stay short term, and remember that interest can be tax deductiable, PMI is not, so if you pay a bit more in interest and don't have to pay PMI you will come out ahead.....if you are there short term
Posted on 1/27/15 at 8:32 am to Tigerpaw123
That's good advice. Honestly it's 1600 sq ft which is definitely big enough for our current situation (married, 4 month old) and for one more child as well with the layout. When I said 5 years that is the minimum. We very well may stay here for a long time. Took some of the poster's advice and ran an amortization table and it looks like I can do an extra 5k/year on principal and pay it off in 12-13 years quicker than the full 30 year and by be under the gun for the 15 year payments every month in case something were to happen.
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