Is now a good (wise) time to buy a house?

[joevol320]

Depending on the terms, it may even be better to get a 20 or 30 year loan and pay it like a 15. When it is all said and done, your effective interest rate could end up being lower. Plus, you have the benefit of having a lower payment to fall back on in case times get rough.

Personally, I got a 30 year loan and should have it paid off in about 10-11 years with how I am accelerating the ammortization schedule with extra principle payments. I thought having that flexibility in payments was worth it in case something happened.

that's the way to do, pay more and get it down faster. i also read if you pay your mortgage biweekly you save thousands and thousands on interest fees.

 

[UT IE 95]

I'd argue at these interest rates that investing the money rather than paying down the principle would be a much better long term investment.

My wealth advisor is pushing me to refi a 15 year mortgage to a 30. I could trim several hundred a month off the note and put it to work for me - making more than my house will appreciate. Plus the tax benefits for the 30 are there since I am down to practically paying principle only on the 15.

 

[UT IE 95]

I'd never even considered a 15 year. Like someone above said, I just figured I'd go longer, but pay extra to pay it off. If tough times do hit, I'd have a smaller monthly note.

Although I've never bought a house before and know little about the advantages of 15 vs 30 year mortgage.

Be careful on the loan terms. Some are front end loaded with interest. So, paying off a 30 year quicker doesn't necesasarily reduce the amount of interest.

 

[droski]

My wealth advisor is pushing me to refi a 15 year mortgage to a 30. I could trim several hundred a month off the note and put it to work for me - making more than my house will appreciate. Plus the tax benefits for the 30 are there since I am down to practically paying principle only on the 15.

The average difference between a 15 and 30 year mortage is like .1 to .3%. with the tax deduction i'd argue you are better off in the 30 and investing the difference at these rates.

 

[SamRebel35]

Let's not forget that inflation in your case with a fixed mortgage would be a good thing. If inflation goes up, your income for cost of living goes up, but your mortgage stays the same. Low interest rates, 8k tax credit (which I just took advantage of), and potential hyper-inflation indicate that this could be a the best time to buy a house in a long time. It also might literally be "now or never" because once inflation hits, its gonna be a terrible deal.

 

[UT IE 95]

The average difference between a 15 and 30 year mortage is like .1 to .3%. with the tax deduction i'd argue you are better off in the 30 and investing the difference at these rates.

It's just contrary to the thought of paying off debt as soon as possible.

I am so close - about 8 years left on a 15. And now I'd reclock to a 30 year. Although, my house note would equal the monthly payment of a Nissan.

 

[droski]

It's just contrary to the thought of paying off debt as soon as possible.

I am so close - about 8 years left on a 15. And now I'd reclock to a 30 year. Although, my house note would equal the monthly payment of a Nissan.

If these were credit cards i'd agree, but with the mortgage deduction that changes the equation. i certainly understand wanting no debt. but at these rates that's good debt. you can easily get a higher return even in a bond account. obviously i wouldn't suggest anyone doing this who is a very conservative investor.

 

[volinbham]

Isn't IE suggesting the same thing as Droski? - Stretch it out given the small spread between 15 and 30 note rates?

I'm looking at a refi now and am considering the 30 simply because the spread is so small and it preserves cash flow to use elsewhere. A 5% 30 year is equivalent to a 3.5% after tax rate and as has been suggested, inflation will either keep pace or out do that. Even if I took the difference and put it in a high yield savings account I'd probably come out better with the longer mortgage. (I have about 40% equity right now)

 

[droski]

buy a laddered AAA muni portfolio at 3.8% and you've just made a profit. want to be really balsy? buy 30 year munis at 6% and lock in a 2.5% profit.

 

[Lexvol]

A lot of it depends on your liquidity. My family grew and I needed a bigger house. I was able to take about 80 out of the old house...enough to put 20% down on the new digs without breaking a sweat. All because I was on a 15 year for 3 1/2 years.

 

[droski]

obviously lex i'm assuming that people are investing the money rather than spending it. no question a 15 year mortgage is a great forced savings vehicle.

 

[rjd970]

A lot of it depends on your liquidity. My family grew and I needed a bigger house. I was able to take about 80 out of the old house...enough to put 20% down on the new digs without breaking a sweat. All because I was on a 15 year for 3 1/2 years.

Your situation is similar to mine. I would love to take my small payment and use the money elsewhere, but we will have a growing family in the near future and have other priorities now.

I wish all these rates and prices would have all happened about 5 years ago for me. Being a first time homebuyer with a good downpayment is gold right now.

 

[UT IE 95]

If these were credit cards i'd agree, but with the mortgage deduction that changes the equation. i certainly understand wanting no debt. but at these rates that's good debt. you can easily get a higher return even in a bond account. obviously i wouldn't suggest anyone doing this who is a very conservative investor.

As crazy as I think you are - that is exactly what my advisor is saying. And it's starting to make sense.

 

[overseasorange2]

I am in a similar situation. After 11 years overseas, I found out a couple of weeks ago that I am being transfered back to the states. I have no debt, and have enough cash to buy a car and house cash, but I prefer to keep that cash making money. I intend to put 20% down with a 15 year mortgage.

 

[overseasorange2]

Double post