Mortgage thoughts

CuzzinOlaf

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May 16, 2014
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I've been thinking about moving to Spring Grove for several years now and finally decided it is time. I made an offer on a house that was accepted, and pending any issues with the inspection (tomorrow), it's all but a done deal.

All of that said, I've been crunching numbers and trying to figure out what is best for me. As of now I anywhere between a 30 and a 20 year mortgage. The 30 and 25 year loans are at 3.75% and the 20 is at 3.5%. I like the idea of saving interest, but also like the idea of having a lower payment in the event I have to spend it elsewhere. I also have been crunching numbers with throwing an extra $300 per month.

The next hang up is if I'm putting 20% or 25% down. Both scenarios make sense to me and are affordable. I get a lower payment with the 25% down, but that is extra money I can save, invest, or put into the house.

Right off the bat, I'm putting all new floors in the house on the first floor (ranch). The basement was recently finished and has carpet that I'm fine with. I'm going to do the two bathrooms on the main level eventually and paint as well. The exterior of the house is perfect and needs nothing.

I know someone here was in this same situation and I'm looking for thoughts for any of the above options.
 

RICH17

Dr. Pussy Slayer, MD
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Nov 14, 2008
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quarter percent isn't going to be much. Yake the lower payment and put more towards principle every month. Make 24 payments in a year and you'll have that 30 year mortgage cut in have in no time. If something comes up then you have the extra money to fall back on.


This is my plan.
 

nytebyte

Not Politically Correct
Mar 2, 2004
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Do the 20 year mortgage if you can, but still do what Rich said and put more towards principle every month. More of your main mortgage payment will go toward principle with the 20 year if you can swing it.

Also don't escrow your property tax payment, assuming you're responsible enough to pay it every year when it's due. Instead, use that money to invest and pull out what you need to pay the property tax. No reason to give the bank free money in the form of a property tax escrow.

And, don't let whatever lender you're using charge you PMI. Since you're putting such a big percentage as a down payment, there is no need for them to do this, but I've seen shady lenders insist on charging you for it anyway. If they do, tell them to piss off and find another lender. Depending on your loan amount, that could be a big chunk of money every month which you don't want to flush down the PMI toilet.
 

Lead Pipe

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First off I always put the least possible amount down. Then you have more liquid money to throw into a savings account or use for renovations. The difference in money down to monthly payments are usually very minimal.

See if your lender will accept bi-weekly payments. Wells Fargo did on our old place buy Chase will not which really sucks. I would take the 30 year mortgage for the monthly payment saving then pay bi-weekly. You essentially turn a 30 year into a 20 and save more on the interest. If and when we re-fi we will make sure that lender accepts bi-weekly payments.
 

EmersonHart13

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Jul 18, 2007
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[MENTION=239]Turk[/MENTION] I believe has posted on this before.

It depends on what you are doing with your money. If you invest and make more than keep your money out of your house and invest it.

I'm in a 15 because I could afford it and the rate was lower. I also pay extra so that will probably tell you my feelings on the matter... Our goal is to get this one paid off then buy a weekend or vacation home or something.
 

CuzzinOlaf

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May 16, 2014
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That sounds great, but when you crunch the numbers, even by throwing more at a 30 year, you still pay thousands more in interest. That is what I'm getting hung up on.

Here is a good example:
A 30 year is $175k in interest. A 30 year with an extra $300 per month is $117k in interest.

A 20 year is roughly the same payment as the 30 with an extra $300 per month. The interest savings is of $14k and paid off a year earlier.

I know having the flexibility is nice though. $14k isn't a ton of money over 20 years, and equates to about $60 a month. I guess throwing the extra $360 a month (adding that extra $60 in the price difference) at the 30 year pays it off in just under 20 years and give me that flexibility just in case.
 

Turk

Lt. Ron "Slider" Kerner
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Jan 21, 2008
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Historically, you're better off getting the longest term possible and investing the extra money per month in the S&P500. What I did, though, is a combo of both. Got a 30
Year mortgage and make extra payments each month. It's what I call my conservative portion of my portfolio.

The stock market makes 10% a year on average. Paying your home down faster "makes" you 3.75% a year, but it's guaranteed....
 

Turk

Lt. Ron "Slider" Kerner
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Jan 21, 2008
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Also, equity in your home isn't liquid, stocks are. The money in stocks can be converted to cash in about 3 days. My recommendation, do the 30 year. 75% of leftover monthly money in the stock market and 25% as extra principal on the home. You'll be rich in 10 years if you stick with that plan.
 

CuzzinOlaf

TCG Elite Member
May 16, 2014
1,766
99
Spring Grove
Do the 20 year mortgage if you can, but still do what Rich said and put more towards principle every month. More of your main mortgage payment will go toward principle with the 20 year if you can swing it.

Also don't escrow your property tax payment, assuming you're responsible enough to pay it every year when it's due. Instead, use that money to invest and pull out what you need to pay the property tax. No reason to give the bank free money in the form of a property tax escrow.

And, don't let whatever lender you're using charge you PMI. Since you're putting such a big percentage as a down payment, there is no need for them to do this, but I've seen shady lenders insist on charging you for it anyway. If they do, tell them to piss off and find another lender. Depending on your loan amount, that could be a big chunk of money every month which you don't want to flush down the PMI toilet.

Exactly, I have no intention of doing escrow and can easily budget this myself. PMI isn't an issue. I'm talking to several banks at the moment and none of them are including it.

Any thoughts on lenders? The cheapest (rates and fees) ones I've found are my credit union (BCU) and an online bank called Sebonic Financial. They have a ton of good reviews on Bankrate, Zillow and even a good BBB rating.
 

CuzzinOlaf

TCG Elite Member
May 16, 2014
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99
Spring Grove
Exactly, I have no intention of doing escrow and can easily budget this myself. PMI isn't an issue. I'm talking to several banks at the moment and none of them are including it.

Any thoughts on lenders? The cheapest (rates and fees) ones I've found are my credit union (BCU) and an online bank called Sebonic Financial. They have a ton of good reviews on Bankrate, Zillow and even a good BBB rating.

Oh, one more question. Where do I stick the escrow money that is safe?
 

EmersonHart13

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Jul 18, 2007
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Yes, no guarantees, not safe, but on average over a long time period you should make money.

I tend to be pretty safe and therefore thats why I dump money into the house... When we buy the second house I might switch gears and do things differently. I had already gotten into the 15 year before I really knew what I was doing and played it safe because of that.
 
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