While a 15 year mortgage limits the interest rate, I'm more of a fan of the 30 year mortgage for a couple reasons. First, if something happens and you lose your job, a 30 year mortgage is must less of a burden on you because it will be a little easier to scrape together enough to pay each month. If I'm doing well and have extra money, I can make additional principal payments every month with no penalties. So it's not like I have to abide by making the minimum pmt every month and really waiting an extra 15 years to pay off my home.
Pre-paying principle shortens your loan, it doesn't reduce the principle and interest payments you make. The banks collect their interest up front.
It does lower the interest you pay over the life of the loan. http://www.bankrate.com/finance/mortgages/pay-extra-toward-mortgage-principal.aspx And play around with this http://www.bankrate.com/calculators/home-equity/additional-mortgage-payment-calculator.aspx You might not be saving much based on tax breaks from mortgage interest lowering your taxes, but that all depends on where you live and what your taxes are like.
Sure. If you pay off the whole loan right away, you'll not have to pay any of the interest. The bankrate article supports what I said. Now, to your question: I'm not sure if you've thought that plan through. Your interest payments are based on your outstanding loan balance, not on your monthly principal payment. If you pay next month's principal payment, you will save a little interest, but not that much because your overall balance hasn't been reduced by that much. And the example he gives is really aggressive. Paying two full extra mortgage payments a year turns a 360 month loan into 286 months. You won't get bills from the bank that decline as you pay extra toward your principle.
Sure I'll save a little interest, but if I make that additional payment every month, I can save myself from paying $20,000+ In interest over the life of the loan as stated in the example. You act like two months is a lot to be prepaying, but in the example given, that equates to only an extra $100/month. Uhhhh what? You said the banks get their interest up front, which is not true. Interest is determined each month based on oustanding balance, you don't pay off the full amount of interest first, then total principle afterwards
It is true. In month 1, you pay $350 in interest. In month 280, you pay $50. I'd call that collecting interest up front. If you pay $50,000 in month 1 to pay down the principle, you'll still be paying real close to $350 in interest in month 2. But your loan would be paid off in 15 years. If you want to pay $50K and reduce your payments, you refinance the loan. You'll save way more that way because the interest on a $50K new loan will be way less than the interest on the first 15 of the bigger loan. $100 on a $500 payment is 20% extra. If you make a lot of money, the $500 may be peanuts. Realistically, people buy what they can make their payments on. The price of the house matters less than if you can afford the PITI. And if you're remodeling, you'd likely want to spend the $100 on drywall and paint, etc.
No Denny. You don't refinance because you have 4k in closing costs from the refinance unless it's really a lower interest rate. Go here http://www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx I entered a 100k loan, with 30 year mortgage, 4.5% interest rate, then told them I would be making an additional principal payment on my initial payment. Guess what? My first interest payment was $375 and my second was $187, not $375 as you stated it would be because interest is calculated on oustanding loan balance
Here is my example above http://www.bankrate.com/calculators...=50000&oneTimeAdditionalPaymentInMY= Feb 2015
I'm wrong, sorry. The amount of your payment will not go down, you just pay less of the payment % as interest and more as principle.
Mick, another thing for you to think about. Where do you work? If you work in Vancouver it makes sense for you to buy in Vancouver, not Oregon. Not only are property taxes generally higher in Multnomah county, if you work in Oregon and live in Vancouver you pay sales tax and Oregon income tax. So if you work in Oregon, I'd buy in oregon. If you work in Vancouver, I'd buy in Vancouver
Keep in mind Vancouver will cost you far more for a multitude of fees that will more than offset any savngs you get from property taxes compared to Oregon. Pretty much EVERYTHING except property taxes costs more in WA. Food, gas, utilities, car registration is obscene, sales tax... The most important suggestion was the one about being able to comfortably afford your payment without a roomie/renter/relative contributing. Bringing your brother in doubles the odds of someone being laid off, injured, or imprisoned, leaving one income to carry the weight. Also, I've found that even the best friends get sick of each other after several months of co-habitation. And when you are buying a home but your roomie is paying half the payments he really can't help but feel like he's a part owner and above obeying your wishes about upkeep, rules... Do you really want to end up hating your brother? Better to rent a room to a stranger you'll be comfortable throwing out if you have to.
For someone like me, that makes over $250k, it's a huge discount to not pay state income tax. I'm not familiar with property taxes, so I don't know if that discount will offset the tax savings. In California, I pay 10% state income tax. That would be a 29k savings if I could do away with state income tax.
Were teamsters. The odds of us getting fired isn't very great. He just wants to room until he makes full wages and can get a place for himself.
