It’s since been purged so i can’t repost it so I’m going by what I can remember (some of my figures may be slightly off)
But essentiall it went like this…
You’re buying a $100K home
You can either A) Put $20K you saved up down and get a 5.7% (ish) mortgage rate
or B) Put $0 down get like a 7.8% or 8% rate and put the $20K into a 10-12% yr investment
If you go w/ B the payment is something like $100 more/month over the life of the mortgage
HOWEVER…if you never take money out of the investment (whatever that is) and let it compound over 20 years you end up making something like $36,000 after you take out the original $20K and the $100/mo you’ve been paying extra
one of the main issues in the logic would be volatility and longevity of the investment in question. quite doable, and you could even make more than that if you were good with your investment, but nothing that is currently at 10-12% is an entirely safe investment, so there is the element of risk. but, even if it works exactly as stated, with the time value of money, the value of that is much less at NPV, so it comes to the issue of how much screwing around is worth a minimal return?
seeing as how the s&p500 is under 8% for the past year, it would be hard for johnny non-investor to make any money at all (if not lose money) with this method.
yet another issue with not having the downpayment on your house is that you are going to behind with building equity on your home should you need to sell it.
im really tempted to write a lot more, but i told you before that i wasnt thinking bank talk since i have today off, so im leaving it with these few scattered comments.
Wouldnt putting the 20K down also qualify you to not have to have mortgage insurance on your mortgage? (over 20% required correct?) hence lower payment also, not only just a lower interest rate?
i put 5k down and I dont think I had mortgage insurance…Ill have to take a look back because at closing all the numbers jumble into one cluster fuck of #s…
Who told you exactly how and why I bought my house? The difference in interest rates was actually only about 1%. I couldn’t think of a good reason to put money down, so I didn’t. I also don’t pay a PMI.
It just came down to deciding to risk that we could make more money by investing 20% than we lose by paying interest on it.
i pay pmi, its like $ 60 / month. its stupid, and should just stop automatically after u make a year or 2 of on time payments. but meh. the standard rule is - if you own 15%or more total equity of your houses value, then u don’t have to pay PMI. this year, i could have an appraisal done, submit it to the bank, fill out a few forms, go meet w/ some mtg “advisor”, and they will release me from the monthly PMI. will i do it? i should, but depends on the lazyness factor.
as far as the investment question, i agree w/ redrum in entirety. sure the 10-12% sounds great, but it’s not likely to last. a few people in my family work in finance/investments, and it’s brutal sometimes. a better bet would be to find a $ 150,000 house for $ 110,000 - buy it and make the payments for 5 years, make minimal updates, fixes, and maintenance over the period, then sell it for $ 165-$170. there’s your 10% right there. hell, if u can rent it out, u will end up making far more than that.
Well you can always just pay down the principal, right now every dollar I put down on my principal I save a dollar in interest. Paying 10 grand on my principal right now will save me 9,700 in interest in the next 3 years. Where can you make that kind of investment, 100% in 3 years???
As for PMI, mine was 45 a month which really annoyed me. So I just payed down my principal to eliminate it. I dont know how you get away with buying a house without it, but all loans are different and mine required I have it until I was like had a percentage of the purchase price paid off. I couldnt even get my house reappraised to get rid of PMI because of the loan that I had.
or, you could do this. (similar to poopra’s model)…
$ 100,000 buying price for house. put down $ 15,000 to give yourself 15% equity and therefore no PMI. 30 year mortgage. make regular payments, but add $ 100 / month principal payment. the mortgage now gets paid off in 20 years instead of 30, and you save $ 36,000. low risk, easy enough to manage.
add $ 200 / month and it gets paid off in about 15 and you save 50k. not bad if you’re not investment savvy.
All you guys’ number juggling is confusing me, as I don’t have time to think through each post’s scenario.
To keep it simple, what I did was gamble that I can make more on the 20k invested than the extra interest I’ll pay by having the mortgage for 20k more.
That is, for the time that I own the house, as I will definitely not be living there until it’s paid off.
Or you could put more money down then get a home equity line of credit, buy an Evolution and deduct the interest you pay from your taxes.
Then put $10,000 more into the Evolution and not be able to sell it.
Ah nevermind, don’t listen to me.(Unless you want to have fun)
I have to admit I have never been a fan of “lets see who can die with the most money”.
PMI is generally added on till you hit the %20 mark, some places are an insane 25%, it’s a complete scam becasue your not allowed to shop around to see who will give you the best pmi rate. it’s nisurance, you shuold be able to shop around. put less than 5% down and got 6.25% interest. If you wnat to pay it off early trow $50-$100 extra in every month, don’t waste teh money they charge you for a bi monthly payment, again another scam by billionaire bankers who pull the string of the congress and senate. I want to add to that if you really want to start investing in real estate, look outside of WNY, with the exception of a very few places, Clarence, Bill’sville… and a few other it will take you 7-10 to turn any kind of reasonable provit, you can go to place that dont’ suck like Florida, parts of S and N Carolina, Va etc… and flip stuff in 6 mos to a year and make a decent buck.
My dad always tells me the same things.“if you can’t pay cash,don’t buy it”-Dad.I’m Very smart w/ $$$ but also kind of stupid @ the same time.I make a nice amount of $$$ on real estate,pick up some great deals on rentals,etc.Then the kind of stupid part comes in where I blow $$$ on stupid things Jewelry,Cars,etc.The way I look at it in 30 yrs all my properties will be paid off,BY MY TENANTS,and I had a hell of alot of fun in my life.Live for today,but you better have a rock solid plan for tomorrow.
you have to live some where, if you don’t buy a house, which will appreciate eventually, even if it take 10 years, you will be investing, if you pay rent, you make absolutly nothing, so, how is buying a house dumb?
The difference in interest rates was actually only about 1%. I couldn’t think of a good reason to put money down, so I didn’t. I also don’t pay a PMI.