??? just about anybody can get a house with 3%, this is nothing new.
---------- Post added at 01:28 PM ---------- Previous post was at 01:25 PM ----------
After the closing costs this would probably do just about the same at the penfed 5/5 if both are paid off in 15 years for me.
I thought 3% down was for first time homebuyers only, hmmmm
My thought is that the $16k in the market is going to continue to blow, and I’m guaranteed 2.38% return on it for at least the next 4 years (when it is paid off) and that 2.38% will be compounded on my 200k loan for the house for the next 26 years… all the while the 16k is back in the market doing whatever it is going to do, and it will have 4.25% interest right with it.
In the borrow scenario what happens if you lose your job/change jobs? Afaik with 401k if you have a loan you must pay it back within a certain period otherwise it is considered a withdrawal and you get fucked by big brother. Imo it doesnt make sense to borrow against unless you have a real emergency especially with rates this low. Also 170k house how bad can the kitchen be? Wait and save then stroke a check for improvements.
Turns out, it wasn’t the kitchen, but the addition that scared me out. I got 1/2 way through the inspection and threw in the towel…
Looking to maximize return, and maxing out the purchase price allowed to 209k…
I’d have 60 days to pay it back. Realistically, if I lose my job my severance package (PTO) would cover it, as would my savings… I understand the risk there, and it would blow… but that is the worst case scenario. If I was worried about losing my job I wouldn’t be buying a house and I would live under a rock for the rest of my life.
The “rates are already so low” doesn’t hold much water with me. Regardless of the initial rate, I’m taking 3.8% off of it… So instead of $6-$700.00 going to interest the first month, it is $6-$7.00.
Realistically, I could pay off the 403B loan in 2 years to cut my losses in the market.
the argument for buying points is saving money over the long term.
the argument against buying points is that most people don’t stay in their home long enough to take true advantage of it even if they think they will.
FYI, for about $100/month, I think I saved ~$60,000 on my house by going from a 30yr to a 20yr mortgage @ 3.5%. (though I put down 20% on the house). With the rates today, money is cheap.
I get the whole 15 vs 30 yr thing… and I totally agree.
Can you think of something that is better than a 30yr mortgage at 0% interest?
I don’t know man I still don’t like the idea of raiding the retirement fund to get there. Jobs are hardly sure things nor are severance packages… or you staying in that house for 8 years/the calculated break even point. Life can change pretty fast. Company takes a shit/medical problems/divorce whatever. I personally wouldn’t have the balls to do it. Call me old fashioned but I consider touching my 401k a nono unless its a real emergency.
I hear ya… just feels like everything about this situation is an exception to the rule…
Yes, that is old fashioned thinking. It is true 99% of the time.
Say the market returns 5% for the next 5 years on that $16k… is that better than a 200k mortgage returning 3.8% for 30 years?
You need to compound your earnings.
You can’t look at it like 5% ROI on $16k = $XXXX. It’s the double a penny for a day scenario.
You need to look at the fact that every dollar you take out, potentially loses you much more. You need to take into consideration that if you pull out $16k now, if the market rises (which it will) that based on what you might have in 5 years compounded over the next 40 years is going to be huge.
I for one, am really interested to see how the market reacts to the upcoming election.
Double a penny a day is the way investment people like to spin it.
Those of us already in the market heavily understand that losing 50% and then contributing your way back to 10 years ago, and then losing another 30% is not doubling your pennies.
Unfortunately I don’t think we can look at past elections and the role try played on the market because of the unique situation we’re in. I think it will continue to blow.
I understand how it works, I’m only saying, the less money you have in the market, the less you are going to make. You’d have to be sure that you would pay off the 403B within a few years. I’d rather have diversity in my savings/investments than a 0% vs 2% mortgage (especially if I was only going to keep the house for less than 10 years).
I understand the market is going to continue to blow, I wasn’t implying that the elections are going to add 10,000 pts to the DOW.
---------- Post added at 09:36 AM ---------- Previous post was at 09:32 AM ----------
Are you talking 403b loan? Or directly taking funds out? I may have missed that.
It is a loan, 4.25% to me, $35 fee up front and $10/qtr for as long as I have the money out.
I’m super bitter about he market (like everyone else) and I just don’t see it recovering before the loan is paid back.
The main reason everything says it is a bad idea is because you get raped with expenses when you take money out early… I’m taking out a loan for a primary residence… they are completely different. Realistically, I will have contributed another $16k out of my check in the first year.
The part of my argument I couldn’t send home to a guy at work was this -
He was trying to convince me to reduce my contribution the $200/mo difference for 8 years instead of the loan… what he couldn’t understand was that the $200/mo I’m paying on the loan would be done in about 8 years… and yet the $200 savings would be for the next 22.
The math I haven’t even attempted yet -
$16k out of the market for 6 years, 4.25% interest paid to me by me…
if the market sees 8% gains on the life of the loan, how much do I actually miss out on when that $16k is really only $15k missing after 5 months and $14k missing after 10… and so on.
if the market sees 4% gains…
if the market drops out again and I lose 10%
Long term, I’m saving about $100k in interest on the life of the loan… sure, I probably won’t be there for 30 years, but my principle is being paid down over $600/mo … I don’t know anyone else who can say that.
The points I’m buying are tax deductible… so assume out of the $26k total I’m buying in points I get 30% of that back in a single tax return check… I could put that right into my 403B loan (realistically, if I have that check this time next year, the loan will be paid off with that check).
I’m still spending $6k annually in taxes, or $500/mo and I get a little piece of that back too.
I appreciate the input Beck… I was hoping someone on here had done something similar… but it just sounds like old wives tales… lol
It sounds to me like you already have your mind made up.
I took money out of my 401k to put more down on my house. I only did so because I pay myself 5.25% and I’ve currently diverisified my funds elsewhere other than my 401k (for personal/work reasons). It’s $40/week out of my check to pay it back and I never even notice it missing. I do however notice the extra $10,000 liquidity I had for a few months until I paid myself back. I think I only have a couple thousand left on the 401k loan.
Mind made up? Kind of. Like I said, I was looking for experience to chime in and not the " don’t borrow from your 401k ever" responses I get from everyone who has never heard of a 0% mortgage or even buying points on a mortgage.
I took a 401K loan to buy down my interest. That was 13 months ago and I have 11 months left to pay on it. I really don’t miss the money out of my check and after it is paid off, it is like getting a bonus since I am not longer paying on the loan and not paying that money monthly to interest on my mortgage. I give your idea :tup: :tup: since I did the exact same thing successfully.
THANKS!!!
Never heard of a 0% mortgage, why don’t more people take advantage of that option???
It took me 3 months to get qualified with near 800 credit scores and lots of cash and assets and the purchase price limit is 209k.
I was approved over the phone for 400k+ @ 4.25% in about 3 minutes.