freeflybella 0 #1 July 29, 2004 Anyone know anything about these "Interest only - ARM" loans? I'm shopping for a mortgage and my head is spinning. Action expresses priority. - Mahatma Ghandi Quote Share this post Link to post Share on other sites
turtlespeed 226 #2 July 29, 2004 QuoteAnyone know anything about these "Interest only - ARM" loans? I'm shopping for a mortgage and my head is spinning. Just the name makes me think you might need to give up a leg to get it.I'm not usually into the whole 3-way thing, but you got me a little excited with that. - Skymama BTR #1 / OTB^5 Official #2 / Hellfish #408 / VSCR #108/Tortuga/Orfun Quote Share this post Link to post Share on other sites
lawrocket 3 #3 July 29, 2004 Lots of people have those loans. I like them, since my wife and I are positioning ourselves for the hot foreclosure market once the interest rates rise (which they already have) and the principal starts coming due. They are good for a lot of people. I personally wouldn't touch them. I want equity. My wife is hotter than your wife. Quote Share this post Link to post Share on other sites
Remster 30 #4 July 29, 2004 What he said. If you want this type of mortgage because you can afford more house with the same monthly payments, dont do it. If you can disciplined enough to invest the money you would put away as equity each month in something else, then maybe, but that requires a lot of discipline.Remster Quote Share this post Link to post Share on other sites
ryoder 1,590 #5 July 29, 2004 Go to a library that subscribes to NewsWeek magazine. If you check back a few weeks there was a feature story about interest-only loans."There are only three things of value: younger women, faster airplanes, and bigger crocodiles" - Arthur Jones. Quote Share this post Link to post Share on other sites
freeflybella 0 #6 July 29, 2004 If I know I'm only going to own the house for 3 years - but get a 5 yr. ARM, just in case - and I'm pretty sure the house will appreciate just by cutting the grass... Could it be good for me? On a fixed rate loan, aren't the first few years of payments mostly interest anyway? Turtlespeed... Action expresses priority. - Mahatma Ghandi Quote Share this post Link to post Share on other sites
PhillyKev 0 #7 July 29, 2004 I wouldn't go for an ARM (adjustable rate mortgage). There's only one place interest rates will go from where they are now, and that is UP. Quote Share this post Link to post Share on other sites
Jday3 0 #8 July 29, 2004 QuoteI may can help you out some - mortgages can be a complicated process. One thing to keep in mind is that rates are low now and going to rise. If you could get a low rate and lock it in you may be better off with a fixed rate mortgage. With the arm you run the risk of the mtg. company raising the rate on you down the road and your future payments can change. Usually I talk to my clients about "arms" when rates may fall. Check out the following web site - some good info and I would be happy to help some more if you want to email me etc...... http://www.federalreserve.gov/pubs/brochures/arms/arms.pdf Quote Share this post Link to post Share on other sites PrairieDoug 0 #9 July 29, 2004 Remster & Lawrocket are right on target... Why am I always so surprised when skydivers demonstrate good judgment, common sense, and knowledge about stuff outside the sport? Quote Share this post Link to post Share on other sites lawrocket 3 #10 July 29, 2004 QuoteIf I know I'm only going to own the house for 3 years - but get a 5 yr. ARM, just in case - and I'm pretty sure the house will appreciate just by cutting the grass... Own the house for three years? Heck, you'd basically be renting it. Say the house appreciates 15k in the next three years, and you've been making an interest payment of $500 per month. You've just paid $18k for the privilege of having your property appreciate $15k. I guess you could argue that you just got a grat deal paying rent for $1000 per year. My wife is hotter than your wife. Quote Share this post Link to post Share on other sites Remster 30 #11 July 29, 2004 Quoteand I'm pretty sure the house will appreciate just by cutting the grass... Carefull with speculating.... If interest rates go up sharply within 3 years, you may have a big drop in the value of the property. But, just like coaching advise on here, we dont knwo your situation.... Remster Quote Share this post Link to post Share on other sites shananay 0 #12 July 29, 2004 I have two loans. One is a fixed 30 year and the other is interest only 3 yr. arm. I actually pay my interest with the extra priniciple for equity now, so if you are disciplined enough to do it then it's not all that bad. I watched the market and leared so much about all this crap when I was trying to buy back in March. The reason I went with it was to get more house like Remster was saying BUT I pay the extra and am already ahead of the game or at least where I should be. The rates do rise and will rise but they can only go so high. I am just a lowly home owner so I don't really know what I am takling about..I do know that this type of mortgage is working just fine with me. Another good website to take into consideration is www.bankrate.com It is totally helpful and you can make comaprisons to the market and current interest rates etc. and get a better feel for ARM and all the others available. I guess it really all depends on the person and what you are capabale of doing. I am quite happy with my ARM. Do it Again! P.M.S. #22 LaLa Gang #4 Quote Share this post Link to post Share on other sites freeflybella 0 #13 July 29, 2004 Agreed on the speculaton and "coaching online" syndrome. About the interest, don't you get a fat tax break on interest paid your first year or two? (first home) And in your analogy - when you say I'd basically be renting - do you mean in general because I only plan to have the house for 3 years - or do you mean because I'd only be paying interest for those years? Action expresses priority. - Mahatma Ghandi Quote Share this post Link to post Share on other sites freeflybella 0 #14 July 29, 2004 Do you have one of those 80/20 combos? Where one is a 30yr fixed and one is a 2yr ARM? Action expresses priority. - Mahatma Ghandi Quote Share this post Link to post Share on other sites Steel 0 #15 July 29, 2004 Quote but get a 5 yr. ARM, just in case - and I'm pretty sure the house will appreciate just by cutting the grass... I wouldn't be too sure about this. Back in March, I looked into cashing out some equity and found that in past three years, houses in my zip code have lost not gained in value. So since I purchase my house in March/01 cashing out non-existing equity was a problem. I am not familiar with the loan you mentioned but from the responses it sounds like its a loan for which you only pay interest for some time and no principle and that is practically what one does for the first couple of years in a 30 year mortgage. Anyway I would stay away from anything other than a fixed rate mortgage for 15 years or less.If I could make a wish, I think I'd pass. Can't think of anything I need No cigarettes, no sleep, no light, no sound. Nothing to eat, no books to read. Quote Share this post Link to post Share on other sites Steel 0 #16 July 29, 2004 Quote About the interest, don't you get a fat tax break on interest paid your first year or two? (first home) reply] It cracks me up when people mention stuff that is tax deductable. Its like they don't really understand what this means. Lets just put it in simple terms suppose you pay an extra $1,000 on interest but hey you can deduct it at the end of the year, right? Well all that means is you can take off $1,000 from your taxable income, which in the end, depending on which tax bracket you are in, will not be much more than $390 at the top. That means you still threw away $610. because you still had to pay that $1,000 extra in interest in the first place. This goes for all tax deductible donations too.If I could make a wish, I think I'd pass. Can't think of anything I need No cigarettes, no sleep, no light, no sound. Nothing to eat, no books to read. Quote Share this post Link to post Share on other sites freeflybella 0 #17 July 29, 2004 Good info in that brochure. THANKS! Action expresses priority. - Mahatma Ghandi Quote Share this post Link to post Share on other sites jazzjumper 0 #18 July 29, 2004 Quote (snip) Well all that means is you can take off $1,000 from your taxable income, which in the end depending on which tax bracket you are will not be much more than $390 at the top. That means you still threw away $610. because you still had to pay that $1,000 extra in interest in the first place. This goes for all tax deductible donations too. Threw away? Hmmmm, I think rent as more of a throw away than a house payment. I move about every three years and am on my 4th house. So far, I haven't lost money on a sale yet. My ex wife did... If you sell for exactly what you purchased it for plus commission, you've basically rented. If it's more, than you made a little money (cause you have to live somewhere). Just my O No matter how good she looks, someone, somewhere is sick of her shit! Quote Share this post Link to post Share on other sites Steel 0 #19 July 29, 2004 QuoteQuote (snip) Well all that means is you can take off $1,000 from your taxable income, which in the end depending on which tax bracket you are will not be much more than $390 at the top. That means you still threw away $610. because you still had to pay that $1,000 extra in interest in the first place. This goes for all tax deductible donations too. Threw away? Hmmmm, I think rent as more of a throw away than a house payment. I move about every three years and am on my 4th house. So far, I haven't lost money on a sale yet. My ex wife did... If you sell for exactly what you purchased it for plus commission, you've basically rented. If it's more, than you made a little money (cause you have to live somewhere). Just my O I don't think its quite that simple. I think there are other factors that need to be taken into account like the money that you have no chance to get back. The home owners insurance, the property tax, if there is a homeowners association fee, and the interest that you pay minus what you get back from deducting the interest and real estate taxes on your Federal income tax. Then you can compare what you made on lost to what you would have payed to rent a house of the same size.If I could make a wish, I think I'd pass. Can't think of anything I need No cigarettes, no sleep, no light, no sound. Nothing to eat, no books to read. Quote Share this post Link to post Share on other sites shananay 0 #20 July 29, 2004 QuoteDo you have one of those 80/20 combos? Where one is a 30yr fixed and one is a 2yr ARM? Yes I sure do. 80/20 w 100% financing. Your getting good at this Shani! Do it Again! P.M.S. #22 LaLa Gang #4 Quote Share this post Link to post Share on other sites AndyMan 7 #21 July 29, 2004 It does beg pointing out that not all ARM's are interest only. We're getting a 5 year ARM on our new condo because we'll be moving in 5 years anyways, we don't need the stability of a 30 year fixed. ARM rates tend to be at least a full point cheaper then fixed rates. ARM rates can be 5, 4,3, or 2 years, and can include equity repayment or not. In our case, we're signing up for a 5 year ARM that does include equity payments... _Am__ You put the fun in "funnel" - craichead. Quote Share this post Link to post Share on other sites Steel 0 #22 July 29, 2004 QuoteIt does beg pointing out that not all ARM's are interest only. We're getting a 5 year ARM on our new condo because we'll be moving in 5 years anyways, we don't need the stability of a 30 year fixed. ARM rates tend to be at least a full point cheaper then fixed rates. ARM rates can be 5, 4,3, or 2 years, and can include equity repayment or not. In our case, we're signing up for a 5 year ARM that does include equity payments... _Am Yeah after rereading the posts I saw that ARM stood for adjustable rate mortgage. I had hear it referred to as a balloon rate mortgage previously. Actually if somebody is sure that they will sell their house in less than 5 years you can't get a better deal. I have heard of these loans as much at 2 percent less than a conventional fixed rate. However, the bank is out to make money not loose it. They are betting that in the end you won't sell your house for one reason or another and you will be stuck with the new rate which you can rest assured will be higher than the fixed rate you would have otherwise had. After having it all explained to me I decided this was a bad idea and went with a conventional fixed 10 year.If I could make a wish, I think I'd pass. Can't think of anything I need No cigarettes, no sleep, no light, no sound. Nothing to eat, no books to read. Quote Share this post Link to post Share on other sites PhillyKev 0 #23 July 29, 2004 QuoteIn our case, we're signing up for a 5 year ARM that does include equity payments... Betting that interests rates won't rise by more than one point over the next 5 years is a bad bet. It will probably be less than a year until they do. At that point you would have been better off with a fixed rate. When interest rates are almost at their lowest point in history and the fed has announced a strategy to raise them in regular intervals, an adjustable rate is a bad idea. Lock in a good, low rate now. They're going to be rising very soon. Quote Share this post Link to post Share on other sites AndyMan 7 #24 July 29, 2004 A "5 year ARM" means that' its' an Adjustable Rate Mortgage, that's locked for 5 years. Technically, we're getting a "5-1 ARM" - which means that it's locked for 5 years, then is adjusted every 1 year after that. We could also get a "5-2 ARM', where the rate adjusts every 2 years after the initially locked 5. I'm not sure I see the point of that. An ARM makes a lot of sense if, and only if, we're going to move before the 5 years are up. Since we're newly married, and the place we're buying doesn't have room for kids, that's probably a safe bet. ARM rates are a lot cheaper since the bank doesn't have to hedge against future rate hikes. For example, in a 30 year mortgage, the bank charges a higher rate because they really don't know what mortgage rates will be doing in 25 years. They charge a bit more to cover potential losses in the future. Secondly, mortgage rates tend to follow the "long bond", aka the T-Bill interest rates. Mortgage rates are not affected by the Federal Funds Rate. _Am__ You put the fun in "funnel" - craichead. Quote Share this post Link to post Share on other sites PhillyKev 0 #25 July 29, 2004 Ah..nice. Yeah, if it's locked anyway and you plan on ditching it before then, that IS a good deal. QuoteSecondly, mortgage rates tend to follow the "long bond", aka the T-Bill interest rates. Mortgage rates are not affected by the Federal Funds Rate. They most certainly do follow the fed rate charged for overnight loans to banks. It isn't an immediate raise the next day after the fed, but when the fed raises rates, you can be sure that mortgage, loan, credit card, etc. rates will also rise in the near future. Quote Share this post Link to post Share on other sites Prev 1 2 Next Page 1 of 2 Join the conversation You can post now and register later. If you have an account, sign in now to post with your account. Note: Your post will require moderator approval before it will be visible. Reply to this topic... × Pasted as rich text. 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PrairieDoug 0 #9 July 29, 2004 Remster & Lawrocket are right on target... Why am I always so surprised when skydivers demonstrate good judgment, common sense, and knowledge about stuff outside the sport? Quote Share this post Link to post Share on other sites
lawrocket 3 #10 July 29, 2004 QuoteIf I know I'm only going to own the house for 3 years - but get a 5 yr. ARM, just in case - and I'm pretty sure the house will appreciate just by cutting the grass... Own the house for three years? Heck, you'd basically be renting it. Say the house appreciates 15k in the next three years, and you've been making an interest payment of $500 per month. You've just paid $18k for the privilege of having your property appreciate $15k. I guess you could argue that you just got a grat deal paying rent for $1000 per year. My wife is hotter than your wife. Quote Share this post Link to post Share on other sites
Remster 30 #11 July 29, 2004 Quoteand I'm pretty sure the house will appreciate just by cutting the grass... Carefull with speculating.... If interest rates go up sharply within 3 years, you may have a big drop in the value of the property. But, just like coaching advise on here, we dont knwo your situation.... Remster Quote Share this post Link to post Share on other sites
shananay 0 #12 July 29, 2004 I have two loans. One is a fixed 30 year and the other is interest only 3 yr. arm. I actually pay my interest with the extra priniciple for equity now, so if you are disciplined enough to do it then it's not all that bad. I watched the market and leared so much about all this crap when I was trying to buy back in March. The reason I went with it was to get more house like Remster was saying BUT I pay the extra and am already ahead of the game or at least where I should be. The rates do rise and will rise but they can only go so high. I am just a lowly home owner so I don't really know what I am takling about..I do know that this type of mortgage is working just fine with me. Another good website to take into consideration is www.bankrate.com It is totally helpful and you can make comaprisons to the market and current interest rates etc. and get a better feel for ARM and all the others available. I guess it really all depends on the person and what you are capabale of doing. I am quite happy with my ARM. Do it Again! P.M.S. #22 LaLa Gang #4 Quote Share this post Link to post Share on other sites
freeflybella 0 #13 July 29, 2004 Agreed on the speculaton and "coaching online" syndrome. About the interest, don't you get a fat tax break on interest paid your first year or two? (first home) And in your analogy - when you say I'd basically be renting - do you mean in general because I only plan to have the house for 3 years - or do you mean because I'd only be paying interest for those years? Action expresses priority. - Mahatma Ghandi Quote Share this post Link to post Share on other sites
freeflybella 0 #14 July 29, 2004 Do you have one of those 80/20 combos? Where one is a 30yr fixed and one is a 2yr ARM? Action expresses priority. - Mahatma Ghandi Quote Share this post Link to post Share on other sites
Steel 0 #15 July 29, 2004 Quote but get a 5 yr. ARM, just in case - and I'm pretty sure the house will appreciate just by cutting the grass... I wouldn't be too sure about this. Back in March, I looked into cashing out some equity and found that in past three years, houses in my zip code have lost not gained in value. So since I purchase my house in March/01 cashing out non-existing equity was a problem. I am not familiar with the loan you mentioned but from the responses it sounds like its a loan for which you only pay interest for some time and no principle and that is practically what one does for the first couple of years in a 30 year mortgage. Anyway I would stay away from anything other than a fixed rate mortgage for 15 years or less.If I could make a wish, I think I'd pass. Can't think of anything I need No cigarettes, no sleep, no light, no sound. Nothing to eat, no books to read. Quote Share this post Link to post Share on other sites
Steel 0 #16 July 29, 2004 Quote About the interest, don't you get a fat tax break on interest paid your first year or two? (first home) reply] It cracks me up when people mention stuff that is tax deductable. Its like they don't really understand what this means. Lets just put it in simple terms suppose you pay an extra $1,000 on interest but hey you can deduct it at the end of the year, right? Well all that means is you can take off $1,000 from your taxable income, which in the end, depending on which tax bracket you are in, will not be much more than $390 at the top. That means you still threw away $610. because you still had to pay that $1,000 extra in interest in the first place. This goes for all tax deductible donations too.If I could make a wish, I think I'd pass. Can't think of anything I need No cigarettes, no sleep, no light, no sound. Nothing to eat, no books to read. Quote Share this post Link to post Share on other sites freeflybella 0 #17 July 29, 2004 Good info in that brochure. THANKS! Action expresses priority. - Mahatma Ghandi Quote Share this post Link to post Share on other sites jazzjumper 0 #18 July 29, 2004 Quote (snip) Well all that means is you can take off $1,000 from your taxable income, which in the end depending on which tax bracket you are will not be much more than $390 at the top. That means you still threw away $610. because you still had to pay that $1,000 extra in interest in the first place. This goes for all tax deductible donations too. Threw away? Hmmmm, I think rent as more of a throw away than a house payment. I move about every three years and am on my 4th house. So far, I haven't lost money on a sale yet. My ex wife did... If you sell for exactly what you purchased it for plus commission, you've basically rented. If it's more, than you made a little money (cause you have to live somewhere). Just my O No matter how good she looks, someone, somewhere is sick of her shit! Quote Share this post Link to post Share on other sites Steel 0 #19 July 29, 2004 QuoteQuote (snip) Well all that means is you can take off $1,000 from your taxable income, which in the end depending on which tax bracket you are will not be much more than $390 at the top. That means you still threw away $610. because you still had to pay that $1,000 extra in interest in the first place. This goes for all tax deductible donations too. Threw away? Hmmmm, I think rent as more of a throw away than a house payment. I move about every three years and am on my 4th house. So far, I haven't lost money on a sale yet. My ex wife did... If you sell for exactly what you purchased it for plus commission, you've basically rented. If it's more, than you made a little money (cause you have to live somewhere). Just my O I don't think its quite that simple. I think there are other factors that need to be taken into account like the money that you have no chance to get back. The home owners insurance, the property tax, if there is a homeowners association fee, and the interest that you pay minus what you get back from deducting the interest and real estate taxes on your Federal income tax. Then you can compare what you made on lost to what you would have payed to rent a house of the same size.If I could make a wish, I think I'd pass. Can't think of anything I need No cigarettes, no sleep, no light, no sound. Nothing to eat, no books to read. Quote Share this post Link to post Share on other sites shananay 0 #20 July 29, 2004 QuoteDo you have one of those 80/20 combos? Where one is a 30yr fixed and one is a 2yr ARM? Yes I sure do. 80/20 w 100% financing. Your getting good at this Shani! Do it Again! P.M.S. #22 LaLa Gang #4 Quote Share this post Link to post Share on other sites AndyMan 7 #21 July 29, 2004 It does beg pointing out that not all ARM's are interest only. We're getting a 5 year ARM on our new condo because we'll be moving in 5 years anyways, we don't need the stability of a 30 year fixed. ARM rates tend to be at least a full point cheaper then fixed rates. ARM rates can be 5, 4,3, or 2 years, and can include equity repayment or not. In our case, we're signing up for a 5 year ARM that does include equity payments... _Am__ You put the fun in "funnel" - craichead. Quote Share this post Link to post Share on other sites Steel 0 #22 July 29, 2004 QuoteIt does beg pointing out that not all ARM's are interest only. We're getting a 5 year ARM on our new condo because we'll be moving in 5 years anyways, we don't need the stability of a 30 year fixed. ARM rates tend to be at least a full point cheaper then fixed rates. ARM rates can be 5, 4,3, or 2 years, and can include equity repayment or not. In our case, we're signing up for a 5 year ARM that does include equity payments... _Am Yeah after rereading the posts I saw that ARM stood for adjustable rate mortgage. I had hear it referred to as a balloon rate mortgage previously. Actually if somebody is sure that they will sell their house in less than 5 years you can't get a better deal. I have heard of these loans as much at 2 percent less than a conventional fixed rate. However, the bank is out to make money not loose it. They are betting that in the end you won't sell your house for one reason or another and you will be stuck with the new rate which you can rest assured will be higher than the fixed rate you would have otherwise had. After having it all explained to me I decided this was a bad idea and went with a conventional fixed 10 year.If I could make a wish, I think I'd pass. Can't think of anything I need No cigarettes, no sleep, no light, no sound. Nothing to eat, no books to read. Quote Share this post Link to post Share on other sites PhillyKev 0 #23 July 29, 2004 QuoteIn our case, we're signing up for a 5 year ARM that does include equity payments... Betting that interests rates won't rise by more than one point over the next 5 years is a bad bet. It will probably be less than a year until they do. At that point you would have been better off with a fixed rate. When interest rates are almost at their lowest point in history and the fed has announced a strategy to raise them in regular intervals, an adjustable rate is a bad idea. Lock in a good, low rate now. They're going to be rising very soon. Quote Share this post Link to post Share on other sites AndyMan 7 #24 July 29, 2004 A "5 year ARM" means that' its' an Adjustable Rate Mortgage, that's locked for 5 years. Technically, we're getting a "5-1 ARM" - which means that it's locked for 5 years, then is adjusted every 1 year after that. We could also get a "5-2 ARM', where the rate adjusts every 2 years after the initially locked 5. I'm not sure I see the point of that. An ARM makes a lot of sense if, and only if, we're going to move before the 5 years are up. Since we're newly married, and the place we're buying doesn't have room for kids, that's probably a safe bet. ARM rates are a lot cheaper since the bank doesn't have to hedge against future rate hikes. For example, in a 30 year mortgage, the bank charges a higher rate because they really don't know what mortgage rates will be doing in 25 years. They charge a bit more to cover potential losses in the future. Secondly, mortgage rates tend to follow the "long bond", aka the T-Bill interest rates. Mortgage rates are not affected by the Federal Funds Rate. _Am__ You put the fun in "funnel" - craichead. Quote Share this post Link to post Share on other sites PhillyKev 0 #25 July 29, 2004 Ah..nice. Yeah, if it's locked anyway and you plan on ditching it before then, that IS a good deal. QuoteSecondly, mortgage rates tend to follow the "long bond", aka the T-Bill interest rates. Mortgage rates are not affected by the Federal Funds Rate. They most certainly do follow the fed rate charged for overnight loans to banks. It isn't an immediate raise the next day after the fed, but when the fed raises rates, you can be sure that mortgage, loan, credit card, etc. rates will also rise in the near future. Quote Share this post Link to post Share on other sites Prev 1 2 Next Page 1 of 2 Join the conversation You can post now and register later. If you have an account, sign in now to post with your account. Note: Your post will require moderator approval before it will be visible. Reply to this topic... × Pasted as rich text. Paste as plain text instead Only 75 emoji are allowed. × Your link has been automatically embedded. Display as a link instead × Your previous content has been restored. Clear editor × You cannot paste images directly. Upload or insert images from URL. Insert image from URL × Desktop Tablet Phone Submit Reply 0
freeflybella 0 #17 July 29, 2004 Good info in that brochure. THANKS! Action expresses priority. - Mahatma Ghandi Quote Share this post Link to post Share on other sites
jazzjumper 0 #18 July 29, 2004 Quote (snip) Well all that means is you can take off $1,000 from your taxable income, which in the end depending on which tax bracket you are will not be much more than $390 at the top. That means you still threw away $610. because you still had to pay that $1,000 extra in interest in the first place. This goes for all tax deductible donations too. Threw away? Hmmmm, I think rent as more of a throw away than a house payment. I move about every three years and am on my 4th house. So far, I haven't lost money on a sale yet. My ex wife did... If you sell for exactly what you purchased it for plus commission, you've basically rented. If it's more, than you made a little money (cause you have to live somewhere). Just my O No matter how good she looks, someone, somewhere is sick of her shit! Quote Share this post Link to post Share on other sites
Steel 0 #19 July 29, 2004 QuoteQuote (snip) Well all that means is you can take off $1,000 from your taxable income, which in the end depending on which tax bracket you are will not be much more than $390 at the top. That means you still threw away $610. because you still had to pay that $1,000 extra in interest in the first place. This goes for all tax deductible donations too. Threw away? Hmmmm, I think rent as more of a throw away than a house payment. I move about every three years and am on my 4th house. So far, I haven't lost money on a sale yet. My ex wife did... If you sell for exactly what you purchased it for plus commission, you've basically rented. If it's more, than you made a little money (cause you have to live somewhere). Just my O I don't think its quite that simple. I think there are other factors that need to be taken into account like the money that you have no chance to get back. The home owners insurance, the property tax, if there is a homeowners association fee, and the interest that you pay minus what you get back from deducting the interest and real estate taxes on your Federal income tax. Then you can compare what you made on lost to what you would have payed to rent a house of the same size.If I could make a wish, I think I'd pass. Can't think of anything I need No cigarettes, no sleep, no light, no sound. Nothing to eat, no books to read. Quote Share this post Link to post Share on other sites
shananay 0 #20 July 29, 2004 QuoteDo you have one of those 80/20 combos? Where one is a 30yr fixed and one is a 2yr ARM? Yes I sure do. 80/20 w 100% financing. Your getting good at this Shani! Do it Again! P.M.S. #22 LaLa Gang #4 Quote Share this post Link to post Share on other sites
AndyMan 7 #21 July 29, 2004 It does beg pointing out that not all ARM's are interest only. We're getting a 5 year ARM on our new condo because we'll be moving in 5 years anyways, we don't need the stability of a 30 year fixed. ARM rates tend to be at least a full point cheaper then fixed rates. ARM rates can be 5, 4,3, or 2 years, and can include equity repayment or not. In our case, we're signing up for a 5 year ARM that does include equity payments... _Am__ You put the fun in "funnel" - craichead. Quote Share this post Link to post Share on other sites
Steel 0 #22 July 29, 2004 QuoteIt does beg pointing out that not all ARM's are interest only. We're getting a 5 year ARM on our new condo because we'll be moving in 5 years anyways, we don't need the stability of a 30 year fixed. ARM rates tend to be at least a full point cheaper then fixed rates. ARM rates can be 5, 4,3, or 2 years, and can include equity repayment or not. In our case, we're signing up for a 5 year ARM that does include equity payments... _Am Yeah after rereading the posts I saw that ARM stood for adjustable rate mortgage. I had hear it referred to as a balloon rate mortgage previously. Actually if somebody is sure that they will sell their house in less than 5 years you can't get a better deal. I have heard of these loans as much at 2 percent less than a conventional fixed rate. However, the bank is out to make money not loose it. They are betting that in the end you won't sell your house for one reason or another and you will be stuck with the new rate which you can rest assured will be higher than the fixed rate you would have otherwise had. After having it all explained to me I decided this was a bad idea and went with a conventional fixed 10 year.If I could make a wish, I think I'd pass. Can't think of anything I need No cigarettes, no sleep, no light, no sound. Nothing to eat, no books to read. Quote Share this post Link to post Share on other sites
PhillyKev 0 #23 July 29, 2004 QuoteIn our case, we're signing up for a 5 year ARM that does include equity payments... Betting that interests rates won't rise by more than one point over the next 5 years is a bad bet. It will probably be less than a year until they do. At that point you would have been better off with a fixed rate. When interest rates are almost at their lowest point in history and the fed has announced a strategy to raise them in regular intervals, an adjustable rate is a bad idea. Lock in a good, low rate now. They're going to be rising very soon. Quote Share this post Link to post Share on other sites
AndyMan 7 #24 July 29, 2004 A "5 year ARM" means that' its' an Adjustable Rate Mortgage, that's locked for 5 years. Technically, we're getting a "5-1 ARM" - which means that it's locked for 5 years, then is adjusted every 1 year after that. We could also get a "5-2 ARM', where the rate adjusts every 2 years after the initially locked 5. I'm not sure I see the point of that. An ARM makes a lot of sense if, and only if, we're going to move before the 5 years are up. Since we're newly married, and the place we're buying doesn't have room for kids, that's probably a safe bet. ARM rates are a lot cheaper since the bank doesn't have to hedge against future rate hikes. For example, in a 30 year mortgage, the bank charges a higher rate because they really don't know what mortgage rates will be doing in 25 years. They charge a bit more to cover potential losses in the future. Secondly, mortgage rates tend to follow the "long bond", aka the T-Bill interest rates. Mortgage rates are not affected by the Federal Funds Rate. _Am__ You put the fun in "funnel" - craichead. Quote Share this post Link to post Share on other sites
PhillyKev 0 #25 July 29, 2004 Ah..nice. Yeah, if it's locked anyway and you plan on ditching it before then, that IS a good deal. QuoteSecondly, mortgage rates tend to follow the "long bond", aka the T-Bill interest rates. Mortgage rates are not affected by the Federal Funds Rate. They most certainly do follow the fed rate charged for overnight loans to banks. It isn't an immediate raise the next day after the fed, but when the fed raises rates, you can be sure that mortgage, loan, credit card, etc. rates will also rise in the near future. Quote Share this post Link to post Share on other sites
