Topping my “bad ideas” list: Looking here for Mortgage advice

Discussion in 'Business, Investing & Finance' started by BNAG8R, Mar 20, 2021.

  1. BNAG8R

    BNAG8R Pronouns: them, they, their
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    This should go splendidly.

    I’m researching mortgage loan options, but all of the advice relates to people that aren’t in my situation. It’s been 25 years since I bought a house so I’m a little rusty with today’s options.

    First - I am looking at this as an investment that I will live in short term, not a long term “place I’ll die”. I would be happy continuing to rent, but the market here has made renting difficult, as all of the houses we’d want to rent are being sold (and we aren’t interested in an apartment again). I am debt free, have a very high credit rating, and have a sizable amount of cash that would allow me to either put down a big (50%) down payment, or a large down payment with cash to fund improvements (I’m working 80 hour weeks so I’ll have to pay someone else to do the work). I am not opposed to buying something to keep as a rental property if the market drops (which I fully expect will happen if I buy).

    So to summarize - large down payment, short term view (2-4 years tops, but possible rental property longer term), I want to minimize “up front costs” that take a longer time to recoup, and I want as much money going to principle and as little to interest as possible.

    I’m sure there are other questions I haven’t answered, but I’ll stop there and see what the peanut gallery has to say.
     
  2. bradgator2

    bradgator2 Rioting
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    Interesting problem.

    On the surface, it would seem like you would want to keep as much cash as possible. As little down while still getting a competitive rate.
     
  3. NVGator

    NVGator Member
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    Are you asking what kind of “loan” you should take? If so, sounds like a 15 year would be your best bet.
     
  4. Concrete Helmet

    Concrete Helmet Hook, Line, and Sinker
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    Just be aware of guys who look like this and tell you they're gonna guide you through the process....
    [​IMG]
    This is often how they look after your closing
    [​IMG]
     
  5. BNAG8R

    BNAG8R Pronouns: them, they, their
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    My thinking is to pay the least amount of interest as possible - I’d pay cash if I could. You think differently?
     
  6. bradgator2

    bradgator2 Rioting
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    I think the key to your situation is how long you plan on keeping it. Have you run the numbers? Once you get below 3% interest, then the interest isn’t eating you alive. If you plan on selling it in 5 years, then what good is a 50% down payment? I would hope you’d be able to invest and earn more than 3% over those 5 years.
     
    • alcoholica

      alcoholica I'm what Willis was talking about
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      There are a couple major factors to consider.

      1) the stock market could crash in the next year.
      2) the housing market could crash in the next 5 yrs.

      Depending on what you think will happen will drive what you do.

      My thinking is this (if renting isn't an option)...do a conventional 30 yr mtg. You lock in a low rate and free up your cash. If the stock market does crash, you can pretty confidently put your cash in an index (relatively low risk) and put your cash to work. Then when you move, you can buy a house down the road with whatever cash/loan mix you feel comfortable with, because there's a decent chance that you'll have not only the cash, but earnings off that cash too..

      Another way to think about it is that many on here (myself included) believe both markets will crash. So you can either save your cash and wait on the stock market to crash and then buy in. Then wait on the housing market to crash and use your cash to buy then. Or you can buy now, with a strong likelihood of the housing market crashing. So you'd be pouring your money in an asset that many believe will depreciate, prior to you leaving it.
       
      • BNAG8R

        BNAG8R Pronouns: them, they, their
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        So I ran the numbers:

        $1.25M home, 2 options (keeping the same monthly payment):

        1. 20% down (finance $1M) - 30 year mortgage @ 3.25% is $4700/mo payment. Over 5 years total interest paid $154.2K, Principle is $107K

        2. 50% down (finance $625K) - 15 yr mortgage @ 3.0% is $4700/mo payment. Over 5 years total interest paid is $80.9K and principle is $178k

        So over 5 yr, $73K difference in interest paid.

        So the difference in down payment is $375k, so I would need to get 4% annual return on that $375k to make up the 73K.
         
        • Back Alley Gator

          Back Alley Gator Well-Known Member
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          You knew who you were going to get a response from, didn't you?
           
          • Gator By Marriage

            Gator By Marriage A convert to Gatorism
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            If you can afford a $1.25M home, you really shouldn’t be asking any of us for advice. You ought know the answers to your questions.
             
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            • Bernardo de la Paz

              Bernardo de la Paz If you aren't a gator you are gator bait
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              This is not the right way to think about it. A 15 year will get you a lower rate and thus less interest compared to say a 30 year, but you'll have to make a bigger payment. If you took the 30 year and put the difference in payment compared to the 15 in an investment that earns a much higher return than the rate on the mortgage you'd be better off.

              Also, it's really important to know how long you plan to hold the loan as it can might make sense to pay points or get a lender credit to cover closing.
               
            • Bernardo de la Paz

              Bernardo de la Paz If you aren't a gator you are gator bait
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              This is getting close. You need to make sure you include the tax implications.

              Assuming this is a primary residence, if you are paying 30k a year in interest you will likely be itemizing and that interest will reduce your tax burden.

              Also earnings on your investment in the difference in down payment would likely be taxed depending on how it's invested so that needs to be factored in as well.
               
            • NVGator

              NVGator Member
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              Why didn’t you just PM @bradgator2 for his opinion? It’s clear that’s all you wanted. Maybe @Detroitgator

              I’m butthurt.
               
              #13 NVGator, Mar 21, 2021
              Last edited: Mar 21, 2021
              • bradgator2

                bradgator2 Rioting
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                That racist ass injun didn’t want my advice.
                 
              • BMF

                BMF Bad Mother....
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                Let us know how this goes BNA. I'm selling soon and moving. We're considering the same (but not at $1.25 million!). Our thinking is we can get into something that will be a good rental property after we move out in 1 to 3 years (hoping for a market downturn). I'm not sure I'd want to rent out a $1.25 million home and let somebody f*ck it up.
                 
                • Alumni Guy

                  Alumni Guy Newbie
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                  DO NOT USE ROCKET MORTGAGE.

                  They are notorious for giving loan approval, then fail to close. Under standard Florida real estate contract, you can lose your deposit.
                   
                • FireFoley

                  FireFoley Senior Member
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                  If by BNA, @BNAG8R means the Nashville area, then yes that market is sizzling. But do you need or want to spend 1M + Large? something less maybe, pay cash, and then reevaluate? Unless, you have to live in Belle Meade or be shoulder to shoulder with the HG Hill family???
                   
                • BNAG8R

                  BNAG8R Pronouns: them, they, their
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                  Formerly of BNA, currently in DEN...same ridiculously hot market. The house in BNA I sold for $500k 2 years ago is $1.1M here.
                   
                • LagoonGator68

                  LagoonGator68 mostly peaceful protester
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                  Kid has made millions in houses....30 year mortgage discussion around 7 minute mark
                   
                • LagoonGator68

                  LagoonGator68 mostly peaceful protester
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                  This guy is excellent!
                   

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