15-Year Mortgages Grow in Popularity
In this weekend’s Real Estate section, the Times had an article on the increasing popularity of 15-year, fixed-rate mortgages: “Brokers and mortgage industry executives say that these loans are becoming especially popular among people who want to shed debt more quickly, and in light of the current economic atmosphere, that goal is perhaps more widely…
In this weekend’s Real Estate section, the Times had an article on the increasing popularity of 15-year, fixed-rate mortgages: “Brokers and mortgage industry executives say that these loans are becoming especially popular among people who want to shed debt more quickly, and in light of the current economic atmosphere, that goal is perhaps more widely applicable than ever. Of course, debt shedding comes at a price. Those borrowing $400,000 on a 15-year loan, with a 4.375 percent interest rate, the average rate earlier this month, can expect to pay about $3,034 a month, compared with about $2,056 a month for a 30-year fixed-rate loan with a 4.625 percent average rate. (The payment excludes costs like property taxes and insurance.) Because a 15-year loan also has 180 fewer interest payments than a 30-year loan, the borrower with that 15-year loan would pay $194,000 less in interest over the life of the mortgage.” Any readers considering them over 30-year loans?
Photo by Rev Dan Catt
Cool!
“government will jack up interest rates to attract money”
WRONG!!!!!!!!!!!! The market will force the Government to raise interest rates!
“housing prices will decrease”
WRONG!!! WilL CRASH!!!!!
“Inflation will rise”
WRONG!!!!! When the Bond Market is finished, the deflation collapse will be awesome!!
The Mutant Asset Bubble is dead in 5 months!
The What (RUN!!!!!)
Someday this war is gonna end…
Right — bonds are down, government will jack up interest rates to attract money, housing prices will decrease, inflation will rise, housing prices will increase. I think. Right?
Let’s say you are 30, a 30 year mortgage means you will own your property free and clear when you are 60. Realistically, you’re going to be well past your working prime at that point so you’d better have your retirement nest egg sorted out by then (or have kids that can support you) – social security is not going to be around in any meaningful way at that point.
To say that your house will be your retirement fund means you will have to downsize to something cheaper and you will live off the difference. But nobody knows what the prevailing property prices are going to be 30 years from now. Maybe at that point the difference might only provide 5 years of living expenses (which would already be pretty generous compared to long-run multiples).
So if you can’t live off your house then you are going to have to save for your retirement. Let’s say you have a 40 year working life and 20 years in retirement before you pop your clogs.
In retirement, you’ll probably spend less money (no mortgage and no commuting expenses, school fees, etc) so let’s be aggressive and assume it falls 75% from your working life expenses.
This still means that you need to put aside 1/8 of your post-tax income if you want an okay retirement. This is assuming that your savings only keep track of inflation. Of course, you can get away with saving less if you are able to achieve inflation-beating returns on your savings – but (as investors burnt in the market in the last year can attest to) not everyone gets to win that game.
So ask yourself a simple question: Do you consistently save more that 1/8 of your post-tax income? Now you know why I want to pay off my mortgage as soon as possible.
“But then when inflation kicks in, won’t the price of houses rise?
”
You know something Mopar? A coulce of months ago you ask me about inflation and made some good points (faints) but the Bond Market is smelling the stinky shit right now! Remember DIBS was jacking off to Quantitative Easing? Well the Bond Holder decided to “Offload” risk back to America, I think it was a Asshole Put under the market! That was 100 basis points ago and The Fed is underwater on all that shit!
(http://en.wikipedia.org/wiki/Quantitative_easing)
The Bond Market had a big sell off today!!!!
http://www.bloomberg.com/markets/rates/index.html
What does it mean???? Well it starts with a F, rhymes with Duck and makes your asshole real sore! Goodbye retards and thanks for the good times….
The What
Someday this war is gonna end…
The What:
When mortgage interest rates rise, the price of houses will fall.
But then when inflation kicks in, won’t the price of houses rise?
Hey The What….
Love the apocalyptic prophesies. I might not be fully in your camp, but lets just say NYC RE (and our economy) took the train to looney tunes-ville prior to the tech boom and hasn’t come back since.
That said,
Not suggesting anyone pay even remotely close to asking price on any property ion brooklyn. I’d say roll back fully to 2002-2003 price per SF if you want to find more intrinsic value….
That said, when I do get my loan to purchase at said discount, no way I’m paying more quickly with ever cheapening dollars…
To any buyer: so long as you can make the payments, and are a value shopper, keep your dollars and let the banks loan you them now. in 20 yrs you’ll be paying back with pennies-on-the…
***Objects in Rear View Mirror are Closer Than They Appear****
Why on earth would you lock into having to pay a higher mortgage if you can pre-pay a 30 year without penalty? That’s just asking for trouble. It’s not like there is a big gap in the rates.
“Couldn’t agree with MoneyForNothing more. I am debt averse but now is the time to lock in the lowest rates for the longest period of time. I signed a 4.5% mortgage a few months ago. I’d love to pay this off early but why would I? In the future inflation and interest rates will be higher that 4.5% and I will be sitting on a loan from the bank that is less than inflation.”
The Asshead award goes to….
Very soon interest rates will go up and all the “equity” will turn to radioactive dust.
“I will be sitting on a loan from the bank that is less than inflation.”
The “Asset” will be worth 50% less!
The What
Someday this war is gonna end..