alright, a little hesitation but I need raw, unbiased advice.
let me have it, mods butt out.
I GC’d in 04-05. 3320sq ft. financed 360000. valued at 550000 (05). did a 5/1 interest only 5.125%. climbed as high as 675000 (ah, th good old days) current value according Zillow 525000. Still decent equity. plan was then too build, and then, build again in 2 yrs. would have worked except lot prices went from $110000 to 195000 by the middle of 06. didn’t seem right to me then, and besides, all the spec builders bought them up. most of them are gone now, but the banks aren’t shorting lots, only houses.
need to refi this year, don’t see rates going any lower.
3 choices. based on 4800 mo gross income
4.675% 30yr fixed apprx $1910mo
3.5% 5/1 arm $1670 mo paying off 560 principal a mo. increasing
3.75% Intrest only $1163 mo.
escrow at 570 mo tax and prop. ins. probably drop $40 next yr then rise again.
Would like/ love to build again. construction loans are available, but VERY difficult right now. And nobody is droping land prices to where they need to be. yet. I am leaning towards the 5yr int only to keep monthly funds available for a construction loan in the next 1-3 yrs.
Blast away, or encourage. ALL input is welcome. don”t see rates going any lower than they are right now, so, I’m locking this up today. give me what you got.
And thanks in advance.
BTW just CAN’T afford the 30yr lock, so focus on those last two.
P.S. I’m 39, wife 36, kids 6,3, 1
Edited 9/30/2009 6:00 am ET by deskguy
Replies
i would do the 5/1 arm if you cant lock in a 30 year fixed. However, that and the interest only loan is going to screw you hard if the fed jacks the rate. Any idea what your payment would be when the adjustable rate actually adjusts to say 7-9% ? That 30 year fixed would look awfully attractive at that point.
And, I wanna meet the banker that will stack a construction loan on a second property for somebody with a 360k 5/1 based on a $4800 gross.
Naive but refreshing !
yeah, I know the rates headed up, probably way up.
have some income that isn't quite verifiable.
have some close connections with several local banks that might help in regards to a const. loan, but their not loaning new construction right now, and may never. (wonder why???)
house was built as an "investment". since the land prices went sky high and good purchases were not available, we had a couple more kids instead. so that is the main reason we arent real interested in moving out of here to find another deal right now. That and the fact that it would probably take 1/2 yr- to a year to sell in the NW market, even at a great discount.
So, the hope is to tie it up another 5 yrs and create a little monthly financial wiggleroom in the mean time, and see if another opportunity might arise.
keep the critiques coming
Edited 9/30/2009 12:53 pm ET by deskguy
If I were you....
I'd sell it for whatever you can get out of it.
I'd then pick up someone else's property "subject to" and then move into that. I'd focus on getting the house payment under 1000.
might not be easy to find a cheaper house. that area is amazingly overpriced in my opinion. Spent a summer working near there and found the RE prices appalling.
To the OP, can you do a 15 yr mortgage? Build equity in the house faster so that you can trade to the next project when it happens. I wouldn't mess with the ARM or IO if you don't have a solid plan for the land purchase and move-in of the next house.
jim, we did discuss that. But had a couple kids lately and moving doesn't look attractive right now. probably the smart thing to do though.
The current thinking is to go interest only, free up some monthly cash that would be saved, look for building oportunity in the next 1-4 yrs, and if nothing opens up deal with the realities that'll exist 5yrs from now. I'm kinda looking at it like renting this house, which I couldn't get anything close to this place for 1700mo., and hopeing that in 5 yrs the equity will rise again.
Also, we have no other debt. cars paid off etc. nothing bt the house, and kids :)
thanks for the input
Lots of people (financial experts) are saying that interest rates will be rising and rising high. The government is just borrowing too much money.
Now when this happens is still up in doubt.
I would go the 30 year fixed.
William the Geezer, the sequel to Billy the Kid - Shoe
CAN'T afford the 30yr lock, so focus on those last two.
I don't understand this part. Do you mean there's a lock fee on the loan you want, or that you see 4-5/8% as being too high for the long run?
the 30yr just leaves NO cash or room for error at the current monthly income once everything gets paid. there would be no chance of getting a building loan if an opportunity arises.
thanks to all for the input. read above responses for more detail. I appreciate all input. I have a tendancy to stress over these decisions and want to be sure I've thought things through really well.
Desk,<!----><!----><!---->
Just not enough information on the loan details to provide much help. As you know, the devil is in the details! Just from a cash flow perspective, you could do the interest only and add a principal payment of $500/month to it. If the loan amortization is monthly, then you will be reducing your interest payment amount a little each month, build equity and if you keep the payment level build equity faster than a conventional 30 year. But it all depends on the loan terms. Also, don’t forget to factor in closing costs in addition to seeing what your current lender would do for you regarding converting. Good luck!<!----><!---->
Frank<!----><!---->Frank
Obviously the risk here is that interest rates increase and you are not able to sell to dodge that bullet. If you can get a lower payment for a specified period, that may be attractive in the short term but it absolutely commits you to action at some point in the future when the circumstances may be much different than today. I think I would suck it up, get the 30 year fixed, and concentrate on raising your income level while keeping your belt as tight as you can for now. It's a safer bet, and while it may limit options for future construction, at least you are preserving a margin of safety for your family in a time of many unknowns.
Obviously the risk here is that interest rates increase and you are not able to sell to dodge that bullet. If you can get a lower payment for a specified period, that may be attractive in the short term but it absolutely commits you to action at some point in the future when the circumstances may be much different than today. I think I would suck it up, get the 30 year fixed, and concentrate on raising your income level while keeping your belt as tight as you can for now. It's a safer bet, and while it may limit options for future construction, at least you are preserving a margin of safety for your family in a time of many unknowns>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Well said, dave.
Dave
does your answer change any if its not a house were going to stay at? we have to move at some point. my income might go way up in a couple years, or I might get a lump sum payment from a business, but then be jobless. plus, it'd be a pretty tight belt, don't have cable or internet already, and don't want to touch the beer fund :)
the thought of freeing up that cash to build my investment portfolio for the next few years seems pretty attractive, and the money would be saved. creating a larger safety net and being free (freer?) to pursue any options that arise seems to me to have a few benifits.
I'm having a hard time justifyng tying up $800 more a month to lock in a 30 yr rate on a house we still intend on selling at some point, hopefully in the next 5 yrs.
not looking for anyones permission, just thinking out loud, and appreciate all the feedback.
wish I had a crystal ball :)
If you are sure you will sell in five years then that changes things. No reason to get a 30 year loan and the interest rate on the interest only loan is great for five years. You could pay on the pprinciple if you want or pur the extra cash in a roth ira and get some tax free earning on the money at the same time. Your contributions could be withdrawn at a later date if necessary without a penalty, you just can't take out any earnings.Problem is if you decide not to sell, I think the mortgage terms are going to be far worse in five years. I may be wrong though.
I'll second the opinion : "sell and buy something you can afford". Listen to Dave Ramsey. You're life will be so much easier. Again, I suggest selling for whatever you can get ASAP! Cash out now. Put the cash in the bank. Interest rates are going to soar. Soon, you'll be earning 12% on a CD. Pick up a preforeclosure and move into it using their mortgage. If prices rise, you still have control of the new real estate. You'll gain the appreciation instead of "waiting for prices to come back". If that's too much trouble to do, go for the interest only and be prepared to let it go back to the bank if your wages continue dropping. You'll know in five years what to do.
The more I listen to Dave the more I think he's an idiot about a lot of stuff..............but I listen when he talks about what happens to people who make bad real estate finance deals.......
If you look at his background? That's something he knows all about.
What is it about Dave that you think is idiotic. I'm no fanatic about him but when I cant get a good sports show or a decent political discussion I listen in. I think his program makes a lot of sense for 90% of the people.
Some of his advice is just plain stupid, or worse yet border line criminal.
For example, when a couple calls in and says they have a car that's a little too expensive and that they are upsidedown on??
And he tels them to:
a. Short sell the car thay have and take a personal loan for the difference.
b. Buy a $2000 used car to replace it
Essentially leaving them with a Loan secured by nothing, which is probably costing them more in interest. AND, having a used car with god knows how many miles on it.
Anyone asking the question? Is usually one bad break away from really big trouble.......... SO sell the good car, still be stuck with a loan, but alos be stuck with a beater car that you have no idea how long it will last or when it will break next?
A recipe for disaster for most of his callers asking the question.
If you listen close you'll find lots more of such silliness. ALL driven by his need to be totally debt free.
Kinda like that chic who makes herself sick to lose those last 5 pounds.
listen to dave ramsey..... you sound like my mother, she just said the same thing two days ago. :)
what do you think will happen to home prices when cd's start returning 12% ? honestly probably the only thing stopping me from selling right now is laziness. that and my daughter just started kindergarten, don't want to blow up the living situation right now. Think if I wait till the spring market, I might have an easier time moving this place, hopefully the bank will have moved all their similar stock around the corner and free up some buyers.
Great advice, I appreciate it.
5 years can go by really really fast! Then what...that's too scary with what's going on.We were going to retire in 2 yrs. That was 3 years ago.Pete
That's a fact. I had all sorts of plans five years ago. Thought my wife was on the same page on all of them. Discussed them all in depth with her (or at least I thought I did).Now I'm divorced with primary custody of my two kids and living very differently than I did just a short time ago.I'm lucky as I have always lived pretty conservatively with regard to my finances (and apparently that is a big reason she left). Amazing the changes that can occur in such a short time.
You indicated you cannot afford the payments on a 30 year fixed rate loan at 4.675 percent interest
This simply means your debt - income ratio is too high
Any way to increase family income and lower the ratios?
Good luck and hope it works out
Edited 9/30/2009 10:12 am by mrfixitusa
sell for 400-450 and buy a house you can afford.
A La Carte Government funding... the real democracy.
Deskguy,
Is the interest rate on the interest only option fixed? If not, interest rates would only need to climb up to 6% before you'd be paying the same amount as the 30yr fixed. Betting that rates will stay below 6% for even the next six months seems crazy to me. Go with the 5yr ARM. You'd be protected for 5 years and who knows what the economy will be doing after that.
it's fixed for 5 yrs, same as the 5yr arm.
I consider myself to be pretty conservative when it comes to personal finance and I think it's OK to go with the 5yr ARM. You could even convince me that the interest only option is ok IF you are discplined enough to put the money you'll be saving to a useful purpose (i.e. - investing in a growing business, paying off higher interest loans, etc.)
I think we can all agree that interest rates will surely go up, but take any predictions that rates will "skyrocket" with a grain of salt. It's simply impossible to predict the future.
I wouldn't take too much of those grains of salt. It'll give you a hear attack.The reason that interest rates will soar is because they will need to jack them to prevent inflation...which will happen because they will have to print money to meet their obligations. Too much money in circulation produces inflation. The feds just stated last week that they will be quick to raise rates to stop the dreaded inflation. Some of us have already lived through this scene back in the 80's. Have you?
Jim, I think I agree with you. Never before in our nations history have we had a gov borrow so much money. When the Chinese get shakey about our debt, all bets are off!!
You are correct about the fed raising interest rates, but will only do so when we start to see inflation. Right now, it is not in the picture. A year from now, may be a completely different story.
I have never spent over 25% of take home for a mortgage.. I always thought that more than that means I won't be able to buy furniture or even drapes.
That reminds me of how minimalism in home decor started. People couldn't afford furniture or even draps, so they made it the thing to do!!
I bet you remember the developements in MI when you worked there, you drive by in the morning and watch the people getting ready for work, no drapes, no privacy!>G<
A home is the worst investment you can sink your money into. Seeing you are 39 with 3 kids and can't afford a 30 year fixed..... making the last payment when you are 69 sez volumnes.
I'd suggest putting the kids up for adoption, maybe a fiscally responsible family will welcome them... and you could apply for section 8 housing.
Good luck.
Wow. That was pretty rough. This guy seems to sincerely want help.
You gave none. Do you somehow feel better about yourself? I'll pray for you both tonight.
alright, called the state and they picked up the kids, taxpayers problem now, screw em, who cares. told the wife we need some CASH!!!!. put her on the street, made $300. think she might have picked up something, told the hospital we didn't have insurance (SSSHHH, it's a lie) all those other suckers can pay for that.
Shot the dog, food costs and all, you know. All he did was look up to me anyway, the idiot. Went to the housing authority and said "gimme some o' that section 8 stuff I heard such great things about from Sledge". Now, here's where I ran into a problem. Seems if you got 20 to 30% equity on a 1/2 million home, they don't think that qualifies you?????? then they said, "you got too much ##%%$@ income". they might not have said ##%%$@, but it sure sounded like it.
So, I called up the bank and told em, you take that house and all that equity and you shove it up your worthless.... well, I stopped there, never know when you might need a refrence. Called work and told them to lower that salary so I can get me some taxpayer subsidised housing, "I'll be a fool no more Mr. Man". So, in a few months I think we"ll have a place all our own. Well, us and the wife's tricks. THANK YOU SO MUCH for the CONSTRUCTIVE criticism, it's changed my life, and the lives of many taxpayers. :)
edited to add.... upon reading this to my wife, she says she'd have made at least $900 tonight on the streets. I didn't dare argue, lest she attempt to prove it. :)
Edited 10/3/2009 2:24 am ET by deskguy
Alright, now that I got the above post out of my system. The situation is NOT dire. The cash income is as stated $57k some 07, $58k some 08. the hourly puts me closer to $49k, afterhours jobs makes up the difference. This year has been very good, will be well over that but I've already put that money in savings and will invest it in a better way shortly. (15k)
As stated in an earlier post, I work in a family business (my families) have worked their since 13 yo. Some monthly household costs are wrapped up in that. so really I'm paying housing, utilities, and groceries out of the cash, leaving enough for the wife and kids to "live". But, Having pulled us both out of shallow debt when we married 9 yrs ago, paid of the cars and built this place, I have no desire to tie us to a 30yr loan that would strap us cashwise. We will either sell the bus. in 2-5 yrs( netting me?? 150k-300k), I will take it over, or we"ll run it into the ground (always a possibilty)
Have pretty much decided on the 5yr IO, but you all knew that. Have already arranged to have $500mo taken out automatically, lest temptation kicks in. So, I guess the current question is...
Is there any benefit to securing the 5 yr arm over the Int. Only???? I'm having a hard time seeing the benefit of paying down the loan as opposed to securing the cash. Cash i"d be able to access without another refi. the numbers are aboout $35k in equity over the 5 yrs, to $28K + or - any investment growth I might realise.So, there's my new reality. Give it to me hard.... but constructivly (sp?).
and, out of morbid curiosity..... what will happen to home prices if (when)the interest rates skyrocket. I was about 12 the last time they were double digits.
thanks again in advance.
"what will happen to home prices if (when)the interest rates skyrocket."Thats a very good question. In the 78s-80's, we started going into hyperinflation. Jimmy Carter froze wages as an attempt to slow inflation. That didn't work. Reagan took over and had to stop inflation while creating jobs. Not a good combo because the feds systematically raised the rates until inflation stopped. Mortgages went to 18% before the wheel slowed. Lets now think about how houses are truly appraised BY THE BUYER. You yourself are thinking in terms of monthly payment for your castle. Thats the same way people equivocate their ability to buy. So, lets use your house. You say its worth 500k. Okay...I won't argue that. Now, apply a 12% interest rate against that 500k and tell me what the monthly payment will be. When you do the math, you will see a very large number for the monthly house payment. How many people will be able to afford that? Those will be your pool of buyers. Lets look at a schmuck like me. What will I be able to afford at 12 to 18 percent interest rates? If I'm grossing 50k, I don't think I'll be looking at any house priced over 100k. If I make 35k, I probably will be looking at 75k houses....and struggling to make that payment. As the pool of available buyers shrinks....so does the value of the houses. To make your house desireable, you'll have to price it so the monthly payment is attractive despite the 12% mortgage rates. Incidently, when the rates hit 12% back then, we had a flurry of new houses to build. Everyone was getting in before the rates jumped higher. When they went higher, everything crashed.
i'm lmao at your last response, i have felt like doing all those things at one time or another.
to answer your question on what happens if interest goes way up.
the market slows to a stop.
funny part is the banks have so much money to loan ,and they can't get rid of it. it comes from everyone depositing their savings. i remember my parents getting 15.5 on a cd.
in the 80's there were many "creative financing deals" alot of those were disasters.
it was tough,the people wanted inflation stopped,so regan did just that.
i would predict if interest went to 12 in 5 years,you would have no equity. most houses around here lost 25-40%. this is the midwest where this latest deal has brought houses down 5-10%.
it was good times
oh and to make it better regan threw out cap gains,if you made a buck you paid on it.
the older i get ,
the more people tick me off
Edited 10/3/2009 9:46 pm by alwaysoverbudget
Thanks to you and Jim for addressing that question. I have a feeling rates are going up, but probably/hopefully not astronomically. Can you imagine the carnage if sales and prices dropped lower than now? there would be about 5 banks left :) part of your answer goes into my current state of thinking. If I sell low now and buy a cheaper place, but everything tanks anyway, I just wasted a heck of alot of effort to be in almost the same spot.
I do agree that selling now and trying to capitalize on the best opportunity I can find would be the smartest play. However, I listed the wife and kids in the equation for a reason, stability, and security. I'm willing to pay a bit of a premium (tax)for those over what a strictly prudent financial decision would be. As Sledgehammer told me a home is the worst financial investment out ther, and I wholeheartedly agree. But, that's why we built in the first place. The sweat equity put in, gave us an extra bit of cushion in case things turned. If I'd bought here in 05', I'd be at purchase in value, and staring at almost the same scenario. I would be looking at a lower mortgage amount, but no equity, or minimal.
worst case scenario for me as I see it now, int. rates at 12-15% nothing selling, no refi. value of home at or below 360K. second worst, int. at 8-11% hardly anything moving, but someone gets a really nice home at cost that I've rented for 8-10 yrs. third, int. holds 6-10%, i can escape with a little cash, hardly worth the effort but enough to find a tidy little thing that is also depressed in the market. fourth, int. at 5.5-9% things move slow but within reason, I keep50k in equity and again move on, or even have an outside chance of possibly building something. 5- and 6 I'll put together, rates stay low, home prices actually tick up. within 5 years my equity grows 3-12 % on a 500k home the equity is worth 80% more than I would have made on the $300k home. Anyway, it's a gamble.
but that last scenario is why I asked what would happen if rates fly up. I may still hope for that, increasing price, but if money becomes "cheaper" ( higher inflation leads to higher rates, and possibly cheaper money as in higher saleries to cover inflation....... that's where my thinking dissapears into the atmosphere, and I beg for help from people who lived it. Even if they didn't know what the heck was happening at the time.
sorry for the long post, but, I hope this is something anyone can get some knowledge from. And, posting ones personal finances online is not done without some (alot) of hesitation. THANKS to all again for their input.
if you weren't around in the 80's instead of the word bailout, it was called the
RTC "real estate trust" government took over 1,000's of savings and loans
back then s&l was probably 85% of the home mortgage lenders. rtc would have auctions and sell 100's of properties during a 1 day auction. it was fun to watch them sell. i saw a property sell for 40k in lawrence ks,that 8 years later was probably 500k in value. lots of opportunity for guys with big ones.the older i get ,
the more people tick me off
All the more reason to stash cash???
seems mindboggling if you add on a high inflation scenario so soon after the recent tanking.
seems mindboggling if you add on a high inflation scenario so soon after the recent tanking.
the normal buyers of our debt (China and a few others) have slowed/stopped buying.
The Fed started releasing dollars into the system to buy that debt......................Inflation is just around the corner
Jim,Sure, interest rates could climb to double-digits in response to heavy government borrowing. Then again, maybe we'll see a tax hike similar to what Bush Sr. and Clinton did to reduce the deficit. Maybe we'll see deep cuts in federal spending. Maybe the economy will start soaring next year and government revenues increase dramatically. Don't get me wrong - there are rational expectations of what might happen, but nothing is certain or guaranteed.
Then again, maybe we'll see a tax hike similar to what Bush Sr. and Clinton did to reduce the deficit.
There's no tax hike that can cover the spending they've rammed through, and if some form of this health care bill goes through it'll add another Trillion or 2 to the bottomless pit.
Joe H
thank you for your input Benito
"You could even convince me that the interest only option is ok IF you are discplined enough to put the money you'll be saving to a useful purpose (i.e. - investing in a growing business, paying off higher interest loans, etc.)"
It's done, $500 a mo. will be taken out automatically. but I have no other loans to pay off. So, any current value in paying down the loan as opposed to hoarding the cash???
May become a business owner in 12-30 mo's. But, it would probably not require a cash outlay. (family transfer, funded by the ongoing concern (possibly))
Paying down loan vs. hoarding the cash?You could pay down the loan, but by doing the interest only, you've already decided that your home isn't the best short- or medium-term investment. Key question then is how do you put the money you're saving to the most productive use? First, pay off all higher-interest debt. If, as you say, you have no other debt, then I'd say next priority would be to establish a savings cushion. How much money would you need to live and pay all your bills (mortgage, health insurance, etc.) for six months if both you and your wife lost your jobs? Set a number you're comfortable with and then start saving towards that (maybe a tax-free muni bond fund? - something that's relatively easy to cash out when you need it.)
If you've achieved that, look longer term - do you have a Roth IRA? (and at this point you should probably seek professional advice.)
You have listed these in order. Now pick>G<
I like the 30yr lock, but I buy my houses with 15 yr mortgages.
If you can't afford the 30 Year fixed?
Than you just plain can't afford it and need to move on. Period.
My Mortgage is closer to $3000 per month.
My take home (Net, after taxes ect) is $5600 a month and my wifes just over $4000
Throw in a car payment, dance lessons, $1500 a month for College tuition and car insurance, New kids sneakers and clothes like once every 2 days?
And their ain't much left.
In the next few years Interest rates are going to SKYROCKET.....so anything adjustable or Interest only is just going to result in the bank owning your house.
you asked
i think your in trouble ,you had a plan it didn't work,i can relate.
if a person can't afford 4.6 interest fixed on a 30 year mortgage for a piece of owner occupied real estate,it's time for a new plan.
sell,forget the dream and get what you can
all a variable rate is doing is letting you rent the house till you lose it,when rates jump to [can you imagine?] 6.5-7%, a interest only loan and you need to know you've already lost the house,just letting the bank collect a little more money before the moving van comes.
get the fixed,save the house and everybody goes and gets a job/second job till the market recovers a little then sell.
i'd take a deep breath,sell,pay off the first interest only loan [did that really seem like a good idea?] for 360 and hope at closing i could walk with 50-75k
sorry it sucks
the older i get ,
the more people tick me off
"sell,forget the dream and get what you can"
well that's the point really, I am going to sell, but the IO gives me 5 more years to do that. Market might improve next spring or in two years. Nothing is moving here right now. the Seattle market is lagging behind the rest of the country's soft recovery. course we entered the slide much latter than the rest. And prices seem to have bottomed out.
according to "rough" appraisals the place is worth 525. in a need to sell next week I'd probably get 450 and walk with about $70k for all my troubles. if I stay I'm basically renting (but I get to write it off) I still have a decent equity cushion so I don't see a scenario where the bank gets the house, but I may be missing something. all the more reason to ask these questions.
I know it may not be the smartest move, I'm okay with that, I just don't want to make the dumbest move.
again, I really appreciate everyones honesty and help.
according to "rough" appraisals the place is worth 525. in a need to sell next week I'd probably get 450 and walk with about $70k for all my troubles. if I stay I'm basically renting (but I get to write it off) I still have a decent equity cushion so I don't see a scenario where the bank gets the house, but I may be missing something. all the more reason to ask these questions.
A lot of really smart people are talking about runaway inflation..............and with that will come interest rate hikes of epic proportions.
Google Mortgage rates during the end of Carters administration.
When, not if Rates go back up? What's going to happen to your home value? BY taking the Interst only, you are betting that by doing so you will be "Renting" the house in hopse that it's sale price will go up. But if interest rates go up considerably?
Then you will have paid 5 years worth of interest and still end up selling it and walking away witht he same $70K.....which by the way will be about what the interest cost you.
Unless you have a reasonable expectation of a pretty sizeable salary increae, you can't afford the house.....and any attempt to stay is betting against the odds that you'll be able to avoid the inevitable.
Move on now, lick your wounds and at least you can start building equity in something else......................AND probably buy something pretty decent at the reduced prices in your area.
AT the end of the 5 Year IO, what's that payment goign to be?
even though were 1800 miles apart ,i know where your at economy wise.i'm in wichita and were completely dependant on aircraft. we didn't start our fall until the first of 09. going with aircraft history,we will come out of this a year or more behind everyone else.
who knows what the future brings,i would guess that in 5 years we'll be pulling out of this,but i do expect around here that the growth will be very slow after that. so you do a interst only loan,5 years are up and the market is flat, your right all you have done is rented the house,with 70k in equity things would have to slide a ways to lose it all.
let me do a what if. all doom and gloom. economy turns,starts back up ,things looking pretty well, but boeing keeps struggling so no real upturn there.[i don't know what you do] but your job goes away at year 4,or your not getting any younger,you get hurt or at least slowing down. so at the year 5 when you need a loan again you can't get it, you would be at the mercy of the bank. if you had been paying principal off on this house from day 1 your principal balance would probably be in the 290 range at the 10 year.you would be getting somewhere.
at the very least i would take the io loan,and on the way back from the bank i would buy a good for sale by owner sign [it might be there for a while] and get it planted. remember that was the plan,to sell. you will never hit the market at a perfect time.
"i had a plan, it just didn't work". it applies to me perfectly......the older i get ,
the more people tick me off
Nothing specific to add, just a general observation. I am constantly amazed at the mortgages people pay, and the percent of their monthly income they're willing to spend on a house.
I realize "everyone" does it, but I could never live like that. We're no where close to spending 50% of the montly intake on the mortgage, closer to 10%, and there are still months when things are tight.
But there are also many more months when things aren't tight and we can actually live. Have a working wife and 2 kids. No way we'd be able to "live" if we had to lay out that big a percentage.
Glad when we first went house shopping the wife said she'd never be "house poor". Saw no sense in it. At that time, young and no kids, we looked at the house as simply a place to store the suit cases when we weren't traveling. Now it's a place to raise a family, but still a place we can usually afford to leave for a while.
You don't say if the wife works, and I have no idea of your local housing costs, but I would have sold quick years ago and found something for $800 a month tops. Being crammed into a too small house but still being able to leave at will is worlds better than having all the room in the world with absolutely no extra money to live and travel on. Like Robert said, kids aren't cheap if you want them to have some fun and be well rounded. No matter what their sport , hobby or lessons are, good lessons ain't cheap.
I would have had a panic attack years ago just looking at those numbers.Vic
I respect your thoughts, and completely understand them. Our first house was 900 sqft 1932 charmer. paid $167,000 in 01, that was back when the wife worked too, the good old days. spent half our weekends working on it. we built this place as an invest ment, and if I'd sold in early 07 when it valued at $675,000 it would have worked out REALLY well, but we had a new baby and ........ dang kid already cost me $150k, good thing he's cute.
my picture isn't as grim as it sounds, work for the family business so some daily cost are business costs and don't drain from my paycheck. the kids are young so costs aren't real high yet, but they are climbing. wife doesn't work so she's able to do some scouting for deals for the clothes etc. she never gets to buy retail anything. and we have no other debt, as of June.
thanks for your input, hope to get my costs down to 10% some day. But even a clean starter in a decent area is still $250-325k around here. I probably couldn't get that 900ft charmer back for less than $235-250. I'll keep working at it.
Glad when we first went house shopping the wife said she'd never be "house poor". Saw no sense in it. At that time, young and no kids, we looked at the house as simply a place to store the suit cases when we weren't traveling. Now it's a place to raise a family, but still a place we can usually afford to leave for a while.
Our rule was straight 30 year fixed or no deal. No IO, No 80/20, no adjustable rates. 30 year fixed, period.
It's a little tight right now because I'm paying $1500 a month plus car insurance for one in college. But that $1500 a month is basically what I would additionally save for retirement.
I got my real estate license in summer of 2002
I remember helping someone buy a house in december 2002
He got a good interest rate which was under six percent
Five point something percent interest rates for 30 year fixed rate loans were something to get excited about
I listened to radio and TV ads saying "interest rates will never be lower" and they said "interest rates will be going up soon"
I watched economists on the news saying interest rates will be going up "next quarter"
The interest rates didn't go up like the experts said they would
I looked up current interest rates for 30 year fixed rate loan at capital federal and they are at 5%
I used to help people "shop" for home loan
We would call 5-6 lenders and see what they had to offer.
Seems like the rule of thumb was credit score of 720 and higher to get the best interest rate