65

I see your confusion: You're looking at the interest as if it applied to the whole loan balance. That's not what actually happens--the interest rate remains the same but as you pay down the loan the amount that you are paying interest on drops. That's what that chart really is showing--as the amount owed drops the interest drops and the amount that goes ...


51

Your first sentence is written in a way that highlights a common misconception about how term loans work: Most mortgages use an amortization schedule that have you pay more interest than principal at the beginning Note the banks are not doing anything mischievous or playing with numbers in such a way to cause you to pay more interest up front than you ...


40

As much as you can reasonably afford As long as you still have an emergency fund(which you noted you will have) then its always a good idea to put down as much as you can afford for the deposit. The more you put down now the less time repayments will take or the less the monthly outgoing will be. The higher monthly payments you can afford the shorter the ...


39

Say I can lend money at a 10% rate. I lend you $10,000 and the note is for $11,000 due in one year. But, the next day, I can sell the note for $10,100, the buyer willing to get a return of 8.9%. ($11K/$10.1K). Why would I lend that $10K for a year, when I can turn over the loan and make 1% in a day? The mortgage is more complex, of course. But the concept ...


38

Each of the recent changes you listed has the following effect on your credit score: $4K on credit line: increases your debt utilization. The smaller the denominator (sum of all credit limits of CC's and lines of credit) the more this will lower your score. The good news is, within 30 days of paying that off your score will jump back up. Co-signing a $20K ...


32

To quote the poet Robinson... You better shop around. Talk to a few other banks and brokers, tell them what rate you want, and if they can't get it don't bother applying. However, online "rates" are generally lower than you actually get - they are enticements to get you to apply with them, and there's always some reason that you don't apply for the best ...


22

To avoid risk from rising interest rates, get a fixed rate mortgage. For the life of the mortgage your principal and interest payments will remain the same. Keep in mind that the taxes and insurance portion of your monthly payment may still go up. Because you own the property, the costs to maintain the property are your responsibility. If you rented this ...


20

I would ask her to be certain, but it should not hurt your loan officer. The loan officer gets rewarded for originating the loan. There is no penalty for them if a loan is prepaid that I have ever heard of. However, you need to look at what the closing costs are for the new loan to know if this is a good idea. Consider how much out-of-pocket you'll need ...


18

Wow, you are in an excellent situation. If it was me here is what I would do: 0) I would only buy if I plan to stay in that location for about 5 years. If you are planning to move, then renting is not a waste of money. Also what are your future plans for your family? Are you planning on more children? Buy with that in mind. 1) At your salary, you ...


18

tl;dr: I think you can find a much better deal. Doing a strait refi will cost you some amount of money. However, a 2.5% fee ont top of closing costs seems really high. You can get a quote from Quicken loans pretty quick and compare their fee. Also I would check with a local bank, preferably one you already do business with. The 2.5% is probably their ...


18

It is not so much that you are miscalculating, but that what you are calculating is not meaningful in the context you're trying to use it ("the annual rate of the loan"). You are essentially trying to compare apples with oranges. You have taken the total interest paid (over one or 20 years), expressed this as a fraction of the original loan amount, and then ...


17

Can I pay $12,000 extra once a year or $1000 every month - which option is better? Depends when. If you mean 12K now vs 1K a month over the next 12 months, repeating this each year, now wins. If you mean saving 1K a month for 12 months then doing a lumpsum, the 1K a month wins. Basically, a sooner payment saves you more money than a later payment. The ...


16

The question you really need to answer is: What else could I do with the money? Consider that you may need to furnish the house, or you may want to improve or remodel it, and you should reserve some funds to do that. You also need to consider how the down payment affects the transaction. For example, you will most likely get a better interest rate with 20%...


15

Unfortunately, you've committed a bit of a home-buying blunder. Large new lines of credit close to home purchase are not advised. New lines of credit after an offer has been accepted have caused many purchases to fall through as buyers become unable to secure financing (until closing, financing is often not guaranteed). The good news here is that you did ...


15

Well besides that usually the money percentage you put down influences the interest rate (the more you put down the cheaper interest you get) you should consider the opportunity cost. This means if you recieve a higher interest on an investment than the rate of the mortgage it makes more sense to invest and have a higher mortgage.


10

I've never heard of a loan product like that. Yes, if they keep the funds in an account, it is no risk to the bank, but they would essentially need to go through the loan process twice for the same loan: when you pick a house, they need to reevaluate everything, along with appraising and approving the house. Even if you did find a bank that would do this ...


10

This contradicts the other answer so I think it's worth mentioning: I believe different companies have different pay structures and the only way you can know for sure is by asking your loan officer. A friend of mine purchased a house earlier this year and just last week he told me he wants to refi but is currently waiting because he too doesn't want to ...


9

As a legal contract, a mortgage is a form of secured debt. In the case of a mortgage, the debt is secured using the property asset as collateral. So "no", there is no such thing as a mortgage contract without a property to act as collateral. Is it a good idea? In the current low interest rate environment, people with good income and credit can obtain a ...


9

1973 was the first year of the oil crisis. Inflation increased radically, so inflation adjusted rates went negative. Mortgage rates adjusted once they realized that the new inflation wasn't a temporary change. The early 1980s were when the Federal Reserve increased interest rates to end the stagflation of the 1970s. The interest rate increase pushed ...


9

What does this indicate about rate prediction over the next few years? It indicates that the market believes that the near-term interest rate will drop below 2.89% (to bring the average down from 3.49% to 2.89%) over the next 5 years.


9

You have not necessarily spoken to a bad mortgage adviser. Lenders have two main channels to the market – direct, and intermediary (through a range of different kinds of advisers). Some lenders specialise in the intermediary channel. They offer their best deals through advisers. If they offer direct deals at all, they may not be particularly competitive. ...


8

I often use the cliche "don't let the tax tail wag the investing dog." In this case it's the house dog. If the tax consideration is enough to sway your decision either way, you need to sit down and re-evaluate the purchase. A bit more detail - Say your state tax is 4% (pls add a state to your question if I'm way off, or no state tax.). That's $8000 or so ...


8

How can one offset exposure created by real-estate purchase? provides a similar discussion. Even if such a product were available in the precise increments you need, the pricing would make it a loser for you. "There's no free lunch" in this case, and the cost to insure against the downside would be disproportional to the true risk. Say you bought a $100K ...


8

tl;dr: I agree with Pete B.'s assertion that you should continue shopping. That's not the whole story though; there are other factors that can raise your rate, and affect your closing costs. The published rate is typically the best rate you can get. Here are some other factors that can raise your rate: What is your credit score? (Obviously the higher the ...


8

It sounds strange, but is partially a matter of idiosyncratic terminology. There are three components to what you pay for a Danish morgage: Repayments of principal. "Interest", which is forwarded to the owners of the covered bonds that funded the mortgage. (This might be either a fixed rate or contractually specified to depend on interbank rates in a ...


7

There are multiple answers here which discuss credit scoring criteria. A good score doesn't require that you pay interest on a loan. I like that you're thinking about this so far in advance. A credit inquiry does impact your score for 2 years. I refinanced my mortgage in November 2011, and the result was nearly $5000 less interest per year. Along with that, ...


7

2.5%? Whoa, you are being robbed there. Straight-up, stripped-down, and bent-over-a-table robbed. Never agree to "fees". If they don't want to do the work to give you a loan, there are other lenders who do. Rarely agree to "points". If you know -- and I don't mean "think", I mean "know" -- if you know that you are going to hold that loan much longer ...


7

Will this come up during the underwriting? Yes. You will have to disclose all of your liabilities when you make the loan application. Is the score I got PQ for locked in? It depends on the lender. They might run another hard credit check, or they might not. If they do, you have to authorize it (but if you don't authorize it and they "require" one then ...


7

The general consensus on paying points to lower your mortgage interest rate is that it's a bad idea. The reason is that it takes a while to break even, say 5-10 years before it was worth it to do so. If you refinance or sell before the break even point then the purchase of points was wasted. If you start overpaying the mortgage to pay it down early, this ...


6

The answer depends on what else you'd do with that 2%. But first, let's look at some actual numbers. For simplicity's sake, let's say you have a £100k mortgage outstanding, your payment is £1000 per month, and you want to pay £1000 extra per month. 2% interest, compounded monthly for simplicity, so .02/12 = .00167% per month. (Your interest is probably ...


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