65
votes
Does paying a mortgage early mean you effectively paid a much higher interest rate?
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 ...
- 5,068
51
votes
Accepted
Does paying a mortgage early mean you effectively paid a much higher interest rate?
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 ...
- 47.2k
40
votes
Accepted
First time buyer- How to decide how much to put toward a deposit?
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.
...
- 651
39
votes
Accepted
What incentives do banks have to gather up loans into pools (backed by Ginnie Mae)and selling them?
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/...
38
votes
Accepted
Going house hunting next week and my credit score just dropped by 100+ points
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 ...
- 47.2k
32
votes
Accepted
How do you figure out if a mortgage interest rate is reasonable?
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 ...
- 131k
30
votes
Accepted
Is there a strong correlation between credit score and mortgage rate in the US?
Criteria is not consistent between lenders, so it's not some set figure, but aggregated data is available to show the impact that credit score can have.
From myFICO's Loan Savings Calculator:
This is ...
- 69.1k
20
votes
Accepted
Refinancing immediately after closing on a house purchase
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 ...
- 131k
18
votes
First time home buyer - Need suggestions and views on few things
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 ...
- 76.1k
18
votes
Mortgage refinancing fees
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 ...
- 76.1k
18
votes
Does paying a mortgage early mean you effectively paid a much higher interest rate?
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 ...
- 9,105
17
votes
Paying extra on a mortgage. How much can I save?
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 ...
- 2,680
16
votes
First time buyer- How to decide how much to put toward a deposit?
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 ...
- 1,020
15
votes
Going house hunting next week and my credit score just dropped by 100+ points
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 ...
- 69.1k
15
votes
First time buyer- How to decide how much to put toward a deposit?
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 ...
- 997
10
votes
Accepted
Can one get a house mortgage without buying a house?
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 ...
- 115k
10
votes
Refinancing immediately after closing on a house purchase
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.
...
- 47.2k
9
votes
Accepted
Why did the change in average real mortgage rates in 1973-74 and 1983-84 swing so wildly?
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 ...
- 21k
9
votes
Can one get a house mortgage without buying a house?
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 ...
- 6,400
9
votes
What does it mean when 5 year fixed is lower than 5 year variable
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....
- 131k
9
votes
Accepted
Mortgage brokers - should I expect to get a better deal than I can find myself?
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 ...
- 3,710
8
votes
First time home buyer - Need suggestions and views on few things
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-...
8
votes
Mortgage refinancing fees
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 ...
- 47.2k
8
votes
Accepted
What's the incentive to offer consumers loans with negative interest?
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 ...
7
votes
Mortgage refinancing fees
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 ...
- 2,321
7
votes
Going house hunting next week and my credit score just dropped by 100+ points
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....
- 3,423
7
votes
Accepted
Is it beneficial to pay mortgage points if I have high income in the year I am starting a mortgage?
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. ...
- 47.2k
6
votes
First time home buyer - Need suggestions and views on few things
I see that you have considered the value of the tax deductions Presumably you are in a area with fairly low property taxes. Another thing to consider is that when you sell, as long as you use any ...
- 3,719
6
votes
Accepted
Repaying a mortgage early
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 ...
- 35.7k
6
votes
Mortgage vs cash for a first-time home buyer
A single person making 6 figures is in the 24% tax bracket, a taxable income over $82,500.
This means a 3.125% interest rate costs you a net 2.375%*. This is less than long term inflation. I ...
Only top scored, non community-wiki answers of a minimum length are eligible