293

You have a misunderstanding of what a mortgage means. The bank does not own 80% of your home. Instead they have lent you some amount of money, and they have a lien which means they can possess your home if you fail to pay it back. They are not responsible for any costs of your home. I know people popularly say "the bank owns 80% of my home" but it is not ...


233

Ask your investor friends if you already owned the house, would they be advising you to take out a mortgage in order to invest elsewhere. If not, ask them to explain the difference between taking out a mortgage on the day you buy the house and taking the same mortgage out the day afterwards.


142

I am a firm believer in the idea of limiting debt as much as possible. I would not recommend borrowing money for anything other than a reasonably sized mortgage. As a result, my recommendations are going to be geared toward that goal. The top priorities for me, then, would be to make sure, first, that we don't have to go further into debt, and second, ...


134

How do you buy 1 house a year? You save up the money you make from the rent for a down payment on the next house. Then you save up the money from those two houses and buy two more the next year (or one bigger one). Rinse, repeat. what bank would be willing to give you that loan? You'd be surprised... This is essentially a major cause of the 2008 ...


112

It's a little unusual, but I don't think the financial terms are completely unreasonable on their face. What you describe is similar to an interest-only loan, where you make payments that only cover the interest due each month, and the entire principal is due as a single "balloon payment" on a specified date (in this case, the date on which the condo is ...


101

Your calculations are correct if you use the same mortgage rate for both the 15 and 30 year mortgages. However, generally when you apply for a 15 year mortgage the interest rate is significantly less than the 30 year rate. The rate is lower for a number of reasons but mainly there is less risk for the bank on a 15 year payoff plan.


97

Transfer the ownership of the house now. If you have broken up and your SO has moved away you don't want them to have a share in the house you are living in. They can cause you a lot of trouble down the line, including: vanishing and never paying you back any loans; preventing you selling the place when you want to (by refusing or just by not being ...


94

They want to gauge the chance of a successful sale. There's nothing quite as frustrating when selling and moving to a new home as getting into escrow, doing all the paperwork, crossing off all the check lists, only to find out that your buyer didn't qualify for the loan and the mortgage fell through. By asking about your down payment (20% or more is often ...


86

The rent payment is in principle taxable. However, you should be able to take advantage of the "rent a room" scheme, and the proposed rent falls well under the £7,500/year tax threshold for that. So no tax will be actually payable and you don't have to formally declare it as long as you stay below that threshold. You should also be fairly well legally ...


83

I can think of a few reasons why they seem like a bigger deal to people than similar situations with other loans. Mortgage values are a lot larger than car loans. For many people, real estate is by far their largest investment. Being underwater on your car represents relatively few dollars by comparison. Student loans can potentially be scarier, but how ...


80

I think you have a misunderstanding in point 2: Effectively, the cost of the mortgage in the first year would be much higher than the nominal ~3.5 percent interest rate of the loan. No, the rate of your loan is how much interest you pay relative to the outstanding balance. In the first year of a mortgage with a constant monthly payment, yes, you pay more ...


79

Logistics of borrowing in a different country aside, financially if the reason the interest rates are higher is because inflation is expected to be higher, you might be trading smaller interest payments for the depreciation of your mortgage payment in the foreign country. So let's look at this scenario: the balance on the mortgage is 10,000,000 XYZ (where ...


76

You submitted a claim for damage to the deck. The insurance company notified the mortgage company. Now the mortgage company wants to make sure that the collateral for the loan is still in good condition. They want you to make the repairs that you insisted needed to be done. They may even require you to use a licensed contractor before releasing the funds. ...


75

Loaning money to close relations tends to end poorly. You are better off not loaning your older child money. This solves all your issues except for one. You mention that your cash savings are earning "almost nothing". Is this an emergency fund, or money that can be invested? If it is an emergency fund, you have yet another argument against paying off ...


71

In other words, math. All the other answers are great, but I thought I might add something concrete to clarify slightly. Consider a counterexample. Suppose I borrow $120000 at 1%/month interest (I know mortgages are usually priced with annual rates, but this will make the math simpler). Further suppose that I want to pay a fixed amount of principal each ...


69

You're borrowing money from someone else, and "interest" is the cost for borrowing money. There's no Greedy, Evil Bankers conspiracy at all: it's just math that the cost is high when you owe a lot. This should incentivize you to: borrow as little as possible, and pay extra early in the loan. (What is a Greedy, Evil Bankers conspiracy are pre-payment ...


68

Compared to the other answers, I feel like I'm taking crazy pills, because: Is my following calculation correct? Sorry to be the bearer of bad news, but no, this is not correct. In 3 years, if the market gets soft, and I have to sell the house for $200,000. Am I still better off than renting, because, $180,000 (taking off 20k for the realtors and ...


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 ...


63

Paying off your house quickly should be a #2-level priority, behind making sure you have some basic savings but definitely ahead of any investing concerns, because your house is not an investment; it's your home. (If you're brave/foolish enough to try buying houses-as-investments in the current climate, this obviously doesn't apply to you!) This isn't a ...


63

RocketLawyer has a brief review of how to place a lien. Searching Money.SE for 'lien' may also turn up some helpful information for similar situations. You should exercise extreme caution when contacting interested parties about a debt, because it can be viewed as a confession of the debt, or renew the statute of limitation on the debt. But the company that ...


58

With the standard "I am not a lawyer" disclaimer, consider this question: If you and your girlfriend split up sometime after purchasing the house but before getting married, would you expect her to repay you for the closing costs and downpayment? That is, if you write her a check for $5k, and 6 months after she signs the papers for the house one of you ...


57

The problem comes when the borrower cannot afford his home. If a borrower buys more home than they can afford, as long as he can sell the house for more than he owes, he's not in a disastrous situation. He can sell the house, pay off the mortgage, and choose more affordable housing instead. If he is upside-down on his home, he doesn't have that option. ...


57

I can use that property to get a loan for another real estate? Or that's not how loans work? That's not how secured loans generally work. You could get a mortgage on your rental property, but the bank will most likely ask why you are getting a loan (to find out if it is because you are in financial distress). You might as well just buy the second property ...


57

Private mortgage insurance protects the lender if you stop making your mortgage payments. It does not benefit the borrower, aside from the fact that many lenders require it if your down payment isn't large enough. Paying for PMI is essentially paying for insurance to protect someone else's investment - if you're not required to do it, there is no possible ...


56

This is why we tell people not to co-sign unless they are able and willing to risk that money becoming a gift... or are able and willing to treat it as business rather than family. Unfortunately that advice is a bit late now to help you. When you cosigned, you promised the bank that you would make any payments he didn't. The bank doesn't care why he didn't,...


56

Two mortgages with the same interest rate and same monthly payment are identical in their total cost and time-to-repayment, regardless of the loan term. The big caveat here is that the 25-year and 30-year mortgage rates are in fact identical, and that there is no prepayment penalty on the mortgage. So long as that is the case, you can take a 30-year ...


55

You said that you figured the interest you will have paid over the first 3 years will be the same with the 15- and the 30-year mortgages. That is not quite accurate. Let's look at the numbers. From the monthly payment numbers you gave, it looks like you were figuring on a 4.0% rate. That seems quite high, as the current national average mortgage rates ...


54

You can make a contingent offer: "I will buy this house if I sell my own." In a highly competitive environment, contingent offers tend to be ignored. (Another commentator described such a contingency clause as synonymous with "Please Reject Me".) You can get a bridge loan: you borrow money for a short term, at punishingly high interest. If your house ...


53

No, you don't need to take a mortgage - if you have enough cash (or other assets) to pay your sister her share, or if she is willing to take it in installments over the next years. Mortgages are not needed to buy houses, but to pay for them - subtle difference. If you can pay - in whichever agreed way - without a mortgage, you won't need one.


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