New answers tagged

2

October 2019 Update Thanks to a risk-assessment framework introduced in 2012, the situation in 2019 has improved slightly, compared with 2011, but the presence of Japanese knotweed will still harm your chances of getting a mortgage (or may adversely affect the rate, or amount of deposit needed). However, it's not impossible, although opinion seems to be ...


1

If you want to buy a house for below market price, don't fall in love with the house. Look at many houses, and focus on those which are short-sales or distressed properties. Alternatively look for properties which have been on the market for some time and have not had many viewings, and appear to be undervalued, but which also show potential. Keep an eye ...


23

the highest offer we could make is substantially below the asking price by around 5%. I wouldn't necessarily call that 'substantial', especially if the property has been on the market some time (I surmise this from "sales in our local area are slow"). That you are ready to proceed also makes you a strong contender, and reduces the window of opportunity for ...


6

Assuming it's under English law - Scotland is different - then offers are not binding. Similarly, acceptance of offers by the seller aren't binding either. It only becomes binding when the contracts are exchanged. If you are in Scotland, then check the local law. This means that gazumping is possible, and there's nothing you can do to stop it, other than ...


3

First see what information you can gather: Who are the people that are selling? Why are they selling? Is there non-monetary benefit you can give them (for example a quick sale, longer time to move out, etc)? Decide your target price - make sure it's not a round number. If you can meet in person, or talk on the phone do that. You can try the the 65-85-95-...


5

The thinking might be very logical; yet the usual problem is that you do not have the data to make the optimal decision: if there are other buyers and how much are they willing to offer; how quickly does the seller need the money... The rule of thumb is that the lower your offer the more risk that it will not be accepted. Having said that: But if we ...


8

You asked a few related questions: My question is - is a credit report actually the source of truth for debt to income calculations? Am I mistaken and instead the consumer is trusted to furnish accurate information? Does the underwriter or whomever actually call the owner of each debt that is listed to confirm the current amount and minimum payments? ...


3

Lenders are generally cautious about consumers that own income property which is mortgaged. This is based on the perception that such arrangements are very high risk - what happens if there's an issue with the rental property or it's mortgage that changes your finances to the point that you can no longer afford your newly-purchased primary residence? In part,...


3

The yield should be the amount of income divided by the amount invested. So you would subtract interest paid from your income, and add the principal to the amount invested. So it's not income since if doesn't increase your wealth, but it does increase the amount of equity that you have in the house. That means that your yield is going to decrease over ...


-1

Yes you can raise funds for down payment of new house by obtaining finance against your existing property. But you need to look at your Debt Burden. You may face difficulty in obtaining required credit limit for new house finance once you avail finance against your existing property.


4

Can you ? Yes.... probably. It depends on the equity you have in the existing house and the down payment you need for the new house and your debt to income ratio and a few other things. Should you ? Probably not. HELOC likely has far higher interest than a mortgage would. There's a reason why banks don't want you to get a loan for a down payment. ...


5

Whether 5% cash back is an advantage depends on the figures. For example, for $1m over 10 years it is advantageous; over 15 years it is not. Illustrating with calculations: s is the principal r is the monthly rate n is the number of months d is the monthly payment s = 1000000 r = 2.79/100/12 n = 12*10 = 120 d = r s (1/((1 + r)^n - 1) + 1) = 9559.44 The ...


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The important figure is how much interest you are saving each month by refinancing, which is what offsets the upfront cost of refinancing over time. (For simplicity, I'm ignoring the increase in your monthly payment realized by moving from a 30-year to a 15-year mortgage and assuming you are OK with the trade-off to pay down the principal faster.) On your ...


2

It sounds a bit cold but the least complicated thing to do is to charge your boyfriend a modest amount of rent. And if not labeled rent then some contribution on his part that eases your financial burden such as paying the utilities. After all, he's living rent free. This way, if the relationship tanks, there's no legal entanglement. The fixed term of ...


1

My boyfriend is trustworthy but we are not married or engaged or anything so the relationship could end at any point. Consider letting things stand as they are while the relationship is still at this ‘phase’, for want of a better term. I like my house and while my boyfriend is more important, I'd really rather avoid losing both. Home ownership has ...


2

If he starts paying money onto the mortgage, will the house just suddenly belong 50% to him? Or is there a way of letting him in on the ownership gradually, in a way that would be fair to both of us? You really need to talk to a lawyer, but it should be possible to write a contract between the two of you which allows for proportional buy-in. For example, ...


0

The net worth of an entity is the difference between assets and liabilities. Considering the special case of evaluating exclusively one house: If you can sell the house tomorrow for $100,000 but there's a $200,000 lien on it, then your net worth is -$100,000. If you can sell the house tomorrow for $100,000 and you own it free and clear, then your net worth ...


2

It is valid to consider the projected expenses when determining whether or not purchasing a home is a wise decision. Expenses are a key component for estimating your expected net profit/loss from buying the home. Expenses and rents help determine the market value of a home. If an investor needs to decide between buying the home and buying a stock, they ...


9

A house's value is whatever it is sold for when you sell it. This doesn't change based on how much you put into the house. There are a lot of examples of that, but let's say you buy a house for $100K. If you assume that the home's "value" increases at 4% per year (and inflation stays at 0%), your house will objectively be worth $324K at the end of 30 years. ...


1

Here is where the expenses become relevant. Assuming you live somewhere that you can rent or buy equivalent houses, imagine you pay $1500 a month rent, but your mortgage payment after buying the equivalent house would be $1200 a month. And then there is the maintenance and so on, perhaps it all adds up to $1800 a month. So you are paying $300 a month more to ...


1

You don’t have apples or oranges :) . You have homogenous units of currency, which I’ll just call dollars for ease of reference. So to work out when you break even, you’ll need to factor in every relevant financial detail, including both positive and negative tax effects. Since you’re comparing what you spend out of your own pocket in both buy and rent ...


1

First, you should be looking at the cash flow as well as the profits. You are making $91/month in profits, but because you still have to pay the principal part of the mortgage, you actually have a negative cash flow. If you refinance to a 15-year mortgage, that effect is even more pronounced: your cash flow will be worse (because you have to pay more in ...


2

This is how I see the calculation: My projected rent is: $1850 now the expenses: My monthly expenses would be: (my current mortgage split is 649 (interest) + 412 (principle). I am including the interest part as an expense) Mortgage : 649 (interest part) HOA : 510 Property tax: 352 Estimate of monthly repairs : 100 Don't forget ...


3

You're overlooking some huge tax considerations. Deducting mortgage interest First, you get to deduct the interest, taxes and insurance on the home, because it's your primary or secondary home. So I see $1001 of interest and taxes, armwave $99 of insurance, and that's $1100/month or $13,200/year of deductions. (By the way, if this is news to you, you ...


1

The benefit of saving first to buy a thing (anything) is that it costs you less - you aren't paying interest; depending on the economic climate (interest rate vs inflation) and the cost of the thing, deferring a purchase may allow you to afford something better when you can eventually buy it without borrowing. The benefit of borrowing to buy a thing is that ...


2

If you prepay your mortgage you reduce the principal balance, reducing the interest due next month and every month forward. If you prepay $1000 on your mortgage, the interest next month will be reduced by 1000*3.7%/12=30.83 You will still make the same payment, but an additional 30.83 will be credited toward principal. The month after that the principal ...


0

I'm not sure what "tilt effect" you're looking for (it's possible that there are multiple things in the world with that name). If we're going by this article or this paper, the tilt effect is a recognition that, over time, mortgage payments get effectively cheaper for most borrowers. Underwriting guidelines don't (generally) change with inflation so the ...


2

Broadly speaking, FNMA and FHLMC allow the government to ensure liquidity in the mortgage market (by ensuring that lenders have a guaranteed buyer of conforming loans) and to provide a small subsidy on mortgage rates. The intention of loan limits is to ensure that these subsidies are focused on "middle class" borrowers rather than the super wealthy. If ...


3

Yes. One 'trick' to paying your mortgage in an accelerated fashion is to use the amortization schedule, and pay 'next month's principal. That puts you a month ahead on the schedule. Put another way, if you math it, take that principal, and inflate it by applying the interest rate over the time til the current last payment, you'll see they match up. i.e. 1....


5

People already answered, but the point is you have a flaw in your thinking. December interest is not interest on december's principal payment amount. You're paying interest on $300k (which is why it's so much), not on $450 (which would be 200% interest per month), your december interest is reduced by about 0.3% (3.7%/12) of $450 (the additional principal you'...


0

The answer will, in part, depend on the country you are in, in part, on the actual terms and conditions of your contract, and in part, on the regulatory structure the lender is required to operate under. Having worked in this area for a segment of my life. None of us can actually tell you the answer. For a scheduled balance loan in the United States, yes, ...


2

The interest payment does not "go away", but the amount you have to pay will be reduced. Each month, the amount of interest accrued is based on the remaining balance; a smaller balance means less interest. You can calculate a new row in the table/schedule the following way: Interest = 0.003083 * previous balance (result of previous payment) Payment = ...


4

Interest does not "disappear", but it is reduced in proportion to your outstanding principal balance. Interest accrued in a pay period (month) = Principal balance * Interest rate (monthly) It sounds like this is what you probably meant. In your example, Dec-19 interest is reduced to what Jan-20 interest would have been without the extra payment.


2

If your home has gained a lot of equity then you are benefitting from being able to afford to live there at what is basically a discounted price relative to what it would have cost for you to have purchased today. Even if you could have bought the home on your own at the time you didn't, your ex contributed a significant portion of the down payment. Now, ...


0

In reality, buydown scheme doesn't help reduce property inventory during a housing slump. Because the bank will be wary to approve a higher mortgage amount. Ironically, it is widely used to encourage flipping during housing speculation booms. In which speculators are using the scheme as leverage to scoop many houses to flip. Here is how it works: one only ...


5

The only way to see the full picture is to create a spreadsheet with two sides: On the first side, map your income from the investment property over the years, including everything down to potential vacancies, repairs costs, and closing costs On the other side, map how much you'd make by selling the house at a given point of time and investing the remainder ...


4

This is lawyer ball Really, it's time to get the big guns involved. Even if this deal is amicable, you need outside help creating a mutually acceptable arrangement. There needs to be a written contract, and it needs to be set up right. This is how I would do it. I would use a share-based organization like an LLC in share mode. Every dollar/Euro/...


8

As Dave Ramsey says, "The only ship that won't sail is a partnerSHIP." That means you essentially have a joint venture in this property. You need to sell your half to your partner, or your partner needs to sell their half to you, end of story. Get a fair assessment of the current value of the property and pay the other party out their due, or sell it and ...


1

To add to Vicky's answer, I think his answer is still unfair to you. You are taking the risks for this house and they are/will be taking the benefits. If I were you, I would evaluate the price of the house now. Do it in two different way: With an expert: "I think this house is currently worth X on the market" Financially: "We have all payed Y for this ...


19

Is my calculation correct? More or less. Your list of expenses is not complete and repair/maintenance expenses can vary wildly. You'll also depreciate the house (not the land), so with your current numbers you could be running a loss for tax purposes which can offset income tax on other income and basically act as a discount to your cost of equity, so ...


4

Three additional things to consider. (1) Are you planning on buying a house in the new town you will be moving to or are you renting? If you choose not to sell your old house and buy a new house you will have less money available for a down payment, which will result in a longer mortgage at a higher interest rate. (2) This assumes you will be able to have ...


10

Go with DJClayworth's suggestion. If you don't, in addition to the problems he pointed out, you're in for a very messy negotiation when you sell (even if you both agree to sell at the same time and both agree to sell at the same price, which is not a given). Why? Because it's like a divorce settlement, the chances you agree quickly on how to share the ...


6

Without knowing your financial goals, income, other assets, etc, I can't make a recommendation. For example, do you have a sufficient emergency fund to cover both the expenses for this home and your new one should you lose your tenant and/or your job? However, one part of the calculation you did not mention is tenant turnover. Does your projected rent ...


33

Does it make sense for me to keep the house Are you willing to be a landlord for $91 a month? What happens if your house goes unrented for 3 months? 6 months? How will you pay its mortgage? In my opinion, you don't have enough buffer to make this worth the risk. If you could afford for it to go unrented for 6 months then it might be a good investment in ...


96

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 ...


4

Just think of it as you loaning them the mortgage payments until you sell the house. Suppose (for the sake of round numbers) you bought the house for $100k with a downpayment of $10k each and a mortgage for $80k, then you sell the house for $200k when there is still $40k owing on the mortgage. At 5% over 25 years the monthly payments are $468. In the ...


0

The above is an example of how the mortgage tilt effect actually hurts the borrower. When there is an inflation, each payment is worth less in real terms, because inflation erodes its purchasing power. In my example, the loan is 30 years with monthly payment about $2500. The blue line shows the trajectory of principal payment in the absence of inflation ...


0

The only solution I came up with is to create a spreadsheet detailing one's total mortgage expenses and comparing them to investing into index funds instead. From my calculations real estate investment is profitable if you have a 30-year mortgage with a low downpayment, presuming that real estate prices grow at at least 1/3 of index funds growth rates.


7

Yes if the interest rate is the same and overpayments are applied to principal then you can get a 30-year mortgage and pay it off as if it were a 15-year mortgage. The risk is that you decide that rather than overpaying you'd rather buy a car, or go on vacation, etc. and you end up paying it over 30 years anyways. A shorter term forces you to pay it off ...


3

A regular mortgage has its balance decrease over time (you could say it 'amortizes' over time), because the total monthly payments are higher than the monthly interest charge. Take a 100k mortgage with 3% interest, with a 30 year term. Monthly interest will be about 100k * .03 / 12 = $250, while the monthly payment will be about $420. Therefore every month, ...


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