2006-06-12 19:00:47 · 13 answers · asked by Paul D 1 in Business & Finance ➔ Renting & Real Estate
You should always put as much down as you can.
2006-06-12 19:01:44 · answer #1 · answered by MsMath 7 · 2⤊ 0⤋
With 11 other good answers do you really need one more?
Yes! I have reasons of my own, so join me in thinking.
When you pay mortgage, you pay mortgage interest. Mortgage interest is tax deductible. So if you are in the higher income bracket, you will have about 32% in Federal tax rate. If you are in a state like California, you will have 9% in state taxes. So you will save about 41% in taxes by owning a property on Mortgage.
If you are in the lower income bracket and the Mortgage is small for homes in other states, you may not even be able to get a Mortgage interest deduction. It will make sense to have a higher mortgage so that the interest payment hits the deductible amount.
If you can save on taxes, have the biggest mortgage possible that will help you save on taxes.
The other strategy will be to use a higher downpayment but an interest only loan. You can always repay when you want. But you can keep your tax deductions the same for the term of the loan.
Let me explain with an example.
Say you buy a 500K home at 6.50%.
You are in a 41% tax bracket as explained above.
Your effective post tax mortgage rate will be 3.84%.
Who will lend you money at 3.84%? So take the most possible mortgage. If you still have money remaining after buying your home, go ahead and invest. I have invested with a Financial Planner for about 9% post tax. So you are pocketing almost 5% based on a borrowing of 3.84%
For 500K that will amount to a cool 25K profit per year.
Disclosure: I am a licensed Realtor in San Jose, CA.
2006-06-13 11:19:10 · answer #2 · answered by amolheda 3 · 0⤊ 0⤋
If you plan to flip the house and are able to get a buyer while you are still closing your loan then yes it makes absolute sense.
Or if you plant to keep the house to live in then zero down would be great if a) the loan does not carry any pre-payment penalties b) the loan is a 30 year fixed and c) you know how to accelerate the pay off so that the mortgage is 100% paid off in less than 8years.
But is you plan to live in the house and make only conventional payments then the answer is NO, you will not only pay more in points but also in interest costs.
2006-06-13 02:30:27 · answer #3 · answered by selfmanagement808 3 · 0⤊ 0⤋
It depends what you're trying to do. If you're looking to build equity by paying into a home instead of renting then putting down money will be beneficial in the long run. If you're looking to get cash by holding a property in a fast growing market, then you would be better off with zero down and an interest only loan. There are plenty of online calculators that will help you find your equilibrium point; that is, how long can you hold before you begin to lose money by just paying interest. The second answer is more risky, but it has been paying off for the past 5 years.
2006-06-13 02:08:11 · answer #4 · answered by jdsorrels 1 · 0⤊ 0⤋
the biggest, and most obvious, problem with zero down is that a) it takes longer to pay off your debt, which is never good, and b) it means paying more interest because you owe more money. Sure, up front, zero down looks good, but when dealing with a major purchase such as a house, you have to realize that the best way of thinking is not short term, but long term. And in the long term, you want to pay as little as possible. Meaning zero down is not the best option. Plus, with the housing market slowing down considerably, making prices go down and selling houses taking longer, the more money you owe on a house, the less chance you have of making any money when selling it. Now don't take my word as gospel. My dad's a real estate agent, but I'm not. I'm just giving you some common sense.
2006-06-13 02:04:58 · answer #5 · answered by goodvsevil1015 1 · 0⤊ 0⤋
I am a mortgage Broker in Central Oregon. It all depends on how much money you have and what the price of the house is. I do alot of zero down loans for my clients. This market is so hot right now though that you can make 50k in equity in 6 months. Please email me if you have further questions. caisjosa@yahoo.com
2006-06-13 02:03:22 · answer #6 · answered by Anonymous · 0⤊ 0⤋
I'm in the same boat. I'll tell you what, I'm not going to fall for it, all that's going to happen is they are going to rip us off. I'm going to go with the rent with an option to buy for two years and save some money for a down payment then I think it will work better. Think about thatI.I've tried to get a loan with 0 down and they give you a run around. Don't do it!
2006-06-13 02:11:36 · answer #7 · answered by israel 2 · 0⤊ 0⤋
If you are flipping yes...if you are renting the place no...if you are buying yes...if your parents are helping to pay no at first, let them pay, then yes...if you don't have the money then no, and if so why are you buying? Hope this helps...and don't get an adjustable rate mortgage!!!
2006-06-13 02:03:43 · answer #8 · answered by James T 3 · 0⤊ 0⤋
The credit plays a big roll.u can get a better rate if your score is 800.
At closing is when u need lots, of lots of cash, that is the only time it counts !
2006-06-13 02:08:31 · answer #9 · answered by kadus66 1 · 0⤊ 0⤋
u should pay as much a su can as a down payment cuz that way ur monthy payment and APR will bw lower
2006-06-13 02:04:01 · answer #10 · answered by sebyta262 4 · 0⤊ 0⤋