to me that is really dumb. Why would you pay all interst for your house. I woulnd't even do a thiryt year mortgage. First fifteen years is all most.ly intrest. I can't figure it out. Are these same people naive and listen to real estate agents or mortgage brokers. there like any other salesman. Out to make the sale and that's it.
2006-09-30 06:17:40 · 11 answers · asked by Anonymous in Business & Finance ➔ Renting & Real Estate
I understand you can use the money for another investment. However your not likely to get an investment return higher than your interest rate. Without risk anyway. I also know that people can take the arm and try to sell higher than they bought it for. However, how much can a home go up? Homes more than doubled since 2001. My opion is there are alot of naive (dumb) people out there. They listen to the agent that says it will keep on going up and just take any amount of mortgage. I see these insane prices for homes. But average salary's haven't gone up much. Also how can you buy ridicuoulsy priced house hoping to get a promotion in the future to pay for it. It sounds insane to me. Or maybe i'm the one crazy
2006-10-02 07:48:41 · update #1
You are right about that intellectual level. Tycoon control the Real Estate Market. It is a Raise in overall prices and a Lowering of Interest rates to sucker people into buying houses. let me put it this way.
15 years ago I bought a Town House for 135,000.00.
The Interest was very high at that time. 10.25 percent. OK Low price, High Interest. That was because the plan was to lower the interest rates gradually to force people to Refinance to lower payments. I started with a 102,000.00 Mortgage.
After a few years I Refinances and brought the Interest rate down to 8.33 percent, but the Refi cost raised my principle back up.
After a couple more years, the Interest rates were lower so I Refinanced again. The new rate was 6.5 Percent. At this time, the Market was so low I owed more on the house than what the full Market Value was.
After a couple more years the rates went down to an all time low. I Refinanced again and brought my rate down to 5.35 percent fixed and that i where I am now. I still have a Mortgage of 89,000.000 on the Townhouse and I purchased in in April of 1989
That is how they control finances. Refi makes money for Banks and Title Insurance companies and that is the name of the game. Relieving you of the money in your wallet. Them that has; gets.
The ARM is a device for getting you to refi and then sticking it to you later when the rates go up. They control everything.
2006-09-30 06:32:23 · answer #1 · answered by Anonymous · 0⤊ 0⤋
The truth is if the value of the real estate increases faster than the interest rate you've made a good decision if it is what allowed you to "get into" the housing market. In some parts of the country the houses are so expensive that interest only loans allow investors to buy now and pay later. For people in careers that will expect a rising salary base this can be a good choice. They are betting the price will continue to go up after they buy. If prices fall, then it will take longer for you to recapture your original investment. That is called investment risk. If your income is low enough you can deduct the mortgage interest which lowers your true cost even more.
2006-09-30 06:35:54 · answer #2 · answered by Jessica M 4 · 0⤊ 0⤋
An interest only loan gives you more borrowing power - if you are stuggling to raise enough money right now.
Also, if you get an interest only loan at low rates - maybe 3-4% a year or two ago & use the difference in repayments to invest, you may create more equity, than paying a conventional mortgage.
I was going to do that but I compromised, I refinanced a 30-year first mortgage & a 10-year second mortgage into a single 15-year mortgage & the lower interest rate meant I now pay less than I sued to on the 2 mortages, and I pay the new mortgage off sooner.
2006-09-30 06:25:00 · answer #3 · answered by dryheatdave 6 · 0⤊ 0⤋
An interest only loan is good for certain situations. If the market is going up, and you plan to sell before the prices drop, you'll benefit from an interest only loan.
Adustable rate mortgages are good when you get a low rate and you plan to sell before the rates skyrocket.
Unfortunately, brokers and banks sell these techniques to people who cannot afford the mortgage in the long run. These folks want to own so desperately that they don't look at the big picture.
But the sale was made and that's what counts, right?
An apartment on my block is on the market for $750,000. Not the building, one condo. Shark agent told my that I could afford it. I make a good salary, but NOT THAT GOOD!
2006-09-30 07:48:48 · answer #4 · answered by Anonymous · 0⤊ 0⤋
There are several reasons people do this...the worst reason is that they can't afford to pay more than the interest only amount every month. However, some "good" reasons exist as well, ie., you can invest in another property or investment and make payments on both for the same combined monthly payment, or you don't expect to live in the interest only home for an extended period of time, or you expect the real estate to go up in value where you can sell for a profit, or you expect the interest rate to remain attractive...etc.
2006-09-30 07:11:50 · answer #5 · answered by skee_123 2 · 0⤊ 0⤋
those are the loans that were given human beings into difficulty. After X type of years (even with the words are) your cost will bypass up a particular share above "suitable". in case you get a 5-twelve months arm your cost will be fastened for 5 years (say fastened at 5.75%) yet after that it's going to bypass as a lot as suitable + 2% or so. meaning in case you purchase the homestead now, in 2013 your cost will bypass as a lot as even with the right is in 2013 (13% of Obama wins, 6% if McCain wins) + 2% so it is going to likely be 15% or 8% or so, a lot more suitable than what that's now and could regulate with the marketplace. in this marketplace that's ideal to fasten in that present day 6.5% or so, till you understand you'll promote the homestead earlier the speed starts adjusting.
2016-12-04 01:43:46 · answer #6 · answered by ? 4 · 0⤊ 0⤋
People want to buy more house than they can really afford, and that is the way they can afford the payments.
A good agent will help you figure what your budget really is, and not take you to anything that cannot be believable gotten for that amount of money. A good loan officer can also help. But it's very easy - and many people do this to themselves - for people to get a wild hair about "just going to look" and then they decide they have to have it. Well, duh. The reason it's more expensive is that it's a more attractive property.
2006-09-30 07:43:55 · answer #7 · answered by Searchlight Crusade 5 · 0⤊ 0⤋
If you believe you will be making more money next year, (such as a new graduate on the way up the career ladder), or if you don't intend to own the house long enough to reach the ballon payment, it would make sense. But it's always risky - what if you don't get that promotion, or you can't sell when you want to?
2006-09-30 08:07:53 · answer #8 · answered by leezard 2 · 0⤊ 0⤋
I agree that there are some unscrupulous salespeople out there. But these loans can be very useful in the right hands.
2006-09-30 06:25:15 · answer #9 · answered by Understood 3 · 0⤊ 0⤋
It probably sounds good at the time and they aren't very knowledgeable. Fixed rate is the best way to go.
2006-09-30 06:26:14 · answer #10 · answered by jackie 6 · 0⤊ 0⤋