Should I get an intrest only loan on a house and put the money I would save from there in an IRA or mutual bonds?
Or should I just get a regular 30 yr fixed and make an extra 2 payments per year.
I plan on selling the house in 2-5 years.
2007-12-09 16:30:59 · 8 answers · asked by Okay Hero 2 in Business & Finance ➔ Personal Finance
"get a regular 30 yr fixed and make an extra 2 payments per year"
You can not guarantee that the price of the house will go up in 2-5 years to cover the cost of the Realtor fees. You need to make the loan less then the original as fast as possible, using the interest only method you could be out of pocket for the Realtor fees in 2 years with no profit.
2007-12-09 16:41:37 · answer #1 · answered by Carl P 7 · 0⤊ 0⤋
Get the 30 fixed mortgage. If you get an interest only mortgage and the value of the house goes down you will owe more than the house is worth when you sell. As far as investments, does your employer offer a 401(k) plan? If so, do they offer a match? If you are not in your employer's 401(k) plan then sign up for at least as much as they are willing to match, if you don't then you are missing out on free money. If your employer will match the first 6% of your contribution and you contribute 12% of your salary, then you have made a 50% return on your money before you even start choosing your investments. The HR department where you work can run the numbers for you so that you will know how (or if) your pre-tax contribution will affect your take-home pay. In my case my take-home pay actually went up with my 12% contribution because it put me in a lower withholding bracket. So I started out with a 50% return and a tiny bit of extra money every week. That was when I realized how much of my salary was going to taxes. Now, instead of going to taxes, the money went to an account with my name on it instead of the IRS.
As to mutual funds, I have been invested in mutual funds for more years than I want to count. But mutual funds are not all safe and they don't all make money every year. The dot com crash a few years back proved that. That being said, at 24 you can afford to take some risk to achieve a better return than a 54 year old. Because everyone's situation and goals are different I would advise you to spend a few dollars and sit down with a Cettified Financial Planner (CFA) and go over your finances and get an idea of what would be best for you as far as investments and taxes.
Chanda-I read your link. I laughed particularly at the sentence that stated that no one has ever lost money with a mutual fund. I have, personally, lost money in a couple of mutual funds. There are good funds and bad funds and even some of the good funds have bad years. At least the link stated that mutual funds are not FDIC insured, they got that part right.
2007-12-09 19:41:15 · answer #2 · answered by Jeanne R 7 · 0⤊ 0⤋
It depends on the interest rate of your mortgage and the investment vehicle you choose.
In short, the money that you save as principal and the extra payments you are willing to put in must have better returns than the interest rate on your mortgage.
e.g. if your mortgage interest rate is 7% then the investment vehicle should make at least that (after all tax deductions) else you would lose money by investing there.
Also, you may not be able to sell in the 2-5 yr window that you plan for. So the mortgage you select should be able to accomodate your change of plans.
Good Luck
2007-12-09 16:49:44 · answer #3 · answered by iBalaAryan 3 · 0⤊ 0⤋
Get the 30-year fixed rate mortgage and make extra payments. Even though you plan on selling the house soon, you never can be sure how things will go. With the real estate market going downhill in many parts of the country, you would have less risk with the fixed rate mortgage. Today, many defaulting homeowners with adjustable rate loans wish they had chosen a fixed rate.
2007-12-09 17:58:31 · answer #4 · answered by Uncle Leo 5 · 0⤊ 0⤋
If you really plan on selling the house in 2-5 years, you should think twice about even buying it. You may not get back what you put into it. Housing is depreciating now and no one really knows when it will bottom out.
2007-12-10 02:04:44 · answer #5 · answered by Anonymous · 0⤊ 0⤋
Regular 30 year fixed . Make sure you can pay for the house if you can't sell it. The market is awful and no telling when it will improve.
2007-12-09 16:42:44 · answer #6 · answered by been_there_done_that 5 · 0⤊ 0⤋
$719K for seventy 8 acres of ingredients looks heavily inflated for undeveloped vacant land. in case you have been to p.c.. this up, you may ought to be doing it for sentimental motives, not investment. family members trusts may additionally get frightening. The greater people in contact the greater it may bypass sideways. I additionally accept as true with the others which you would be greater suitable off spending your cash on knocking off something of your pupil loans. solid success on your determination!
2016-12-17 13:07:07 · answer #7 · answered by Anonymous · 0⤊ 0⤋
Buy something wholesale and sell it retail on Ebay!
2007-12-09 16:47:18 · answer #8 · answered by Anonymous · 0⤊ 1⤋