Explain to Koy using small words: housing and mortgages

[snoopy369]

Don't forget to find out what the assessments are. Frankly, Koy, assuming the assessments are >= to the rent savings (which they probably are if it's only ~$200), or even close to it, I'd recommend not doing it unless you get a pretty good below market rate. The uncertainty, combined with the fact that a 3-5 year stay in a condo will be mostly interest and will give you relatively little in equity by the end (assuming a 30 year mortgage), means you probably are better off renting unless you have a reason to believe the condo will appreciate... which my bet is it won't, if they're having trouble selling them as it is (and the market isn't going to exactly get much better in the next couple of years I suspect, though as Dan notes perhaps central Maine is not as bad as other parts of the country)...

[Dinner]

Don't buy now. Prices will be cheaper a year from now and it is a buyer's market right now. Time is on your side so let him take the price hit.

[DanS]

Ya, real estate taxes are important. Less so in DC (our income taxes are high), but moreso in most other places.

[Dinner]

My property taxes basically amount to $350 per month; which is nothing to sneeze at. Factor that in to your monthly cost equations visa vi renting vs buying. Also all condos have home owners' association dues which must be paid and can suck up another couple hundred a month.

I think you'll find that you're better off renting then buying in a bear real estate market.

[snoopy369]

When I say assessments, I think i'm not just talking about property taxes... aren't Assessments the things that cover various things like the doorman and the grass mowing and other CAM? In Chicago they are usually $300-$600 in a normal building for a $200k 1BR condo, more in some very expensive/old buildings. In some buildings (say, $120k studio condo) they can be more than the mortgage payment...

[Flubber]

Originally posted by snoopy369
combined with the fact that a 3-5 year stay in a condo will be mostly interest and will give you relatively little in equity by the end (assuming a 30 year mortgage),

Just curious but why do people assume a 30 year mortage? When I have looked at the differences in payments it was always so little that my thinking was if you NEEDED the 30 year payment you were cutting things too tight.

( But personally I go the opposite way with a 25% downpayment to avoid mortage insurance fees and an initial 20 year amortization-- ) But perhaps someone could explain to me why 30 year mortgages make sense over say a 25 year amortization-- Again the reduction in required payments seems so small and the extra interest you will pay in the additional 5 years seems like so very very much

[Dinner]

A $350,000 mortgage at 6% for 30 years is $2,098.43 while the same terms & amount over 20 years is $2,507.51 per month.

That's a relatively small mortgage too. 20% extra is a lot extra but better in the long term if you can swing it.

[DanS]

Yes, condo association fees as well. You are right, Snoopy. Although I note that these fees usually include utilities, which probably Koy is paying separately now. One thing to watch out for on condo association fees is that sometimes a place will give teaser fees and then raise them later.

Flubber: 30-year is a standard time period here in the States. Fannie Mae purchases loans like these that conform to certain criteria, thereby guaranteeing a market for loan originators and lowering prices to a reasonable premium.

In any event, in truth, a 100-year or interest-only loan would make sense if you put 20% down. This is a somewhat advanced and theoretical discussion though.

[Lancer]

Offer something really low. Really low. You never know how much they need the dough. The worst they can do is say no, and you are likely better off waiting a year anyway. Look elsewhere as well and mention it to them. They'll then be worried about losing the rental income during hard times and be more likely to consider your low offer.

[SlowwHand]

Originally posted by Koyaanisqatsi


Probably not, but after spending an hour digging out cars and reflecting on the 50"+ of snow we got last month, Florida doesn't sound half bad. Hell, even Texas might be worth a shot.

Why do people insist on dragging Texas into the conversation? Stay out. Keep thinking Texas is bad. That's fine. Just go to Florida. Sure. Go to Florida.
Repeat as required to yourself. That the last thing I want is people with a negative attitude being here.
GO TO FLORIDA.

[Flubber]

Originally posted by Oerdin
A $350,000 mortgage at 6% for 30 years is $2,098.43 while the same terms & amount over 20 years is $2,507.51 per month.

That's a relatively small mortgage too. 20% extra is a lot extra but better in the long term if you can swing it.

So 409 extra bucks..... If I was that tight for 400 I would seriously question the viability of taking on a 2K a month payment

[Flubber]

Originally posted by DanS


Flubber: 30-year is a standard time period here in the States. Fannie Mae purchases loans like these that conform to certain criteria, thereby guaranteeing a market for loan originators and lowering prices to a reasonable premium.

In any event, in truth, a 100-year or interest-only loan would make sense if you put 20% down. This is a somewhat advanced and theoretical discussion though.

On the investment side I can see a lot of merit in longer terms if the assumption is that you will earn more than your mortgage rate of interest on your investments (pretty good assumption in the long term based on market history). But we are pretty risk adverse when it comes to our home (we don`t view it strictly or even mainly as an investment and plan to be here for 20 years plus) . We take a lot of comfort and security from the fact that our home equity currently exceeds what we owe by a wide margin.

[Dinner]

Originally posted by Flubber


So 409 extra bucks..... If I was that tight for 400 I would seriously question the viability of taking on a 2K a month payment

I doubt most of them are tight for the extra $400-$500 but the problem is a lot can happen in 20 or 30 years so people are attempting to limit their minimum payments due each month for the next couple of decades.

[DanS]

Originally posted by Flubber
On the investment side I can see a lot of merit in longer terms if the assumption is that you will earn more than your mortgage rate of interest on your investments (pretty good assumption in the long term based on market history). But we are pretty risk adverse when it comes to our home (we don`t view it strictly or even mainly as an investment and plan to be here for 20 years plus) . We take a lot of comfort and security from the fact that our home equity currently exceeds what we owe by a wide margin.

Well, that's your psychology, so suit yourself.

But from a financial standpoint, you should match your liabilities with usage. A house's useful life is a long, long time. Having a mortgage with a like payoff period is the optimal financial path, so long as you are able to exit the arrangement at the time of your choosing (the reason for the 20% down).

[Lancer]

As long as you are ready to make those payments every month which makes you a slave to your job, or at least to working someone elses hours for your day doing what someone else tells you to do. What happens then is that all that dough you're making goes to the house or some shiny new gas guzzler that the TV said would make you happy or sexy or free, none of which it can do. It can get you to work...