A deal just blew up before my eyes and I could not stop it...

[chewyxrage]

get a 10/1 5-2-5 LIBOR IO conforming loan


you will want the interest only

use savings to invest or you can always pay down the prin balance if you would ever want to.

this is like a foreign language to me

 

[chewyxrage]

you might be able to get it with 10% down........

but you have to pay PMI (private mortgage insurace), which'll cost you another 100-200 bucks at least.

anything less than 20% down and you have to pay PMI.

$100-200 is nothing....

Saving 20% vs. 10% would take me years......

 

[calveless wonder]

this is like a foreign language to me

lol...in laymans terms.

get a 10 year ARM (30 year loan fixed for 10 years. there's no way you'll be in the same loan for 10 years, but still basically gives you the security of a 30 year fixed.)

he suggests you go interest only that way you're not locked in to paying the principal everything month.

you can either take the savings and invest it, or pay down the principal at your discretion. (will probaly work out to $200 a month)

wise choice considering most equity is NOT built through principal reduction and you can probably get a higher ROI investing that in something else (i.e. another property, a business etc)

 

[chewyxrage]

lol...in laymans terms.

get a 10 year ARM (30 year loan fixed for 10 years. there's no way you'll be in the same loan for 10 years, but still basically gives you the security of a 30 year fixed.)

he suggests you go interest only that way you're not locked in to paying the principal everything month.

you can either take the savings and invest it, or pay down the principal at your discretion. (will probaly work out to $200 a month)

wise choice considering most equity is NOT built through principal reduction and you can probably get a higher ROI investing that in something else (i.e. another property, a business etc)

So what's the advantage? I'd get a lower rate for getting an ARM?

I assume you meant I wouldn't keep the same loan for 10 years because I'd refinance for a lower rate, correct?

So get the ARM, save $200 a month and refinance before 10 years...right?

lol...I'm quite new to this, I've started exploring buying a house recently (since I graduated college and am now renting)...I'd like to be investing in something (ideally a duplex). I dispise renting. Plus, lol, I want to grow some weed eventually, which ain't gonna happen in an apartment

I'm definatly gonna hit you RE posters (jnev, you, reggin) up for lots of advice once I go through w/ it.

 

[calveless wonder]

So what's the advantage? I'd get a lower rate for getting an ARM?

I assume you meant I wouldn't keep the same loan for 10 years because I'd refinance for a lower rate, correct?

So get the ARM, save $200 a month and refinance before 10 years...right?

lol...I'm quite new to this, I've started exploring buying a house recently (since I graduated college and am now renting)...I'd like to be investing in something (ideally a duplex). I dispise renting. Plus, lol, I want to grow some weed eventually, which ain't gonna happen in an apartment

I'm definatly gonna you RE posters (jven, you, reggin) up for lots of advice once I go through w/ it.

you'd refinance before the 10 years for something. whether to cash out equity you've built up, get a lower rate...or you may even up selling your house.
only 1% of people actually finish paying off their original 30 year loan. most people refinance on average every 3-4 years. most of my clients every 2-3 years lol.

The rate difference between a 10 year ARM and a 30 year fixed isn't that dramatic, but i believe you can't get an interest only on a normal 30 year fixed w/ most banks now. programs just don't work that way (jnev might correct me though, most of my clients have SHIT credit and don't qualify for them anyways).

Renting does sucks... a duplex is good for cash flow and reducing your monthly nut. careful about the weed thing though lol. your tenants could totally use that against you

 

[chewyxrage]

you'd refinance before the 10 years for something. whether to cash out equity you've built up, get a lower rate...or you may even up selling your house.
only 1% of people actually finish paying off their original 30 year loan. most people refinance on average every 3-4 years. most of my clients every 2-3 years lol.

The rate difference between a 10 year ARM and a 30 year fixed isn't that dramatic, but i believe you can't get an interest only on a normal 30 year fixed w/ most banks now. programs just don't work that way (jnev might correct me though, most of my clients have SHIT credit and don't qualify for them anyways).

Renting does sucks... a duplex is good for cash flow and reducing your monthly nut. careful about the weed thing though lol. your tenants could totally use that against you

haha

what's why I post a "420 friendly" message when looking for roommates If I get lit w/ them they can't say much...

Thanks for the response. What do you mean interest only? I'm not sure how that is different from a normal loan...

 

[calveless wonder]

haha

what's why I post a "420 friendly" message when looking for roommates If I get lit w/ them they can't say much...

Thanks for the response. What do you mean interest only? I'm not sure how that is different from a normal loan...

*smacks forehead*

j/k

ok, when you pay a loan...you usually pay 2 things (not counting taxes and insurance).

1.) interest to the bank
2.) principal, to knock down your principal balance

in an interest only loan, you don't pay any principal. First 10 years of a 30 year loan you're paying mostly interest anyways...so an interest only can be very beneficial assuming you take that money and invest it elsewhere that it can create a high yield (as i said, a business or another property etc)

as i stated, most equity is not created through reduction in principal. my dad has had his mortgage for 15 years and has barely made a dent in his 30 year balance. however, he gained a shitload of equity from the appreciation over the 20 + years we had the home.

 

[chewyxrage]

*smacks forehead*

j/k

ok, when you pay a loan...you usually pay 2 things (not counting taxes and insurance).

1.) interest to the bank
2.) principal, to knock down your principal balance

in an interest only loan, you don't pay any principal. First 10 years of a 30 year loan you're paying mostly interest anyways...so an interest only can be very beneficial assuming you take that money and invest it elsewhere that it can create a high yield (as i said, a business or another property etc)

as i stated, most equity is not created through reduction in principal. my dad has had his mortgage for 15 years and has barely made a dent in his 30 year balance. however, he gained a shitload of equity from the appreciation over the 20 + years we had the home.

Ah, I see.....so your just taking care of the interest part...but not paying on the principal part and investing the rest of the money somewhere else.

To me, a person who is NOT trying to be a landlord (besides a duplex, which would be infinately easier) the money would be invested in the market, which may or may not be a greater return than 6.5%.......doesn't sound too appealing.

How does using an interest only loan effect the amount of equity in your house? no difference?

 

[dead_reggin_storage_fashi]

How does using an interest only loan effect the amount of equity in your house? no difference?

the balance never goes down.

have 200k with an interest only loan your balance will always be 200k.

no it isnt bad at all.


the balance will only go if you pay down the princ. If you do pay down the balance an interest only is the way to go as the payment is determined by the remaining balance. So you start with 200k at 3 years down the road you only owe 175k on the loan. Your payment is based off the new balance. It is progressive and you are rewarded for sending extra to the princ.

A 30 yr fixed for example if your payment is $1500 fixed at 6.75% your payment will always be $1500 for 30 years even if you only owe $20k on the loan.

the average home owner refi's every 3-5 years or buys something new every 3-5 years. etc

I wish I had this link that shows 2 guys who one goes for a 30 yr fixed and one goes for an IO. Show how both make some income etc and are the same person and the 30 yr guy just tries so hard to send in extra to pay down the balance while the IO guy takes the savings invests etc.

10 years down the road the 30 year fixed guy still owes 160k on his 200k loan and the guy who went with the IO loan still owes 200k but he now had 100k in cash aval. to pay down the balance if he wanted or keep investing while the 30 yr fixed guy all his money is his home


chewy you FYI you get better interest rates in Single family homes
IL has $$ property taxes
maybe try an FHA loan? only need to put 2.25% down put you will pay MIP (.0052 of the balance monthly) 120k loan extra monthly will be $50 (yes the up front mortgage insurance as well)

since you just got out of college the FHA loan uses the school history to your benefit while some convention loans need 2 year job history etc. FHA doesnt if you have been in school

in IL FHA is awsome because IL is a "low closing cost state" where banks can only charge X amount of closing costs on government loans (FHA or VA)

renting at all bad man.....everything is about cash flow. but buy when you can.

 

[jnevin]

you'd refinance before the 10 years for something. whether to cash out equity you've built up, get a lower rate...or you may even up selling your house.
only 1% of people actually finish paying off their original 30 year loan. most people refinance on average every 3-4 years. most of my clients every 2-3 years lol.

The rate difference between a 10 year ARM and a 30 year fixed isn't that dramatic, but i believe you can't get an interest only on a normal 30 year fixed w/ most banks now. programs just don't work that way (jnev might correct me though, most of my clients have SHIT credit and don't qualify for them anyways).

Renting does sucks... a duplex is good for cash flow and reducing your monthly nut. careful about the weed thing though lol. your tenants could totally use that against you

You can get IO on a 30 year fixed. Most are 10 year IO and a 20 year repayment after the IO period is through. For maybe .25 to the rate, you can get it on a 40 year term, so if you think you'll be there for a long time (doubtfull) you have the 10 years IO then it's like a regular 30 year fixed when you repay. The payment won't jump as much.