"basskisser" wrote in message
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NOYB wrote:
"basskisser" wrote in message
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NOYB wrote:
"basskisser" wrote in message
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NOYB wrote:
wrote in message
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But, I thought that you had to get an interest only loan?????


The bank was offering me either loan...conventional, or
interest-only.

I chose the interest only loan over the conventional 30-year
fixed,
because
it gives me the option to pay principal on the loan (but only
if
*I
*decide
to do so). Right now, it makes more sense for me to put
$25-30k
per
year
away in a qualified pension plan than to pay principal on a
home
mortgage.
In 4 1/2 years, I'll only be 38...and I'll have an extra
$6000/mo
(before
taxes) to put towards principal and/or retirement savings. At
that
time, I
can get a 20 year conventional fixed mortgage, and pay the home
off
before
I'm 60.


Yeah, sure, whatever.......


Boy, you sure put a lot of thought into that reply. Sorry I taxed
your
brain so much.

The mortgage companies PUSH interest only loans to consumers. Care
to
venture WHY????


Because they have a non-decreasing revenue stream coming in while the

principal is outstanding. So what. It's good for the bank...but
even
better for me.

Are you smart enough to do the math on exactly how much *principle*
you're
actually paying in the first 5 years of an $800000 mortgage at 4.25%?

Yes.

I'll get you started:

No need.

Payment (principle+interest)= $3935.52
Payment (interest only)= $2833.33

(Answer= $66,131.20)

So at the end of 5 years, I'd owe $800,000...and the guy who paid
principle
owes $733, 868.80.

Keep in mind that I'm putting that $66,131.20 into my wife's and my
Simple
IRA's instead of towards the principle of the house. Because it's a

qualified plan, I saved $20k in Federal taxes over the schmuck who
used the
money to pay down the principle on his home.

At the end of 5 years, he paid an extra $20k in taxes to the Feds,
and owes
$733, 868.80 on the home.

At the end of 5 years, I put $66k into my simple IRA and paid $20k
less to
the government. Even if the house doesn't appreciate, and I get
*ZERO*
return on my investment in the Simple IRA, my net worth is ahead of
his by
$20k. If I get even a nominal 5% return on my Simple IRA per year,
I'm even
further ahead of the other guy.

Paying principle on a loan is an opportunity cost.

Again, mortgage companies are going out of their way to qualify people
for interest only loans, and they wouldn't qualify for a conventional
loan.

That's bull****. The lenders use different debt-to-income ratios for
interest only loans, but all of the other lending requirements are the same.


Are you smart enough to know WHY mortgage brokers are pushing
interest only loans so hard? Is it for YOUR welfare?

Banks are willing to offer interest-only loans for this reason: they can
lend more principle, which means they can collect more interest.

If a customer can afford a $3000/month payment, the bank prefers that he
spend all $3000 in interest. They make more profit than if the customer
spends $2200 on interest and $800 on principle. The customer benefits by
living in more house than he might be able to afford if he had to pay
interest *and* principle. So both parties win.






Hell, might as
well go one more. If you don't like paying down the equity in a home,
get a reverse mortgage!

Eventually, when I retire, I will. Why die with a couple of million in
equity tied up in a house?



Also, you see, when you get done in five years,
you'll still have to get a mortgage for the original amount.

And the house will be worth $1.5 million. So I'll go secure a 20 year fixed
mortgage for $800k...which means that I have more than a 45% equity position
in my home.


If I waited 5 years to buy the same house, I would have had to borrow $1.2
million...and I only would have had 20% equity in the same home.

That means that my method will increase my net worth by $400k over your
method.


Someone
with a decent ARM would have at least some principal paid off, so his
loan amount would be lower than yours, while his payments wouldn't be
that much different for the first five years.

You're trying to tell me that there are better ARMs than a 5-year fixed at
4.25% for a jumbo non-conforming? LOL. You *are* the king!