[corn18]

Holy crap! We just moved and are building. I just locked in our mortgage at 30 year, fixed, no points @ 2.75% ($700k house, $510k loan to keep it conforming). I want to just pay cash, but that is seriously cheap money. If anyone is looking at buying or refinancing, now is a good time.

[BMW F22]

Are you kidding me? Now is a terrible time to buy. Watch as the housing market crashes in the next year. You can always refinance a mortgage but not renegotiate its purchase price.

[corn18]

Originally Posted by BMW F22

Are you kidding me? Now is a terrible time to buy. Watch as the housing market crashes in the next year. You can always refinance a mortgage but not renegotiate its purchase price.

Good point. I don't have a crystal ball. If you are buying a house, don't do it as an investment (I never have). But the age old question of should I invest in the market or get a mortgage gets a lot more clear to me when the mortgage is 2.75%. That is a no brainer on every level.

[BimmerDimmer6]

Fed already hinted at keeping rates low for at least another year. The only smart decision would be doing a cash out refinance before people start losing equity IF we have a correction.

That cash could be used for stocks, or investment property when prices start to fall.

Patience.

[Hawkeye]

You were posting in the thread a few months ago where I had mentioned that I got that same rate... This isn't really a recent thing.

https://www.zpost.com/forums/showpos...3&postcount=14

[corn18]

Originally Posted by Hawkeye

You were posting in the thread a few months ago where I had mentioned that I got that same rate... This isn't really a recent thing.

https://www.zpost.com/forums/showpos...3&postcount=14

It is for me.

[rebekahb]

Originally Posted by corn18

Holy crap! We just moved and are building. I just locked in our mortgage at 30 year, fixed, no points @ 2.75% ($700k house, $510k loan to keep it conforming). I want to just pay cash, but that is seriously cheap money. If anyone is looking at buying or refinancing, now is a good time.

Who is your lender?

[corn18]

It was my builder's lender based in OH called First Mortgage. They are just a broker, though, so I'm not sure where they got that rate.

[Alfisti]

What does no points mean? And how long is the interest rate locked for?

I locked in ours (usually go variable) for 3 years at 2.65 last yr.

[Nuckle]

I just refinanced at 3.125% locked for 30 years.

[corn18]

Originally Posted by Alfisti

What does no points mean? And how long is the interest rate locked for?

I locked in ours (usually go variable) for 3 years at 2.65 last yr.

You can pay points up front to reduce the rate. For example, you might get a loan for 3% but if you pay 1 point (1% of the loan amount), you could buy that rate down to 2.75%. Paying points is rarely a good idea.

For your second question, I am going to answer 2 ways. First, the rate of 2.75% (sorry for the 2.74% in the title) is "locked" or guaranteed until I close. That means that if rates rise to say, 3% between now and when I close on the loan on 29 Jun, my rate still stays at 2.75%. If it goes down, I could lock in the lower rate. Once I close on the home on 29 Jun, the rate will be locked at 2.75% (that's what fixed means) and can never go up. I think things work a bit differently up North.

2.75% is remarkable for 30 year money. If inflation stays at 2%, then my real interest rate is just 0.75%. If I can make more than 0.75% real on my money over the next 30 years, I come out ahead. I am looking to retire next year and really didn't want to carry a mortgage into retirement, but when I run the numbers, I come out way ahead with a 2.75% mortgage.

[lsturbointeg]

we just refinance from a 30 year to 15 year @ 2.87%. we are saving $320k!

[zx10guy]

Crap. I'm going to have to look into refinancing now. At a 2.75% rate, it is definitely worth it for me. I've been holding off because my primary home has a rate of 3.75% fixed for 30 years. However, I don't know if it would be worth refinancing my vacation home which has a 3.25% fixed rate for 30 years.

[David70]

Originally Posted by BMW F22

Are you kidding me? Now is a terrible time to buy. Watch as the housing market crashes in the next year. You can always refinance a mortgage but not renegotiate its purchase price.

If going from a house to another house, in a similar price range, the market makes close to no difference, sell high/buy high or sell low/buy low has similar results.

The rest is a gamble, if waiting solely to time the market, it might never happen, rates could go up and not come down for a years, you have to deal with where you live now instead of where you want to be, waiting to buy the house has addition payments going towards rent that is gone.

We refinanced to a 15 year 2.75% in 2012, balance has dropped significantly and part going to principle gets bigger every year. 7 more years (at some point will just pay it off as the benefits of having a low balance, low rate loan aren't worth it) and it will be paid for. When possible I strongly recommend going to a 15 yr as the part of the payment going to principle is far greater and you get a lower rate.

[zx10guy]

Originally Posted by David70

If going from a house to another house, in a similar price range, the market makes close to no difference, sell high/buy high or sell low/buy low has similar results.

The rest is a gamble, if waiting solely to time the market, it might never happen, rates could go up and not come down for a years, you have to deal with where you live now instead of where you want to be, waiting to buy the house has addition payments going towards rent that is gone.

We refinanced to a 15 year 2.75% in 2012, balance has dropped significantly and part going to principle gets bigger every year. 7 more years (at some point will just pay it off as the benefits of having a low balance, low rate loan aren't worth it) and it will be paid for. When possible I strongly recommend going to a 15 yr as the part of the payment going to principle is far greater and you get a lower rate.

I have a different philosophy concerning paying off a home. I rather have a lower monthly payment and take the money that would have been put into the house and invest it. So far this strategy has done well for me. There's also the liquidity and cost factor of tying up a huge chunk of your money in your home.

[Hawkeye]

Originally Posted by zx10guy

I have a different philosophy concerning paying off a home. I rather have a lower monthly payment and take the money that would have been put into the house and invest it. So far this strategy has done well for me. There's also the liquidity and cost factor of tying up a huge chunk of your money in your home.

I have a similar philosophy, especially when the loan is at 2.75%, hard to pay any quicker than necessary in that case.

[Alfisti]

Wait, wait. So it's locked in at 2.75 for 30 years?

You guys down there really do have overly confusing taxation and finance rules, it's a fucking dog's breakfast.

[corn18]

Originally Posted by Alfisti

Wait, wait. So it's locked in at 2.75 for 30 years?

You guys down there really do have overly confusing taxation and finance rules, it's a fucking dog's breakfast.

Yes and I agree.

[Alfisti]

Holy shit that's amazing

[David70]

Originally Posted by zx10guy

I have a different philosophy concerning paying off a home. I rather have a lower monthly payment and take the money that would have been put into the house and invest it. So far this strategy has done well for me. There's also the liquidity and cost factor of tying up a huge chunk of your money in your home.

I generally agree and would think the odds are you can make money by investing but one requirement is you invest all of the reduced payment, spending none of it. Another is I find a lot of value in not owing others money.

With the "increased liquidity", not sure what you doing with the money but I have investments I can sell, assuming you are also investing the saved money and have similar issues.

With the math, interested in someone checking me. To make math easier using $200k loan, remove insurance, HOA, and tax

30 year loan @ 2.75%, payment is $816 and after 5 years (set purchase date to 1/1/20 and end of 2025 to make simpler) have $27,542 in equity - https://www.bankrate.com/calculators...alculator.aspx

15 year loan @ 2.5%, payment is $1333 and after 5 years have $70,039 in equity.

Difference in balance is $70,039-$27,542 = $42497. To get the same balance with my investment of $517 a month ($1333-$816) I invest $517 a month per month over 5 years and with it if I get 12% average return I will have $42,223. Slightly less and I still have to pay taxes on my investment? https://www.bankrate.com/calculators...alculator.aspx

Seems like the calculators or my inputs are wrong but I don't see where.

[corn18]

I don't directly compare what I could make with the investments vs. the mortgage because I am close to retirement. Carrying a mortgage into retirement increases sequence of returns risk and that needs to be managed.

I look at my savings balance at the end of the mortgage. The mortgage is a rare expense that is not tied to inflation. A $1,000 P&I payment today is $412 30 years later (3% inflation). That has a significant impact over 30 years. My 30 year mortgage will end when I am 84. Total amount paid in today's dollars (Net Present Value) on my $510k mortgage will be $540k. So, $30k in real interest. This distinction is critically important, as it is what you should use to decide whether to take a mortgage or not. I used 2% inflation. If I use 3% inflation, the NPV of my mortgage is $474k. You can see what happens with higher inflation: I actually paid LESS in today's dollars for the house. This to me is a great inflation hedge.

And notice I never once mentioned investment returns. As long as I can get 0% real return on the money I would have used to pay cash for the house, I am ahead of the game. The historical average for a 60/40 portfolio is 5.8% real return, so I should make out like a bandit. But I don't need that to make a case for borrowing 30 year money at a fixed 2.75% rate.

This analysis works because rates are ridiculously low. When I bought my last house, my rate was 3.875% and I paid off the loan because I wanted to be debt free for the first time in my life and I could make a case for going either way. Now that I am locked in @ 2.75%, I will have a really hard time convincing myself to pay that off.

[Nuckle]

@corn18 Are you getting an extra bump for being retired military? I noticed when I applied the VA loans were a little lower than conventional which I think is great!