They're going to brag about rates but you'll never hear the full story. To your point, you can't just listen to people on reddit. It seems likelier now then in the past 10 years Banks recalls mortgages in 2008 for that exact reason. But combining a high LTV and a potential downturn is a risk I would not take. Whether that is fixed with a crash or a downturn that will have to be seen. There is a lot of evidence that we are in a housing bubble. I'd love to poll the people that come to this sub and say " I won't be here in X years" and see how life turned out for them. While it is likely the market will be up, it's also likely rates will be up too.ġ0 years is a long time for changes in life. But in general your loan shouldn't be close to 100% LTV. There are some exceptions to this rule, like if there is first time buyer assistance. If you can't put a down payment on a house, you shouldn't buy it. But that brings me to the reasons it's not a good idea. The only big chunk of change you can invest is the down payment. The difference in monthly payments is negligible. The risk was discrete and unlikely to occur, while the savings were immediate.
I would have had to have not decided/had the opportunity to refinance during that 10 year period.įor me, it was a no brainer. Interest rates would have to have risen (the rate was variable and would remain low as long as rates were low) I would have to have not paid off the house early I would have to still be living in my house (the median tenure of home ownership in the US is only 13 years) In order to bear that loss, all the following would have to be true: The amount of that possible loss was subject to a cap on the interest rate (I think the cap was 8.5%), so I could calculate the entire amount at risk. I was exposing myself to risk that, after the 10 year term, my rate would increase on the remaining amount of the mortgage (roughly 80% of the original balance based on the 30 year amortization schedule). I think it was a 10 year ARM at just over 2%.
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On the plus side, the ARM would save me money in the immediate term. In taking out my last ARM, I considered a few factors. Lower interest rate during fixed term as compared to 30 year fixed. Mortgage depreciates based on a 30 year amortization schedule. Interest rates reset at the end of the fixed term and can float subject to a cap. Fixed rate for a set number of years at the beginning of the term. You should look into the features of the ARMs your bank is offering, but here are the terms of the couple I had: They're a misunderstood product that can be really good for you depending on your life situation. Here, please treat others with respect, stay on-topic, and avoid self-promotion.Īlways do your own research before acting on any information or advice that you read on Reddit.
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Get your financial house in order, learn how to better manage your money, and invest for your future. Banking Megathread: FDIC, NCUA, and your cash.Private communication is not safe on Reddit. Scam alert: Ignore any private messages or chat requests.Costs of transferring property out of and back into trust are not included in guaranteed fees. Loans may not be closed in the name of a trust.Charges by your current lender in connection with your payoff are not guaranteed. Prepaid interest, taxes and insurance collected at closing are not guaranteed.Fees customarily paid by seller that buyer may agree to pay are not included in this guarantee. Guaranteed fees on purchase transactions include only fees customarily paid by buyer.Borrower may choose to use different providers, in which case these fees are not guaranteed. Guarantee of Settlement Agent, Lender Title Insurance and Government Recording charges requires the use of our recommended providers.Fees for third party service providers are also guaranteed, including Appraisal, Credit Report, Flood Cert, Tax Service, Settlement Agent, Lender Title Insurance, and all Government Recording and Transfer Charges.We charge one flat Guaranteed Lender Fee.We guarantee not only our own fees but those of third party service providers as well. While other lenders offer a Loan Estimate of closing costs, AimLoan provides you with a Guarantee of Total Closing Costs.
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