Just wanted to see if anybody had any opinions as to what mortgage product is most attractive right now: 30-year fixed, 3/1, 5/1, 7/1 or interest only? I'm evaluating the purchase of a new construction condo for primary residency, 25% down, loan amount of over $1-million, high-700 to low-800 FICO and time horizon of at least 10 years. With a fixed rate loan, I like the idea of locking in a fixed... [more]
Just wanted to see if anybody had any opinions as to what mortgage product is most attractive right now: 30-year fixed, 3/1, 5/1, 7/1 or interest only? I'm evaluating the purchase of a new construction condo for primary residency, 25% down, loan amount of over $1-million, high-700 to low-800 FICO and time horizon of at least 10 years. With a fixed rate loan, I like the idea of locking in a fixed monthly payment and not having to worry about where interest rates might go (it also makes modeling the transaction much easier) but I also realize the tremendous amount of interest that I will pay with a 30-year fixed. Even though rates have spiked recently, I suppose they are still relatively low on a historical basis. Any thoughts from the gallery? Please, no discussion about "buy vs rent" or whether or not the market will crash - we already have enough threads devoted to those topics. Thanks!
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Response by doubledown
about 18 years ago
Posts: 3
Member since: Jun 2008
Also, forgot to mention that I might be willing to pay up to 1-point upfront to bring down the rate, if it made sense.
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Response by dledven
about 18 years ago
Posts: 198
Member since: May 2008
if time horizon is 7+ years the rates make sense to do a 30 year fixed, it doesn't seem to me like you are worried about payments so don't even look at the Interest Only option. if i were you would look at the 20 year fixed program, and 25 year fixed program so you pay down the loan quicker. Also look at bi-monthly payments to expedite the paydown.
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Response by cliff702
about 18 years ago
Posts: 182
Member since: Apr 2007
In NY state (unlike some other states like Florida where I've been stung), there is no pre-payment penalty. Bi-monthly payments sometimes have an annoyng fee attached. If you just make a 13th payment to principal every year on your own, a 30 year fixed mortgage pays off in 18 years.
But Consumer Reports wrote in a recent issue that early mortgage payoff is not necessarily a good thing, but I don;t have the article and can't remember their reasoning.
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Response by csn
about 18 years ago
Posts: 450
Member since: Dec 2007
Stick with a 30 year fixed. For your conditions it is perfect. You can make extra principal payments when you can afford to which will shorten the loan but if you are staying about 10 years I would stick with the regular payments. A good mortgage broker can give you all the different possibilities including paying points. Good luck.
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Response by Colgin
about 18 years ago
Posts: 79
Member since: Apr 2007
cliff702,
When i run the numbers making an extra principal payment per year only knocks down the term to about 24 years from 30, not 18. In any event, a fun tool to play around with is the extra payments calculator at www.mtgprofessor.com. The site has a calculators section inclouding an extra payments calculator which allows you to slice and dice extra payments in a more or less infinite number of ways -- extra monthly, quarterly, semi-annual and annual payments and permutations thereof.
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Response by Jeff260
about 18 years ago
Posts: 10
Member since: Mar 2008
I was in a similar position recently and chose a 10-yr ARM with 1 pt up front and 5-yr prepay penalty. I got a rate more than 1% lower than the prevailing 30 yr fixed.
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Response by cliff702
about 18 years ago
Posts: 182
Member since: Apr 2007
Colgin - Thanks for the site. I have four mortgages so I need all the help I can get.
Also, forgot to mention that I might be willing to pay up to 1-point upfront to bring down the rate, if it made sense.
if time horizon is 7+ years the rates make sense to do a 30 year fixed, it doesn't seem to me like you are worried about payments so don't even look at the Interest Only option. if i were you would look at the 20 year fixed program, and 25 year fixed program so you pay down the loan quicker. Also look at bi-monthly payments to expedite the paydown.
In NY state (unlike some other states like Florida where I've been stung), there is no pre-payment penalty. Bi-monthly payments sometimes have an annoyng fee attached. If you just make a 13th payment to principal every year on your own, a 30 year fixed mortgage pays off in 18 years.
But Consumer Reports wrote in a recent issue that early mortgage payoff is not necessarily a good thing, but I don;t have the article and can't remember their reasoning.
Stick with a 30 year fixed. For your conditions it is perfect. You can make extra principal payments when you can afford to which will shorten the loan but if you are staying about 10 years I would stick with the regular payments. A good mortgage broker can give you all the different possibilities including paying points. Good luck.
cliff702,
When i run the numbers making an extra principal payment per year only knocks down the term to about 24 years from 30, not 18. In any event, a fun tool to play around with is the extra payments calculator at www.mtgprofessor.com. The site has a calculators section inclouding an extra payments calculator which allows you to slice and dice extra payments in a more or less infinite number of ways -- extra monthly, quarterly, semi-annual and annual payments and permutations thereof.
I was in a similar position recently and chose a 10-yr ARM with 1 pt up front and 5-yr prepay penalty. I got a rate more than 1% lower than the prevailing 30 yr fixed.
Colgin - Thanks for the site. I have four mortgages so I need all the help I can get.