First time Home Buyer

[MidnightVoice]

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OneMortgageGuy wrote:

A GOOD TIP... ON A PRINCIPLE AND INTEREST PAYMENT. TAKE YOU PAYMENT AND TIMES IT BY 1.25 AND APPLY THE EXTRA TO YOUR MORTGAGE AND YOU WILL CUT THE LOAN IN HALF.

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Is this better than getting a mortgage for half the length of time?

[Anonymous]

20 years ago a colleague expressed the opinion that he thought it better to have a 30 year mortgage and pay it off at the payment rate of a 15 year mortgage.  He reasoned it gives you the option to pay the lower (30 year) monthly payment if ever needed, rather than being forced to always make the higher payment of a 15 year mortgage.  (Btw, The same financial formula applies to all interest, principal, # of payments, and amount calculations.)

If you know you will always make a payment equivalent to a 15 year mortgage, or want the discipline imposed upon you of having a 15 year mortgage, and/or can get a lower interest rate on a 15 year mortgage, you might well want to get a 15 year mortgage instead of a 30 year mortgage.

[Anonymous]

You can look at it lots of different ways....My income is all over the place so I did a 30year I/O. When Im having a good month I make a 15yr or a full 30yr payment. If I'm having a bad month I do the I/O payment.

As far as 30 Year loan and making the payment x 1.25 or just doing a 15 year loan. You really need to look at the fees and points. Most of the time a 15 year will give you a better rate and sometime it will give you the same. I just like having the option to do so.

STAY AWAY from the Pay Option Arm loan!!! As seen on TV. " 200K loan for only $600 a month... Call now!" What they are not telling you is when you make that 600 payment or 1% payment, the difference is added to the back end of the loan buy you do have 4 payment options. Now the rate can and will go up every month but its good for investors.

[Anonymous]

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Rocket01 wrote:

20 years ago a colleague expressed the opinion that he thought it better to have a 30 year mortgage and pay it off at the payment rate of a 15 year mortgage.  He reasoned it gives you the option to pay the lower (30 year) monthly payment if ever needed, rather than being forced to always make the higher payment of a 15 year mortgage.  (Btw, The same financial formula applies to all interest, principal, # of payments, and amount calculations.)

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I too have heard this advice. The one caveat I have also heard is to talk with your lender about it. Some may apply the extra payments to the principle on the back end which screws you into paying the interest of a 30 year mortgage in 15 years. Make certain they will apply those extra payments to the principal thereby reducing your interest paid very significantly.

Another option for those who get paid every two weeks is a biweekly mortgage payment. You're making 26 half monthly payments a year so it's like paying one extra month of payments in the year. You can pay off a 30 year mortgage by paying every two weeks in about 22+ years.

[Anonymous]

I'd be pissed if someone tried to sell me a crock like adding the principle to the back end.  I'll be watching for that one when we are shopping for a mortgage.

That two payments per month is certainly attractive.