Is there any benefit to paying extra toward a mortgage these days in a flat market?

I have an interest only 80% at 5.5% (5 yr fixed) and a 20% loan that's 30-yr fixed at 8.5%.

The 8.5% is my highest rate debt by far. Everything else is at 2%, and I can earn more than that by saving it. But am I wasting my time paying extra towards the 8.5% loan? My house is already worth less than I have in it due to the slumping market. I'll have to refinance some time in the next 4 years regardless, but it's not like I'm gonna get out out of paying the loan balance. I have to sooner or later.

I really don't have anything else to spend my money on. I'm saving towards some home remodels but I've got that mostly paid for and haven't even started yet because I'm lazy.

Your thoughts?

it's a fine line... but generally speaking, any money you can put towards principle is a good thing.

If you were to run an ammortization schedule, it would scare the shit out of you - right now, all you are paying is interest. No principle at all. If you start making extra payments, it will lower the basis. It all adds up QUICKLY.

I agree. 8.5% is a fairly high interest rate these days. You would be surprised how much money you would save yourself by paying extra each month.

My wife and I paid off our mortgage by paying weekly and tripling the payment. The interest we saved was awesome.

I would certainly suggest that you also pay off that 8.5% quickly.

Gary

Does your 8.5% have a prepayment penalty? If not I'd get rid of that loan asap.
If there's any to roll the 2 mortgages into one fixed, I'd do it sooner rather than later. Who knows what the interest level's going to be in 4 years. And right now there's a lot of programs out there to get people out of adjustables and into fixed loans. These programs will probably continue thru the slump which is going to be at least thru this year.

You can always play around with quotes on something like eloan.com. And I haven't looked into it but, I though I heard that FHA was doing something like this or it's in the current bill that congress is looking at.

If you get everything into one loan and then start making extra payments on the principal, like Andy said it'll add up quickly.
There's websites out there that have calculators that show ammortization for a fixed rate loan and then allow you to calculate the savings by adding $100, whatever, per month to the principal.

Yeah I was literally making $50 in principal per month on the 2nd mortgage ($80,000)

I threw 5K at it, and now double that, $100 is going to principal. I'll try knocking it down more.

And I have to refi either way, and paying more now means a lower loan.

Not really a question for this place though, just kicking it around.

If you are going to refinance, I would not do it. It is usually only indicated if you are going to stay and pay off the house.

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Sure it is...You are in OFF TOPIC. Anything is fair game here isn't it?

Ok, stepping out here, but paying 30 yrears on a motrgage is stupid.
After the 1st ten years you've paid off the house. The next 20 years are all profit for the fat cat wall street investor that bought your house from the bank. Banks dont carry mortages, they sell the contract to a investor on wall street.

Having a 1st and a second means that you put down less than 20%.
In todays market that usually means that youre upside down in your home.

If youre upside down you're wasting your time and money on a house that you'll never own.

Who knows when your property will again gain value. Certainly not in the next 4-5 years.

Real estate will fall 10% this year and 15% next year. Thats more than you can make up for in 5-10 years.

What can you do?

Make all of your payments and keep your credit at 100% and save all of the cash that you can its going to be along haul till real estate becomes profitable again.

It may take 10 years so be prepared for the long haul.

If you can save some money for the next two years you'll be in an excellent position to buy another home at a really reduced rate.

Two homes are twice as good as one home, if one home goes up 10% two homes go up 20%.

A word of caution renters can be real problem and costly there is no profit without risk.

i bought a house in 1997 and refied it 4 years later and bought a house in another city and 2 years later I refied my house again and paied off my second house.

My second house went up in value for enough to pay off my 1st house, but rather than pay off my 1st house I rented my 2nd house for a net of $700.00 a month.

My 1st house I turned into a duplex for a net of $700.00 a month which is 65% of my mortage.

After I paid off the 2nd house I bought a 3rd house that I held with no payments for 4 years and then I refied it to but my 4th house.

I sold my 3rd house after its value peaked and netted $65,000 on it.

I still have 3 homes with a debit of $284,000 on property worth at todays rate of $810,000.

Buying one home and paying it off is stupid.

Money never sleeps it has to keep on moving.
Dont buy one home, buy two.

Makes sense.

In other words, the home never gets paid off by putting money into the mortgage. It gets paid by flipping other properties.

But I don't see whats so bad about a 30 yr fixed in this market. Or are you saying just do another interest only refi? And save the extra for another home when the market doesn't suck. I'm gonna put the money into adding onto the house now, since I'll at least get something tangible out of that.

See if you can refinance at 10-15 years, providing the payment is affordable. His first paragraph was saying how you pay for the house in the first 10 years then fill the loan institutions pockets for the next 20.

I would definitely not go interest only.

I have a 0% loan on my house. I'm paying my mom cash for it and it was a hell of a deal as well.
Currently my fiancee and I are renting her house, but after her lease is up, we will be buying it and letting my dad stay in my house.
My neighborhood is going up in value, but teh landlord couldn't sell her house to anyone because of a few issues, but those issues are being taken care of thanks to me.

As far as buying more than one house, I have several coworkers who own 5 or more houses and rent them out.

Currently in NJ, a 3 bedroom/2 bath house rents for $1800-2000 a month.
These guys bought houses way back and did what redwing did.

After we buy this house, I'm still keeping mine and will probably rent it out when my dad no longer needs to live there.

I'm also going to start looking for Real Estate in Delaware where a little money goes a long way, maybe I can finally buy and keep enough land to build my own go kart track.

A 30 year fixed is the only way to go. Adding on in a good market makes sence, but in a declining market it doesn't.

If you can refi into 30 fixed at say 5.6% do it. Probably the bank will not do it if you owe more than 85% on your home.

If your credit score is 700+ and you owe less than 75% or 80% on your home and the loan is below the jumbo loan cutoff at $417k it might just fly. If you can do it, do it.

When you buy a home you're not really so much buying a home as your really buying money. Up untill 2 years ago money was cheap and plentiful.

When money got tight the speculators started dumping property they weren't in for a home. It was about the money.

So now California, Nevada, Florida are in step declines and equity is a thing of the past. Some folks with good credit scores and the ablilty to pay are walking away from thier homes. Even when they bought in with 20% down with the decline in equity thier finding themselves up side down
with no where to go. So there walking away.

Theres a web-site called walking away .com.

The daughter and her husband bought 1,900 sgft new in Fresno in 2006 for $377,000 with a 1st and a 2nd.
I tried to sell them our rental for $240,000 but he stuck his nose up at it and said we were tring to dump the house on him and then he said we only buy new. "We don't buy used houses".

Today that new house is worth $235,000 and dropping. Our rental is worth $197,000. They've lost not only the equity that didn't happen but also the principal something like $142,000. If he'd bought our used house for $240,000 they would have lost $43,000.

They weren't thinking money, they were thinking I want a new house.

This is the worst housing market since 1929.
08 10% drop in value, 09 15%. In the central valley a 2 year old 2,400 sgft is going for $210,000.

Fix your loan and save as money as you can, its getting to be a buyers market.
Everyone says that real estate is a long term investment. Stocks are real estate is get in make the repairs and sell it.

Always think money...........

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It's a good idea to put money against the 8.5% debt.
Think of it this way, the money used to pay the 8.5% debt is earning 8.5% for you. Finding an 8.5% return today is a tough task.

I'm not experienced with those mixed loans you folks in California pioneered. So I don't know how the 2% and 8.5% thing works, but if you can put money against the 8.5% debt do it. As for the 2%... you have to pay it sooner or later, not sure I'd worry about putting extra against that.

Its youwalkaway.com

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I'm very conservative, so take anything I say in that context. Fixed is the only way to go if you can do it. 30 year is poison. What I did, was finance 30 year fixed, because the difference at the time was 1/4%. So I have a 30 year mortage at 5.75%. Now, paying it for 30 years would be stupid. Like redwing said, you pay the house price to the lender in 10 years, and then line their pockets the last 20. So, I pay extra. Taking random numbers, if my payment is $800/month, and I pay $1000/month, I pay that loan off in 18 years. Go here:
http://www.hughchou.org/calc/missing.cgi
Plug in numbers and see what happens.
Buying real estate will make you money, but it's also a second job. Renters and repairs are a serious headache.

The best way to think of it is, once you take on a debt, you have to pay it back. If your debt is at 6%, every dollar you owe is going to keep growing the debt at 6%. Every dollar extra you put against that loan will keep it from growing interest debt at 6%, thus EARNING you 6%. So, if you put $100 extra against a debt that you owe 6% for 20 years, it's like investing $100 in a fund that will return 6% for 20 years.

You guys are smoking crack.

This is suburban San Diego. A 15 yr mortgage is NOT an option.

I was considering adding on to the house because I actually like living here, not for investment reasons.

Seems like people's decisions in real estate revolve around making money. That's not me. I want to do what I want with the money I have, and use the leftovers wisely, which was my reasoning for this post. I'm not tryin to get rich quick. Never had/wanted any money before, I don't see any reason to start now.

Good for you Coaster, you do what you want cause that is what makes you happy, and that is exactly how you should live your life mate, happy. You dont need me to tell you that, cause you allready know it.

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Checked the site, seems to be aimed at people that can't afford their mortgage and were betting big on a real estate boom.

It also seems completely dishonest. I think I'll stick with it rather than pass the buck.

Other than being on the wrong side of the boom, I actually like the flat market. Most of the speculators are gone. Maybe now some honest hard working families down here can actually afford a home, of course, excluding those who gambled and tried to live beyond their means.

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What you did is generally what we recommend. If It can be done, even sending in a payment on the 1st and the 15th, thousands can be saved and the mortgage is shortened greatly. (I'm not saying..sending in a full mortgage payment on the 1st and the 15th. I'm saying send in half a payment on the 1st & 15th. check to see if its ok with the lender).

Quote:That's how I feel about cars. Too many people out there worry about resale value. If you never sell, you never have to worry.
As for my house. My dad bought in 1975 for $33,000. Over the years the value of the house went up to about $125,000 when we decided I'd buy the house. Being as lazy as I am, it took a couple more years before we actually did it. We based the sale on $125,000 even though other house in my neighborhood were selling for $250,000 and higher.
Currently, my neighborhood has sales over $300,000 and higher and most people are just buying the house for the lot.
1/4 lot is going for $200,000, then add on $289,000 for demo of the old house and builing the new. These people are paying almost $500,000 for a house they can sell for $375,000.
But the people aren't going anywhere, they are staying put. In my town, it has become Little Israel. Thousands of folks are moving here from New York after coming here from Israel and other places.
My coworkers and friends wonder why I want to live in a Jewish neighborhood. I tell them that I was here first, house is paid for(for the most part), I drive 3 miles to work, why would I want to leave?
If I sell my house for $350,000, where am I going to move. The county north of me is more expensive in taxes and real estate and my own county is rising. For me to sell my house and move to a comparable house in another town, I'd be paying more for a house and higher taxes and tolls to get to work not to mention the further distance to work.
I'm staying put until I retire(7 more years) and then I'll worry about what I'm going to do.
I had a point here and not sure if I made it.

I think your point is if you buy low and sell high, you still have to rebuy high to have a place to live. And you don't really win until you cash out and move to the boondocks.

But the way to win in real estate in a strong market is gaining equity against money that isn't yours, by spreading yourself thin. It's also the exact same way to lose in a bad market. :tongue: Invest $50K in a $500K house. House goes up 10% in value one year, you sell it for $550K. You just made 100% return on investment (in simple math). Now you have $100K to invest and the market's only gone up 10%. Put that 100K into the same house, and you may make only $50K more next year. Spread it into 2 homes, and you have the chance at making $100K. Wash, rinse, repeat.

shit, Torrance is even worse... $675k for a remodeled refrigerator box...

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If you get closer to the beach or city then it does get up there.

I can't complain though, I had a 6:30 departing flight and I accidentally slept in until 5:20 and I still made my flight! The airport is downtown on the harbor...

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Something for nothing IS the american dream. But it's not my dream. Although I may succumb to it eventually.

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I have money saved for that exact type of scenario. I also try and keep myself employable so I have options. Right now I have too much job security even, and that can be a bad thing too. Anyone who depends on someone else's decisions to keep their house is assuming risk.

I didn't ask how to play my cards to get rich quick. I simply have a little disposable income and wasn't sure if there was any benefit to tying it up into a mortgage debt in this market or to keep it liquid at 3%.

6 months ago a friend asked me if I wanted to join in some investment scheme his friend started to double my money in 1 year, guaranteed. He asked me to put down $25K with him. He was completely sold on it. Without asking any more questions I told him if it was such a golden deal, why was his friend having to get the capital from people he didn't know? I told him, no thanks. You give it a shot and tell me how it works out. Now he's out of his cash and the guy skipped town. He's also upside down on his house and can't afford the payment and his co-owner wants out. Poor guy was trying so hard for that american dream!

I remember my point now. It was, don't worry about it, if you like the house live in it, don't sell it and do what you want to it.
But obviously, putting a $100,000 kitchen in it and then trying to sell the house 6 months later doesn't make sense.
I've seen people both with cars and houses pour so much money into it and then complain when they lose money.

Well, i have to agree that in a Capitalist country that money is evil just as in a socilaist country capitilism is evil.

So where does that leave us?

The idea that one can turn against money in a country built and run on money is beyond my idea of reality.

The Central Coaster asks a question about money and then he says hes not about money?

He buys a home that he clearly can't afford and then askes about what to do with his back up funds?
There is some common sence here in that anyone who carries two mortagages on a home is in over thier head. In other words they had less than 20% to put down.

In a declining market that is going to come back to haunt them.
The US economy is in the crapper, is there anyone out there who doesn't know that?

The one that I noticed the most about the internet is just how stupid most people are.

But the man in all of his dumb posts has back ups.

The second shoe is about to fall. Ps New Jersey has the highest property tax in the nation. Theres no room to make money there, the state takes it all.

All ignorance aside Im a capitalist and Im proud of it.

Ya, all enjoy your ignorance ya here.

Redwing, why the hate all of a sudden?
Its just a discussion after all. Your response makes you appear immature and childish.




Back on topic. I dont have alot to add other than my perspective on 30yr fixed mortgages. I got into our house 5 years ago for 139k at 5.5% fixed on a 30yr VA. I try to pay a bit extra here and there, maybe an extra $500-$1000 a year. I plan to pay it off in 22-24 years. I also have a unique perspective on those last 10 years of my mortgage. A $940 a month house payment (includes taxes and ins) 5 years ago was fairly steep for me. Its not so bad now. In ten years my electric bill is likely to be close to that amount. The last 10 years, more so the last 5 will be a small % of my income. Another benefit to a fixed is inflation. If we have steep inflation and wages at least come close to keeping up then I will be able to pay my house off sooner. I like where I live and want to stay here.




Frank, if you sell your house for $400k you can move down here. We have no state income tax, better roads and little snow.

redwing apparently just wants to tell me how to think and doesn't like being disagreed with. His method and thinking may work for him, but it doesn't suit me.

Arguing that one can afford a house that's 100% financed is akin to pissing into the wind, I know, but I'll do it anyways.

The fact is I had zero money starting out, just like most first-time buyers. I had decent pay and no accessible savings. I had been putting alot into a 401K instead of saving it for a downpayment.

20% down plus closing costs out here equaled about $100,000 for a small 3-bed home at the time I was shopping. It would've taken me probably 5-10 years to save that much. (How long would it take you if you had no existing equity, wise guy?) I was advised to save my cash, take the 100% loan, pay all the closing costs, and use the rest on the house. So yeah, I chose a higher payment and a house to live in.

I can afford the payment and other expenses, and can afford to put extra towards it beyond the interest payment, and I have, and the rent income is a surplus beyond that. I chose the interest-only to give me flexibility for home improvements, not because I couldn't afford a 30-yr fixed. The only caveat to that is the interest only loan going variable in 4 years, but the market is either going to suck and rates will stay low (good for refi) or it'll start rising and rates will go up (good for equity). Aside from the house I am in the black, and I own all my vehicles.

CC, is going to a 30yr fixed now out of the question? You KNOW what you're getting with that type of loan and no surprises or worrying about the market swings. If nothing else peace of mind.

You could allways sell it and move out here where its cheap to live.

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Yeah but then I'd have to have people like you as a neighbor. Kind of a wash there.

Yeah I guess so. I do have a fridge full of beer in the garage and alot of tools though. :tongue:

I guess I could refi my 1st mortgage to a 30-yr fixed. I can't consolidate though since I have no equity.

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I'm kinda old fashioned and conservative on alot of things. I'd say to at least refi your 1st but I dont know your whole situation and I'm no finance guru(is there a financeguru.com? )
I have only 1 credit card that I have not used in 3 years and wont allow my wife near it. I try to pay cash for most things or not buy them. I also try to follow alot of Dave Ramsey's financial advice.

Quote:My taxes have nearly doubled in the past three years. I only pay township taxes for property though, the state takes their share of income tax though.

I think the property tax increases are restricted in CA. I know Hawaii had problems with that where people literally owned their homes but were forced to reverse mortgage or sell to afford the ridiculously high property tax increases. How stupid are we to let the govt' tax us on something we own?

I think it's complete bullshit that it's based on property value too. Why should the guy next door on the same street, same lot, with a nicer house be paying more than his neighbor?