General > General Technical Chat

First house for a young man

<< < (16/26) > >>

rstofer:

--- Quote from: nctnico on July 04, 2017, 09:44:55 pm ---I'm wondering what exactly you mean with ARM loans? Are those so they change the interest rate every year? If yes they may not be so bad. Over here you can get mortgages where the rate changes every year. Sure there will be good years and bad years but overall the interest rate is lower than longer term fixed rates. What I did in the past few years is wait for the interest rates to drop before committing to a longer term interest rate (which is pretty sweet if I may say so). I expect the interest rates won't stay as low as they currently are for very long; I expect to see a rise somewhere in 2017/2018.

--- End quote ---

Right, Adjustable Rate Mortgages.  It all depends on how it is structured.  We just got a flyer for an ARM that started at 2.5% and, over time could get to 8% while a 30 year fixed might be 3%.  The rate is intended to rise, it is not simply a matter related to the Prime rate.  Bsically, the bank is lending money quite cheap in the first couple of years and making up their profit in later years.

ARMs are a little more reasonable (they used to top out at 15% or more, much more than a 30 year fixed loan of, say 3%,

The idea is to allow people to buy more house than they can initially afford with the hope that there income rises as fast as the rate.

When money is cheap, house prices rise.

IanB:

--- Quote from: rstofer on July 05, 2017, 01:16:50 am ---Right, Adjustable Rate Mortgages.  It all depends on how it is structured.  We just got a flyer for an ARM that started at 2.5% and, over time could get to 8% while a 30 year fixed might be 3%.
--- End quote ---

Adjustable rate (or variable rate) mortgage loans were for a long time the standard repayment mortgage in the UK, and fixed rates were almost unheard of (and maybe still the case, I haven't look at the UK market in 20 years). There were some mortgages where the rate was fixed for, say, the first ten years, and after that it varied.

So coming to the USA from the UK and seeing interest rates fixed for the life of the loan was something of a surprise.

That said, I have an ARM, I chose it deliberately. The rate is tied to a standard bank rate, so the interest rate is not going to go up arbitrarily. After I got the loan I watched people refinancing each year to get lower rates, while for me the rate just went down automatically. Maybe in the future the rate will go up again, but I won't be too concerned. I knew exactly what product I was buying and am completely happy with it. Another benefit is that I have tremendous payment flexibility. I can pay as much or as little as I like each month as long as it is more than the minimum amount (effectively interest only). If I want to, I can pay the loan off early without penalty.

So, I really don't agree that ARMs are bad. They are different, is all. There are pros and cons and you need to know what you are getting into.

cdev:
There are crooks who are pushing to pull something similar to 2008 again, but this time the people will be hit much harder.

The world will want to punish everyday Americans for electing such irresponsible people. But, they didn't know. People here have been really badly deceived by both parties, who must be laughing together behind our backs.

Both parties here now are rich crooks who couldn't care less about the country or its people.. They just want to milk their positions of power for as much money as they can, and stash it away in some numbered swiss bank account.

rstofer:

--- Quote from: IanB on July 05, 2017, 01:31:51 am ---So, I really don't agree that ARMs are bad. They are different, is all. There are pros and cons and you need to know what you are getting into.

--- End quote ---

What the banks did around here is have the beginning interest rate less than the Prime Rate.  They were loaning money for less than it cost them to borrow.  To recover this, the rate of increase and the maximum amount for the interest were set fairly high - much higher than a fixed rate mortgage.  As the payments ratcheted up, people could no longer afford the payments.  Throw in some asset depreciation, wage stagnation or job loss...

The idea behind the ARM is twofold:  Allow people to buy houses they can't afford in order to keep prices up and, second, hope that the asset value increases such that the buyers can sell out with a profit to use as a down payment for a different house.

As the prices fell, a LOT of people realized they were under water and just walked away from their obligations.  The .gov helped with this by cancelling the capital gains tax they should have had to pay.  This tax alone would have bankrupted most people.  Imagine suddenly owing tax on $100k (or more) worth of capital gains!  All of a sudden there was a flood of houses on the market, prices collapsed and the banks and bond holders were in trouble.

Had the buyers been able to hold on, they would have recovered and then some.  Not every area has recovered equally but I suspect that everybody would have been fine.  But they couldn't hold on because the interest rate was increasing and, really, who wants to make payments on a house that is wildly underwater?

I don't object to ARMs if they are sensible but, basically, they are allowing folks to buy stuff they can't pay for.

The banks knew these "liar" loans were questionable so they came up with a way to securitize the mortgages and sell the debt off as Mortgage Backed Securities.  What could be safer than a MBS?  In a normal market, these bonds would have been a good investment.  In a crash, they were worthless.

At the time I remember reading about a town in Finland that was especially hard hit because they had invested in these bonds.  I was staggered that a housing problem in the US could devastate a town in Finland!

Here is a discussion about Finland's national problem during the meltdown but I didn't find the article about one specific town:

http://njb.fi.s189994.gridserver.com/wp-content/uploads/2015/04/2013_1_Paper_Laitamaki_Jarvinen.pdf

Around here, ARMs are really bad news but the fixed rates are fairly low at around 3%.

I would like to see the US go back to the arrangement we had in the '50s and '60s.  Banks didn't write mortgages. Savings and Loans took all of the mortgage business (and risk) leaving the banks doing 'banking'.  Interest rates were fixed for 15 or 30 years and some kind of down payment was required (usually 20%).  GI Loans didn't require a down payment but, naturally, the payments were higher.

Instead, I get several offers to refinance my house each week.  They all have attractive 'teaser' rates but, in the end, they're all ARMs.  It seems everybody wants to write GI Loans because so much of the loan amount is guaranteed by the .gov.



LaserSteve:
A couple of comments from a University Staffer who takes care of a big house on 7/10s of an Acre in Ohio.

One as I read this, I see the tone of a single, male, engineer, so a few things you need to think about:

HOAs and Electrical Engineers don't mix.  You'll need antennas for satellite internet if there is no FIOS or a 2.4 Ghz directional panel for WISP,
No Engineer I know is happy with the internet speeds at his house these days, and many of them have two internet
feeds.   If you have the renters, they will need high speed feeds of their own, a place to park their cars, and their own bathrooms.

 You will eventually probably want to try ham radio or having a trebuchet or boat in the back yard.  Every engineer I know that has a HOA has ran into them headlong one time or another. Often over the color of paint, or tree choices, or even  the desire to keep a trailerable airplane in the driveway.


The HOA may have something nasty to say about your planned  subleasing or choice of sub-lease candidates or even your tools.. I have a neighbor who is moved from a HOA covered house to our neighborhood. Her nosey attitude has caused problems for me, including with a pre-employment background investigation.  She even nagged local cops about the extensive electronics gear and tool kit in the back of my then SUV.   Pick a place where you, will be, quietly left alone.  Never discount the problem of neighbors who seemingly have nothing better to do then to study you and complain. If you can, meet the neighbors before you buy!

State funding and in some cases Federal funding for universities is rapidly decreasing. I know you are a "Rising Star" from the quality of your posts, but even with a EB1, I would not assume they will make you a Post-Doc or offer you a associate faculty  slot, even if you have big time IP with them.  I'm seeing the direct results of this more and more here in the Midwest, with large staff cuts.  By all means please stay in the US, but get the Green Card ASAP.


Along the way, as you work at the "happy hunting ground" of a University, where there are far more potential quality  mates per square meter then anywhere else for the rest of your life, hopefully  you will find a potential  Mrs. Blueskull.  From minute one SWMBO (She who must be Obeyed) will start making choices about your home, and the first thing to go will be your renters. Her income will be spent on shoes, and not the mortgage payments, for the immediate time being. In other words, do you really want to buy something you'll need to "Flip" when you get the good job?
She certainly will not want to share a bathroom...

  If your going to stay in academia, SWMBO is not really a option you can ignore, as one of the silent, un-expressed,  criteria for joining a faculty (in many cases) is a stable home life. Why? A single PROF can outperform married with children co-workers 20 to 1, not having all the responsibilities of a married staff member with hatchlings.  That can anger your colleagues, as they can see it as a unfair advantage. Your colleagues will want to see stability, and a major indication of that is a communicative, educated, spouse.  Married staff members value married colleagues.   Look at the house you buy in a woman's eyes or potential mate's eyes. 

    Girlfriend 1.0  is always seeking an upgrade to wife 2.0, and will spawn daughter processes*. (Part of old joke) Educated women choose where to raise their offspring carefully in terms of local schools.  So look carefully at the school district where you buy the home, as in talk to local parents and look at the funding, demographics, and teacher student ratio..

Your predicted/planned   utility, upkeep,  and emergency upkeep costs are too low. No where did I read about the costs of a lawn-mower and consumables.

If you rent/sublease, make sure you can dismiss/remove the renter on a short, reasonable notice. In some locales, getting rid of a persistent renter can require the reformation of the universe as we know it. Check with local landlords about jurisdiction  related issues, and  have a lawyer review the rental agreement.

Also check into the local, state, and federal taxes... Paying 4,000 to 6,000$ a year in taxes might be typical.

Just an FYI..

*, Link to old programmer's joke:

http://www.indranet.com/potpourri/humor/girlfriend_upgrade.html

Steve






Navigation

[0] Message Index

[#] Next page

[*] Previous page

There was an error while thanking
Thanking...
Go to full version
Powered by SMFPacks Advanced Attachments Uploader Mod