I think the 60 year low of interest rates are over

Horsepower Lifestyles said:
My wife and I are young, we bought our house in 2016 and locked in our rate at 3.5% i think which was great at the time. Even then we were still in a bidding war for our house and i think we paid 15k over asking. There were multiple cash offers on our house but the realtor really liked us and swayed the buyers into selling to us. 

Fastforward to today and the house across the street from me just sold in one day for an insane price and it was a cash deal. Based off that sale my house has almost doubled in price from what I paid in 2016. Mind you we have remodeled so that added alot of value

My question to everyone is will the craziness and prices really come down even with the interest rate rising? Talking to friends, realtors, and watching the market it seems every house has a cash offer on it, So what will the interest rate matter if its a cash buy? I understand it might take some of the bidders out who can't afford the mortgage with a higher rate but do you think all the cash buyers will stop buying?

I have friends and family who are sitting on cash waiting for something to drop so they can start picking up properties at a reasonable price, commercial and residential
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If history is any indicator, the market will go stagnant before the prices start dropping. With rental demand so high it may even take longer. If I couldn't afford my house payment right now I could rent it out for more than my mortgage. I think a lot of people are in that position right now and are not willing to take a big hit by selling. 

But we are in uncharted Territory who knows what the hell's going to happen.

 
John@Outfront said:
Its all up hill from now,  i just refi'd but shortening my 30 year loan to a 15 year to take advantage of having 8 less years of mortgage payments.  it closes this Friday and was able to lock in a 2.875 rate from 3 weeks ago, my broker tells me today (3 weeks later) the same loan is now at 4+% and 30 year loans are mid 5%'s.  this will be the beginning of the housing crash in my opinion or at least a reasonable adjustment down.  

Just looked at Zillow and they showed the most insane 30 day increase on my property--unbelievable actually.  it can not keep doing this

i still remember when i bought my first home in 86 and i think the rate was near8% so they are still great at the moment just not "as great"
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That is great John.

When we refi'd I thought about doing a shorter term, but my loan guy said...do the 30 and pay off more if you want to. If for some reason one month you don't want to pay that much you don't have to. We did 2.75 for 30 yr.

There is no penalty for paying off sooner...I want to pay mine off in 12-15...but if it goes to 18 no biggy.

Just my worthless $.02 :lmao:

 
dbart said:
That is great John.

When we refi'd I thought about doing a shorter term, but my loan guy said...do the 30 and pay off more if you want to. If for some reason one month you don't want to pay that much you don't have to. We did 2.75 for 30 yr.

There is no penalty for paying off sooner...I want to pay mine off in 12-15...but if it goes to 18 no biggy.

Just my worthless $.02 :lmao:
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but on any given day the 15 year interest will always be lower so even if you pay extra or dont have have a small penalty by not doing the 15 

 
John@Outfront said:
but on any given day the 15 year interest will always be lower so even if you pay extra or dont have have a small penalty by not doing the 15 
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By doing the 30 yr loan and paying an extra payment a year against Principle, you can lower your term to an 15-17 year loan and have a larger interest write off............I was told this by someone a lot richer than me, so I trusted them. :classic_blink:

I currently have a 30 yr loan at 2.6%, I pay an extra payment once a year, but I am going to start doing this twice a year when my last kid is thru college (two more years)

There is no penalty to pay off the loan early

 
ANGRYBUTTCRACK said:
Had too much scratch and just paid the mo-fo off a few years back.. nice feeling.. no debt.

abc
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Investment funds.  Read somewhere that at current rent prices, regular houses can support over a $1M purchase price and still outperform most mutual funds. 

 
Good chance rates dip one more time when things fall apart either later this year or next, but it will be a short lived dip, and then rates are going to the moon. 

 
EmpirE231 said:
Good chance rates dip one more time when things fall apart either later this year or next, but it will be a short lived dip, and then rates are going to the moon. 
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i dont think so with the dough head in the WH

 
Cookie said:
By doing the 30 yr loan and paying an extra payment a year against Principle, you can lower your term to an 15-17 year loan and have a larger interest write off............I was told this by someone a lot richer than me, so I trusted them. :classic_blink:

I currently have a 30 yr loan at 2.6%, I pay an extra payment once a year, but I am going to start doing this twice a year when my last kid is thru college (two more years)

There is no penalty to pay off the loan early
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Why would you want a larger interest write off? That just means you are paying more interest. Writing off interest only saves you what your tax rate is. So if you are at a 30% tax rate, for every $1 you pay in interest you save $.30 on your taxes as the interest reduces your taxable income. If you must pay interest then I totally get it. But paying more interest to save taxes makes no sense. The only time this applies is if you believe you can make earnings higher than your interest rate so you put your cash to work elsewhere vs. paying off a loan. If you are comfortable with investment risk you can make some $$ on the spread. So if your interest rate is say 3.5% and believe you can earn 5% then invest the money and take the tax write off. 

 
Dockmaster said:
Why would you want a larger interest write off? That just means you are paying more interest. Writing off interest only saves you what your tax rate is. So if you are at a 30% tax rate, for every $1 you pay in interest you save $.30 on your taxes as the interest reduces your taxable income. If you must pay interest then I totally get it. But paying more interest to save taxes makes no sense. The only time this applies is if you believe you can make earnings higher than your interest rate so you put your cash to work elsewhere vs. paying off a loan. If you are comfortable with investment risk you can make some $$ on the spread. So if your interest rate is say 3.5% and believe you can earn 5% then invest the money and take the tax write off. 
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It gives you much more flexibility in the future.  When I was self employed, I would agree with you 100%.  Being in a corporate job now with zero tax write offs, I need anything to help my tax base.  But then again the difference between 2% (15 yr) and 2.5% (30 yr) isn't going to do much in the big picture. But, I like to have flexibility with my money, and being tied to a lower payment (and then making extra payments) will allow me more money in my pocket.  At the end, I will finish my loan at the same time of a 15 yr loan and get a little tax help along the way, and if I lose my job and have a hard time paying my payments, I will have some flexibility as well.

 
Cookie said:
By doing the 30 yr loan and paying an extra payment a year against Principle, you can lower your term to an 15-17 year loan and have a larger interest write off............I was told this by someone a lot richer than me, so I trusted them. :classic_blink:

I currently have a 30 yr loan at 2.6%, I pay an extra payment once a year, but I am going to start doing this twice a year when my last kid is thru college (two more years)

There is no penalty to pay off the loan early
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One extra payment a year will not take a 30 year loan down to 17, especially at the low interests rates we are at. Yes it’s a smart strategy to pay one extra payment (13th payment) a year directly to principal. It will shave off several years on a 30 year loan, but not half. 
 

We were just in year 4 of a 30year loan when we refinanced. We did a 20 year which essentially took 6 years off. Even with the lower interest rates our payment was going to go up. I was able to pay down the loan to keep our payments the same. It’s a comfortable number we can make. I was looking at a 15 year term, but was concerned with not leaving us enough cushion if we had another bill like a new car or whatever enter our life. Plan still is to make the 13th payment which if we do each year should shave off a couple years. 

 
Mac said:
I refied at 2.25% on a 30 fixed.  Boom...done.  We will never see that again in my lifetime.
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I'm at the same rate and am now ready to GTFO of Ca, should have saved the rate and moved sooner

 
John@Outfront said:
Its all up hill from now,  i just refi'd but shortening my 30 year loan to a 15 year to take advantage of having 8 less years of mortgage payments.  it closes this Friday and was able to lock in a 2.875 rate from 3 weeks ago, my broker tells me today (3 weeks later) the same loan is now at 4+% and 30 year loans are mid 5%'s.  this will be the beginning of the housing crash in my opinion or at least a reasonable adjustment down.  

Just looked at Zillow and they showed the most insane 30 day increase on my property--unbelievable actually.  it can not keep doing this

i still remember when i bought my first home in 86 and i think the rate was near8% so they are still great at the moment just not "as great"
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Always a pleasure to help out a GD'er.  Thanks John.  

 
NIKAL said:
One extra payment a year will not take a 30 year loan down to 17, especially at the low interests rates we are at. Yes it’s a smart strategy to pay one extra payment (13th payment) a year directly to principal. It will shave off several years on a 30 year loan, but not half. 
 

We were just in year 4 of a 30year loan when we refinanced. We did a 20 year which essentially took 6 years off. Even with the lower interest rates our payment was going to go up. I was able to pay down the loan to keep our payments the same. It’s a comfortable number we can make. I was looking at a 15 year term, but was concerned with not leaving us enough cushion if we had another bill like a new car or whatever enter our life. Plan still is to make the 13th payment which if we do each year should shave off a couple years. 
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Doing the math and for me and my rate 2 extra payments a year only saves 8 years and 114k in interest. My rate is 2.25. 

 
Cookie said:
It gives you much more flexibility in the future.  When I was self employed, I would agree with you 100%.  Being in a corporate job now with zero tax write offs, I need anything to help my tax base.  But then again the difference between 2% (15 yr) and 2.5% (30 yr) isn't going to do much in the big picture. But, I like to have flexibility with my money, and being tied to a lower payment (and then making extra payments) will allow me more money in my pocket.  At the end, I will finish my loan at the same time of a 15 yr loan and get a little tax help along the way, and if I lose my job and have a hard time paying my payments, I will have some flexibility as well.
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When you say flexibility what you are describing here is cash flow flexibility. I agree and understand that is a consideration. But shouldn’t be confused with the fact that you will never recover the interest you pay in a tax write off. You only get a portion of it. 
 

And when you talk the difference between a 15 year and 30 year term there is a huge difference. Even though the rate may not be substantially different, the amount of interest you will pay is exponentially greater with a 30 year loan. Mortgages are not simple interest loans, the interest is very front loaded. So you will pay way more in total interest dollars with a 30 year term vs 15. There are many simple online loan calculators that will graph this for you based on your loan amount and term. Plug your numbers in and you may be shocked at the difference. 

 
Jtmoney714 said:
Doing the math and for me and my rate 2 extra payments a year only saves 8 years and 114k in interest. My rate is 2.25. 
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Exactly. That’s why I said one extra payment will not cut your loan in half. But cutting 8 years and 114K or even 4 years and 50K is a big deal. 

 
Glad to see this discussed as the gf and I are currently dealing with this situation. We moved from South Carolina to Colorado because, I mean it's Colorado. We've been staying at an Airbnb for almost a year and she has been trying to buy a house since Nov. She sold her house and therefore has a downpayment so it is her buying the house since we keep our money separate (she is super awesome and smart, especially with money, and I am lucky to have found her). She's put in 9 offers, almost all over asking and been out bid everytime, regularly by 20-30k and once by 80k. With the rates going up we've essentially already lost 50k worth of buying power and they're still rising. We're to the point where we are very close to just leaving our jobs here and moving back to SC where I still have my house until this housing calms down some or until we can find somewhere cheaper to buy a home. The people here paying 100k over asking and 50k over appraisal are just crazy and we just can't understand it!

 
Yep! That's the world we're in today^^^

Amortization chart shows a 15yr loan vs a 30yr loan being huge savings. Simply doing a 30yr and thinking I'll pay it off in 20 or even 15, remember the interest is usually collected up at the front of the loan. Keeping the 30yr when you could've went 15 is more expensive regardless. 

I love it when people keep saying what the rates are gonna do 😆 I need that crystal ball too. We need inventory! People need to sell their houses now that we have peaked lol because God forbid the 500k house of 2019 goes to a Mil this year! Hahaaa. Now that rents are screaming high, people don't have anywhere to go! Sell? No way, I got a gold mine of equity! It's crazy. 

Here goes another crystal ball prediction. By 2050 there will no longer be a housing problem due to millennials not having babies as we did in the past. 

 
Let me backtrack a bit and give you the bigger picture.

When I last bought a house, the difference between a 30 year and 15 year loan was $500 a month in payment.  I am not afraid of Interest, because the only thing I pay interest on is my house, everything else has been paid for with cash (cars, Moho, Buggy, Trailers, kids cars, kids college, and so forth).  So here is the next step, I take that $500 a month and invest it is the S&P 500.  S&P 500 has doubled in the last 5 years, then add the $6,000 a year I put into it, it is building nicely.  That is flexibility with your money.  At the same time I reduce my taxable income some (not much, but some help).

Like I said above, I currently pay an extra payment a year (against principle) right now because I have one kid still in college.  Once she is out in two years, I will add two or three payments a year.  My house will be paid off in 14 years and at the same time I invested a chunk of money that will allow me to retire in Ca at 60-62 years depending on the stock market.

It works for me, more than one way to skin a cat  :classic_biggrin:

 
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