Home buying thread

Picasso_sl said:

I guess I could list about 2 thousand things in each category of market fluctuations, mortgage types, the unpredictability of life, and changing needs for a home but instead I'll just ask for you to point out the distinctive factor of 5 years in this chart.

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All he said was a large portion of your payment is going towards interest, and hardly any of it towards principle during the first 5 years of a 30 year mortgage. And that statement is unequivocally true. I'm not really sure what your other bullet points have to do with that? Especially the mortgage type since he specifically said "traditional 30 year".

"People who bounce around houses every few years are only giving money away to the bank." Primary statement of issue.

And what the numbers show is 5 years is an arbitrary point. Even if you pick the date where you're paying more principle than interest it's nothing more than a mental thing when you've been whittling it down for 2 dollars a month for 15 years.

Cad_sl said:

The thing that makes it stupid is the "5 years" part. It's majority interest for 12-13 years depending on a few factors.

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I figured the "5 years" part was because that's the cutoff most people use when they talk about how long they want to stay in their "starter homes". So that's the point of reference.

5 year plans and all that.

I don't usually hear people talking about buying a starter home and living in it for 15 years.

And Picasso, by and large people who bounce around or refinance a lot are the bread and butter of the mortgage industry. Still not really sure why you take issue with that statement. It's pretty true.

Khane_sl said:

I figured the "5 years" part was because that's the cutoff most people use when they talk about how long they want to stay in their "starter homes". So that's the point of reference.

5 year plans and all that.

I don't usually hear people talking about buying a starter home and living in it for 15 years.

And Picasso, by and large people who bounce around or refinance a lot are the bread and butter of the mortgage industry. Still not really sure why you take issue with that statement. It's pretty true.

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Pretty true.
1. 5 years is stupid
2. All people who bounce around are "Only Giving away money to the bank" is false
3. "Almost entirely interest" is hyperbolic.

Now call me hodj but I think some part of the statement should be accurate.
Since it was 2 sentences and I think we're all agreed that there there are no breaking points for amortization interest, the post has already failed.
And I also assert the undeniable facts that people who bounce around every few years either to capture better appreciating markets, avoid cap gains tax by flipping primary residence every 2 years, move where they want to live, or buy because a good deal has come up are not *only giving away money* but may actually be improving their life and or finances.
3. I could just as easily say unless you're going to live somewhere 15 years you're throwing your money away because you're paying more in interest than in principle. An entirely useless bullshit statement without any context that dominate these decisions.

I think if you want to have a debate on the negatives of bouncing realtor fees and closing costs are way ahead of interest.

Cad_sl said:

I mean most people's home decisions are purebred stupidity for a lot of reasons, the mortgage industry and 30 year amortization just being one of them and not even close to the worst one.

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Care to elaborate? I'm curious. I came out alright on my first home but in hindsight wasn't really prepared for all that came with it. It was definitely an experience that taught me a lot, and not just about the buying process. There are certainly mistakes I made that I won't repeat.

Picasso_sl said:

Pretty true.
1. 5 years is stupid
2. All people who bounce around are "Only Giving away money to the bank" is false
3. "Almost entirely interest" is hyperbolic.

Now call me hodj but I think some part of the statement should be accurate.
Since it was 2 sentences and I think we're all agreed that there there are no breaking points for amortization interest, the post has already failed.
And I also assert the undeniable facts that people who bounce around every few years either to capture better appreciating markets, avoid cap gains tax by flipping primary residence every 2 years, move where they want to live, or buy because a good deal has come up are not *only giving away money* but may actually be improving their life and or finances.
3. I could just ask easily say unless you're going to live somewhere 15 years you're throwing your money away because you're paying more in interest than in principle. An entirely useless bullshit statement without any context that dominate these decisions.

I think if you want to have a debate on the negatives of bouncing realtor fees and closing costs are way ahead of interest.

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I'm guessing you bought a starter home?

Ad hominem, address the points, retard.

Come on dude. I said that because it seems like you believe he is personally attacking you.

1) 5 years is not a stupid number, I already explained why. People tend to have 5 year plans, so that's the point of reference
2) Most people who bounce around are just giving money away to the bank. People tend to use generalizations when they speak of things in a majority sense. A very small fraction of home buyers who move around a lot ever break even, let alone make money
3) I'm not sure how to address this since the statement isn't hyperbolic at all, and you can take a look at any mortgage amortization on a 30 year fixed to see that. I'm not even sure how someone could argue that point.

"Your first 5 years on a traditional 30 year loan are almost entirely interest payments and very little going to principle. People who bounce around houses every few years are only giving money away to the bank"

What picasso would like to see:
The amount of amortization buttfucking one receives is proportional to the mortgage term and term remaining. Bouncing houses frequently incurs inequitable expenditures that may be difficult to overcome from a purely financial perspective with typical market conditions.

Maybe I'm triggered because I have to write very cautiously to assure someone doesn't read a report with shitty qualifiers or supposed hard numbers, take it as the gospel, and modify a sidewalk so that Tuco gets wedged between 2 telephone poles when he's riding his bike?

Cad_sl said:

People get emotionally attached to one particular thing that drives 10 other compromises e.g. I want a yard even though I can't afford a house with a yard within 30 miles of my office without living in a crack den

People buy a house that is way too expensive for them to afford unless their earnings continue to significantly increase, which of course then just get spent on cars/etc rather than savings. Take what they "say" you can afford and spend about half that.

Location, location, location. You don't really need 6000 square feet or a 4 car garage or 2 acres. What you do need is to be close to the shit you use every day. Like your office. Or good schools.

People buy tract houses in tract developments in sprawling shitty suburbs. The land in these developments are not valuable, you're just paying for the house. Houses are not appreciating assets. The stack of bricks you bought is a slowly depreciating asset. The land can appreciate if it's in a good area. If its a tract house in a shitty tract development in a shitty suburb, it's not going to. Then you pay interest on this shitty depreciating asset that you could barely afford. Make sense yet?

People sell their house to move after a few years, paying interest, real estate agent, mortgage closing costs, movers, landscapers, shutters, flooring, etc; to "fix up" their house so that it is "livable" and then promptly dump it. You might as well just light your money on fire.

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All good insights.

I think of the things I did really right when I bought my place was locating in a good school district in a desirable party of town. My house is smaller and less valuable than a lot of newer homes nearby, but that's because there are whole subdivisions full of mcmansions around me. I also did a good job of buying well within my budget, and have never struggled to pay bills or mortgages. I had too much credit debt at the time, but I've paid everything off fully now and it has really made keeping up with repairs and other maintenance a lot easier.

The mistakes I made were not having enough of a down payment for a conventional loan, and buying a house that was great for me in my mid-20s that isn't quite so hot in my early 30s. A big yard, deck, pool, sunroom, etc. were great when I was single, rented rooms to my buddies, and we had company all the time. It's a much poorer use of space when it's just my wife and I and we're never home enough to use it, and rarely entertain. My dogs get more use out of the pool than I do, and that fucker is expensive.

I don't want more house, I just want better allocation of the space we've got. In my wife's case, she wants a better commute. She didn't pick this place, I had bought it before we met. We've done a lot to make it feel like home for her, but the location just doesn't fit our life anymore. For her, it never did. She drove up into the burbs to see me, and moved here because it made sense while the market was bad. Things have bounced back a little, and it's time we find a spot in town we can put down real roots. I don't know if we'll ever have kids, it's leaning more towards no at the moment, but I still want to be in a good location where the land is desirable.

Besides only giving away your money to the banks it sounds like you have a good plan. Can you put 20% down on a new place now and not deal with the contingency shit? Contingency seems pretty terrifying to me but I've never done it. Supposedly the reason we got our place over another couple was we weren't contingent.

No, and it's something we're going to need to work on. I have a short list of necessary repairs we've got to address (we're due for paint, garage doors need replacing badly, etc.), and then I'll be funneling all of our savings into a house fund.

I have no background whatsoever in finance, but could someone explain this to me...

Why is the interest paid up front on your average home loan? Why isn't the division between interest and principle even over the life of the loan?

For instance, if you have a $200,000 house loan for 30 years, and with interest that ends up with you paying $350,000, why isn't your mortgage payment 57% principle and 43% interest every month? You still end up at the same point, and same money paid over 30 years. If it just purely a cash grab by the banks/lenders to front-load the interest?

joeboo_sl said:

I have no background whatsoever in finance, but could someone explain this to me...

Why is the interest paid up front on your average home loan? Why isn't the division between interest and principle even over the life of the loan?

For instance, if you have a $200,000 house loan for 30 years, and with interest that ends up with you paying $350,000, why isn't your mortgage payment 57% principle and 43% interest every month? You still end up at the same point, and same money paid over 30 years. If it just purely a cash grab by the banks/lenders to front-load the interest?

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Because you would have larger payments up front. Amortization works in such a way that your payment stays the same every month which most people prefer because most people buy houses they can't *really* afford. And people like to know exactly what their expenditure will be at all times.

57% of your principle when your principle is 250k is a lot more money than 57% of your principle after you've payed 100k down after 20 years.

And yes, it's also a cash grab.

EDIT: Also, your payment isn't nearly as interest heavy on 10 or 15 year loan terms. In fact, it's a majority principle on those terms starting from day 1. 30 year loans are a bad investment unless you know something about the market and how to manipulate that money in a better way elsewhere.