The housing market

[StarCat]

Interest Only

I'm not sure if i have this right or not, but if you only pay interest for the first 7 years, and then decide after 5 years, to sell, you have never actually paid a cent toward the principle of the house, right? That sounds a lil bit stupid to me. Please correct me if I'm wrong.

 

[Kizzy]

When we bought ours a few months ago it appraised for more than what we were buying it for then so I can only imagine now.

I'm so glad I didn't take that interest only mortage.

Smart smart smart girl

I played the gambling game.

Rates were higher last year in June and July, much higher, they jumped a point from the spring. The way these loans work is that you pay a penalty of 1-2% of 80% of the value of the loan, IF YOU PAY IT OFF EARLY so you have to take the chance that the rate your getting is going to save you money over the course of the loan and that you'll be able to refinance at a decent rate in which you'll qualify for, but many will not shop until it becomes a forced issue. After the loan grace period of 3/5/7 or 10 years, the rate can jump up to 10 percent or higher.

It is a gamble, and one I haven’t felt comfortable making, but for us the decision proved to be the right one. We saved money this way even after paying the penalty.

It just makes me wonder about those who don’t bite the bullet and take the penalty when the market drops. It could be a troubled road for many.

 

[czygvtwkr]

The funny thing is that the only thing that caused the house prices around here to go up was peoples hysteria, almost like gas two weeks ago.

An interest only loan basically boils down to paying rent, or a lease with a ballon payment.

 

[Kizzy]

I'm not sure if i have this right or not, but if you only pay interest for the first 7 years, and then decide after 5 years, to sell, you have never actually paid a cent toward the principle of the house, right? That sounds a lil bit stupid to me. Please correct me if I'm wrong.

You are only required to pay the interest only on the loan for whatever term the loan is, 3, 5, 7 or 10 years. These interest only loans could be at a rate of 4% when the current fixed rate is 7%.

However, only an idiot would just send interest only and not additional principle, because once the term passes, the rate has the ability to jump at it will. So, people in interest only loans need to be shopping, but like I said, many will not take that route until they see the statement and go OMG. The rate went up.

BUT, many mortgage people are putting people in interest only loans because they don't qualify for a fixed rate loan. That wasn't the case with us; I gambled the market and it happened to turn out for the better.

I feel I am good with finances and I'll say that even I wasn't comfortable with the "game" I was playing. Everytime I thought about it, it made me sick to my stomach. Right now, I'm relieved and at a rate of just a little over 5% now/fixed that is the result of the refinance, I felt it was worth the gamble.

I'm not sure I'd deal with the stress again.

Once is enough. At a rate of 4% with a loan that could jump to a max rate of 10.5%, it is a gamble that could cost double the mortgage payment or more.

 

[StarCat]

You are only required to pay the interest only on the loan for whatever term the loan is, 3, 5, 7 or 10 years. These interest only loans could be at a rate of 4% when the current fixed rate is 7%.

However, only an idiot would just send interest only and not additional principle, because once the term passes, the rate has the ability to jump at it will. So, people in interest only loans need to be shopping, but like I said, many will not take that route until they see the statement and go OMG. The rate went up.

BUT, many mortgage people are putting people in interest only loans because they don't qualify for a fixed rate loan. That wasn't the case with us; I gambled the market and it happened to turn out for the better.

I feel I am good with finances and I'll say that even I wasn't comfortable with the "game" I was playing. Everytime I thought about it, it made me sick to my stomach. Right now, I'm relieved and at a rate of just a little over 5% now/fixed that is the result of the refinance, I felt it was worth the gamble.

I'm not sure I'd deal with the stress again.

Once is enough. At a rate of 4% with a loan that could jump to a max rate of 10.5%, it is a gamble that could cost double the mortgage payment or more.

I was just wondering because on the radio, i hear commercials for interest only in Virginia, ALL the time. i think im going to wait to buy a house, when i wouldnt even have to think about interest only. Maybe when they go down a few hundred thousand lol. What I'm worried about too, is buying a house for, say, 400 thousand, next thing you know, the market plummets, and my house is only worth 100 thousand. Can that happen? I would be REALLY mad.

 

[FastCarsSpeed]

I had no choice really had to cash out on the house to pay off ex. so the only way to do it was interest only. But I did it smart.. I have a no payoff penalty clause in my mortgage so I can refi and my interest rate is locked for 10 years on the worst case scenario. Some of these people that are doing Adjustable rate Interest only loans are nuts.

 

[Hot N Bothered]

I was just wondering because on the radio, i hear commercials for interest only in Virginia, ALL the time. i think im going to wait to buy a house, when i wouldnt even have to think about interest only. Maybe when they go down a few hundred thousand lol. What I'm worried about too, is buying a house for, say, 400 thousand, next thing you know, the market plummets, and my house is only worth 100 thousand. Can that happen? I would be REALLY mad.

Theoretically that can happen, but...

say, you didn't just buy in New Orleans, did you?

 

[dems4me]

Theoretically that can happen, but...

say, you didn't just buy in New Orleans, did you?

At least there, they'd bring food, water, debit cards and donations to your door daily

 

[Kizzy]

I think it could happen, losing value, but if I was to take a stab, it isn't going to lose 25% I wouldn't think, but who knows. It is all based on guesses and opinions. If I could see into the future, I'd get one of those 1-800 #'s and charge people to call Mother "kizzy" love. I'd be rich.

I just happen to be in the opinion that if the rates go up, housing prices will fall little by little unless or until incomes go up.

 

[StarCat]

Theoretically that can happen, but...

say, you didn't just buy in New Orleans, did you?

No but I'm starting to wish i had.

 

[StarCat]

I think it could happen, losing value, but if I was to take a stab, it isn't going to lose 25% I wouldn't think, but who knows. It is all based on guesses and opinions. If I could see into the future, I'd get one of those 1-800 #'s and charge people to call Mother "kizzy" love. I'd be rich.

I just happen to be in the opinion that if the rates go up, housing prices will fall little by little unless or until incomes go up.

I just cant imagine them going up much higher, people already cant afford a house, much less a house AND gas lol. So it seems to me, they would have to come back down eventually, in order for them to ever be able to go back up.

 

[czygvtwkr]

Nobody could have guess houses would have trippled in price in 5 years either, would they?

 

[LostSoul20010]

It's insane. We had our house appraised last month and in the 11 mos. since we moved here it's gone up quite a bit.

yeah my house appraised for 463,000 its nuts

 

[LostSoul20010]

I just cant imagine them going up much higher, people already cant afford a house, much less a house AND gas lol. So it seems to me, they would have to come back down eventually, in order for them to ever be able to go back up.

so i should sell?? lol

 

[Hot N Bothered]

I think it could happen, losing value, but if I was to take a stab, it isn't going to lose 25% I wouldn't think, but who knows. It is all based on guesses and opinions. If I could see into the future, I'd get one of those 1-800 #'s and charge people to call Mother "kizzy" love. I'd be rich.

I just happen to be in the opinion that if the rates go up, housing prices will fall little by little unless or until incomes go up.

Actually, I can see losing 25%, but Star's scenerio had the house losing 75%. That won't happen without a disaster.

The problem with the housing bubble bursting isn't so much the cost going down. The problem comes when you have to relocate, for a job or something and your house stays on the market for months, instead of days. You still have to go for that job, but you have to wait to get your money out of the house, and maybe pay two mortgages.

 

[dems4me]

Nobody could have guess houses would have trippled in price in 5 years either, would they?

I sure as heck didn't...

 

[LostSoul20010]

Actually, I can see losing 25%, but Star's scenerio had the house losing 75%. That won't happen without a disaster.

The problem with the housing bubble bursting isn't so much the cost going down. The problem comes when you have to relocate, for a job or something and your house stays on the market for months, instead of days. You still have to go for that job, but you have to wait to get your money out of the house, and maybe pay two mortgages.

i moved here 3 months ago and i couldnt believe the cost of housing. now it just blows my mind in TX my house would be like 200,000

 

[czygvtwkr]

i moved here 3 months ago and i couldnt believe the cost of housing. now it just blows my mind in TX my house would be like 200,000

I know in Texas a 350k house is literally a castle, here its just another house that could have been on the Brady Bunch

 

[StarCat]

Actually, I can see losing 25%, but Star's scenerio had the house losing 75%. That won't happen without a disaster.

The problem with the housing bubble bursting isn't so much the cost going down. The problem comes when you have to relocate, for a job or something and your house stays on the market for months, instead of days. You still have to go for that job, but you have to wait to get your money out of the house, and maybe pay two mortgages.

I'm just bitter because I cant afford a house. If i had come out of school, and bought a house then, before everything went up, i would have one now, that i could more than likely sell, for some crazy amount, then buy another one and move out of the area, with it paid for. Its impossible now, because I want to be home with my son. Unless I get a job, we cant afford it, BUT, if i get a job, i will probably only make a lil more than it costs for daycare. My husband makes alot, but its still not enough. I would need a job making as much, or maybe a lil less than him.

 

[LostSoul20010]

I know in Texas a 350k house is literally a castle, here its just another house that could have been on the Brady Bunch

sometimes i think its not worth it to live here