.

[boone7247]

Ran it in an amortization calculator. Option A has an interest rate of about 3.812% while option B has 3.722% interest rate.

Interest paid over the life of the loan would be A) 102,000 B)129,000, options B results in a $8,100 tax savings over the life of the loan.

Over the last 30 years the DOW would return about 8.2%. That would be $3,690 in additional income per year.

Just the fact that the $45k would pay the excess payment of $200 per month plus another $107 per month would be worth it in my mind.

Option B is a no brainer if the discipline is there to invest the $45K and not touch it. You are paying a lower interest rate, and able to invest market it. That is the essence of putting your money to work for you.

 

[1100011CS]

I couldn't resist running the numbers immediately because I love this crap. At today's rate at my credit union of 3.8%, if he put all $50K down, he would pay the house off in just under 11 years. (assuming $150K loan at 3.8% for 15 years)

If he put 3% down, invested the remaining $44K at 8.8% (a 5% spread over mortgage rate) he'd be able to pay it off in 9 as below.

[TABLE="width: 192"]
[TR]
[TD="class: xl63, width: 64"]Year-end[/TD]
[TD="class: xl63, width: 64"]Mtg Bal[/TD]
[TD="class: xl63, width: 64"]Inv Bal[/TD]
[/TR]
[TR]
[TD="class: xl64, align: right"]1[/TD]
[TD="class: xl65, align: right"]$184,215[/TD]
[TD="class: xl65, align: right"]$47,872[/TD]
[/TR]
[TR]
[TD="class: xl64, align: right"]2[/TD]
[TD="class: xl65, align: right"]$174,052[/TD]
[TD="class: xl65, align: right"]$52,085[/TD]
[/TR]
[TR]
[TD="class: xl64, align: right"]3[/TD]
[TD="class: xl65, align: right"]$163,496[/TD]
[TD="class: xl65, align: right"]$56,668[/TD]
[/TR]
[TR]
[TD="class: xl64, align: right"]4[/TD]
[TD="class: xl65, align: right"]$152,532[/TD]
[TD="class: xl65, align: right"]$61,655[/TD]
[/TR]
[TR]
[TD="class: xl64, align: right"]5[/TD]
[TD="class: xl65, align: right"]$141,143[/TD]
[TD="class: xl65, align: right"]$67,081[/TD]
[/TR]
[TR]
[TD="class: xl64, align: right"]6[/TD]
[TD="class: xl65, align: right"]$129,314[/TD]
[TD="class: xl65, align: right"]$72,984[/TD]
[/TR]
[TR]
[TD="class: xl64, align: right"]7[/TD]
[TD="class: xl65, align: right"]$117,028[/TD]
[TD="class: xl65, align: right"]$79,406[/TD]
[/TR]
[TR]
[TD="class: xl64, align: right"]8[/TD]
[TD="class: xl65, align: right"]$104,267[/TD]
[TD="class: xl65, align: right"]$86,394[/TD]
[/TR]
[TR]
[TD="class: xl64, align: right"]9[/TD]
[TD="class: xl65, align: right"]$91,013[/TD]
[TD="class: xl65, align: right"]$93,997[/TD]
[/TR]
[/TABLE]


That's a virtual wash (one year) IMO and not worth the investment risk to your principal. Put the $50K down and don't look back!

Don't you need to consider the tax implications of both options?

EDIT: Looks like Boone answered my question

 

[BCClone]

I couldn't resist running the numbers immediately because I love this crap. At today's rate at my credit union of 3.8%, if he put all $50K down, he would pay the house off in just under 11 years. (assuming $150K loan at 3.8% for 15 years)

If he put 3% down, invested the remaining $44K at 8.8% (a 5% spread over mortgage rate) he'd be able to pay it off in 9 as below.

[TABLE="width: 192"]
[TR]
[TD="class: xl63, width: 64"]Year-end[/TD]
[TD="class: xl63, width: 64"]Mtg Bal[/TD]
[TD="class: xl63, width: 64"]Inv Bal[/TD]
[/TR]
[TR]
[TD="class: xl64, align: right"]1[/TD]
[TD="class: xl65, align: right"]$184,215[/TD]
[TD="class: xl65, align: right"]$47,872[/TD]
[/TR]
[TR]
[TD="class: xl64, align: right"]2[/TD]
[TD="class: xl65, align: right"]$174,052[/TD]
[TD="class: xl65, align: right"]$52,085[/TD]
[/TR]
[TR]
[TD="class: xl64, align: right"]3[/TD]
[TD="class: xl65, align: right"]$163,496[/TD]
[TD="class: xl65, align: right"]$56,668[/TD]
[/TR]
[TR]
[TD="class: xl64, align: right"]4[/TD]
[TD="class: xl65, align: right"]$152,532[/TD]
[TD="class: xl65, align: right"]$61,655[/TD]
[/TR]
[TR]
[TD="class: xl64, align: right"]5[/TD]
[TD="class: xl65, align: right"]$141,143[/TD]
[TD="class: xl65, align: right"]$67,081[/TD]
[/TR]
[TR]
[TD="class: xl64, align: right"]6[/TD]
[TD="class: xl65, align: right"]$129,314[/TD]
[TD="class: xl65, align: right"]$72,984[/TD]
[/TR]
[TR]
[TD="class: xl64, align: right"]7[/TD]
[TD="class: xl65, align: right"]$117,028[/TD]
[TD="class: xl65, align: right"]$79,406[/TD]
[/TR]
[TR]
[TD="class: xl64, align: right"]8[/TD]
[TD="class: xl65, align: right"]$104,267[/TD]
[TD="class: xl65, align: right"]$86,394[/TD]
[/TR]
[TR]
[TD="class: xl64, align: right"]9[/TD]
[TD="class: xl65, align: right"]$91,013[/TD]
[TD="class: xl65, align: right"]$93,997[/TD]
[/TR]
[/TABLE]


That's a virtual wash (one year) IMO and not worth the investment risk to your principal. Put the $50K down and don't look back!

Now the next step in the investing that is overlooked. Im the investor type also BTW. You need to cut roughly 25% of the 43997 off for income taxes. So you will need at least another year to wash them out.

 

[serverguy]

Ummm...not basically...you ARE taking a loan out from the bank.

In most cases, everything else you say is true. In the OP's case it is not, necessarily. He's got the money. And if he is disciplined enough to invest it wisely, it CAN be a sound and even very profitable financial decision.

That said, this is coming from a guy who paid off his house early after swearing he never would so...

It can just as easily fall apart and now you have a big whole to dig yourself out of. There is allot of risk you are taking on with no safety net.

 

[SoapyCy]

It can just as easily fall apart and now you have a big whole to dig yourself out of. There is allot of risk you are taking on with no safety net.

are you saying with a higher down payment your cash safety net is gone or having a larger loan would hurt you if something happened?

 

[ruxCYtable]

It can just as easily fall apart and now you have a big whole to dig yourself out of. There is allot of risk you are taking on with no safety net.

Some people are risk tolerant, some people are risk averse. There is no one answer that will be right for everyone.

 

[BCClone]

Some people are risk tolerant, some people are risk averse. There is no one answer that will be right for everyone.

Im more risk seeking than either.

 

[ruxCYtable]

Now the next step in the investing that is overlooked. Im the investor type also BTW. You need to cut roughly 25% of the 43997 off for income taxes. So you will need at least another year to wash them out.

True, I didn't factor in taxes at all.

 

[KnappShack]

How many folks on here bought their first home and stayed until it was completely paid?

I owned mine for 5 years before leaving Iowa. I wonder what is the typical time a person stays in that first home.

 

[Cyclonesince78]

the income cutoff is 65k. i'm not judging the program because i'm only interested in the number-crunching. but 65k doesn't seem too low income in iowa.

That is slightly lower then the median income in the counties that surriound DM (for a 2 person household). Technically, it would be considered low-to-median income. It's designed for the lower income bracket though.

 

[dmclone]

How many folks on here bought their first home and stayed until it was completely paid?

I owned mine for 5 years before leaving Iowa. I wonder what is the typical time a person stays in that first home.

The average is 13 years.

 

[Cyclonesince78]

The average is 13 years.

No it isn't. It's more like 3-5 tops.

 

[dmclone]

No it isn't. It's more like 3-5 tops.

Do you honestly believe this?

 

[dmclone]

I'm sorry, 11 1/2 years for first time buyers.

http://eyeonhousing.org/2013/01/lat...ge-buyer-expected-to-stay-in-a-home-13-years/

 

[Cyclonesince78]

Do you honestly believe this?

For a first house, yeah I believe it. Who buys their first house and stays there for 13 years? It used to be 3 years, but when the economy crash it extended a bit. I think once the economy kicks back, you'll see a solid 3-5 years for first homes.

 

[dmclone]

For a first house, yeah I believe it. Who buys their first house and stays there for 13 years? It used to be 3 years, but when the economy crash it extended a bit. I think once the economy kicks back, you'll see a solid 3-5 years for first homes.

Could you provide some data on this or is this just something you think?

 

[dmclone]

The article also shows that, over the 1987-2011 period, the expected length of stay in a single-family home has been consistently longer for trade-up buyers than for first-time buyers. Averaged over those years, the expected length of stay in a single-family home is about 11 and a half years for first-time buyers, compared to 15 years for buyers who have owned a home before.

 

[Cyclonesince78]

Could you provide some data on this or is this just something you think?

Well I know for a fact a lot of Fannie's guidelines are based on 3 year parameters because that used to be the average amount of time that someone spent in their home. But that has without a doubt extended because home values stopped increasing. Now that prices are going back up again, I think the data starting after May 2015 will see a shorter time period.

As far as your link that was the first link that pops up on a google search. It's from 2013 and we were still seeing low home prices.

I don't really feel like spending the time trying to find a link, so we can agree to disagree. I'm just using common sense, that most first time homebuyers don't stay in a house for 13 years, regardless of that link.

 

[isufbcurt]

How many folks on here bought their first home and stayed until it was completely paid?

I owned mine for 5 years before leaving Iowa. I wonder what is the typical time a person stays in that first home.

I don't live in my first home anymore but I still own it because my dad lives there.

 

[brianhos]

I like the idea of paying as much cash as I can on big items. Did this when I got a house 20 years ago, and I am thankful every day that I did it that way.