ShaneMcKenna

Thank you all for the advise. This is an old post, and now I have the cash to pay off the 2nd mortgage which is at $20k. The interest rate is 7.5%, so I am excited to pay off the $20,000 and simply have 1 mortgage. Again, I did an 80% 1st and 20% 2nd to avoid PMI. Now I will have just a 1st of $130k which is 6.5%. Thanks again for the help, Shane

I am researching paying off my $22,000 HELOC with $10,000 cash and putting $12,000 on a 3% interest credit card. (for the life of the balance) The advantages are my interest rate is 1/4th with the cc as it is HELOC, and I will be paying a total amount of $575 in interest over 3 years! (now I pay $250 a month and that is interest only) I will be set to have it paid off in 3 years vs paying Interest Only on my HELOC. The downsides are it is a credit card and I know most credit card companies aren't in business to "save you money". So you will need to be cautious. I have never missed a payment and I am setup for auto debit, so I don't see defaulting on the 3% and jumping up to 25% being an option. My only question is does $12,000 in Credit Card debt look worse on your credit report than the current $20,000 HELOC? I know the credit report looks into debt to income ratio correct? So they will take the balance of each credit card and multiply it by 2 or 3% to get the minimum payment, and that is a monthly debt correct? In general, will doing this and saving thousands in interest and gaining equity much quicker be harmful on my credit until I get my balance back down to $0? Thanks much, Shane

That is my next step, is talking with my current mortage company, and then from there pricing a few others out on refinancing. It just sounds funny I want to refinance and I've only been in the home for 6 months. I know for a fact there is NO early payment penelty on the 1st or 2nd. My main goal is not cash in my pocket, it is to eliminate the need for the 2nd mortgage, or setup a payment plan to overpay on it and eliminate it that way. Right now I am just paying Interest on it, and that does not take anything off the $23,000 principle. So my options are overpay $500 here and there, and in time, that $23,000 will be gone. But in the mean time I am paying $225 a month to borrow that $23,000. I was interested in tapping into my existing equity in the home and using that as part of my initial 20% and then paying off the rest with cash.

Hey I just got into my first house in Feb. of this year. I have an 80% 1st and 15% 2nd, and put 5% down. Right now I am only setup to pay Interest on my 2nd mortgage, but I want to get some kind of a plan to pay down, and eliminate the 2nd loan. My house was appraised for $14,000 higher than what I purchased it for. Plus I put down $10,000. In theory now I have 24,000 equity in the house correct? IF I refinance, I can use that 24k as part of my first 20% right? The house is valued now at 180k. 20% of that is 36k. Minus 24k equity is only 12,000 I would need to bring to closing to elimnate a need for a 2nd, correct? Would that be the better approach and paying refinancing costs vs over paying on 2nd loan for the next 3 years? Thanks, Shane

Thanks for the reply. Last night I called the mortgage exchange I am going to try to sit down with them and talk more about it and ask them my questions sometime next week. I am interested in an interest only loan. thanks for the help, Shane

Thank you for the reply. I have been looking around my area, for a townhome for between $145,000 and $165,000 I hope to find something in that price range. I'd like to put down $10,000 if I find a home for $165,000 that would mean I would need a loan for around 95%, is that financable with a credit score in the high 600's? My 2nd question is could I request an interest only payment for the first 5-10 years? Can you tell me if I'd qualify and also the advantages and disadvantages of doing that for my first loan. thanks, Shane

Hello everyone. I've been on here a few times in the past. I'm about to turn 21 years old, and I have about a year left of College. Then I'll have my degree in business. Realestate has always interested me. I've even went to a few seminars in the past. Anyway my brother is 24 years old and he is wanting to get into his own place. (we still both live with our parents) He has been set on looking at apartments mostly because you'd only be in a lease, and if you need out within a year or so, all you lose is a months rent. Is that true? Where as if you get in over your head with a house you may have to sell it quick for less than what its worth... Anyway a two bed room apartment in our area is pry going to cost around $900 a month. If you rent you won't have to put any money down, pay insurance, or property tax right? Then if you own, you have to pay say $150-$200 property tax on a $155,000 house, you'll have to pay pmi, and home owners insurance. Thats another $100 a month roughly. And I'd assume it's good to put at least $5,000 down. So I see where he's coming from how it may look better to rent/ get an apartment. But I always thought owning a home was so much more beneficial. You will see a benefit on your taxes if not each month, at the end of the year you should get some decent money back. Depending on what you buy, you are free to do an addition, or make a change to the house. Most importantly, if you buy in the right area, the house can only go up in value. If we want to get a cheaper mortgage, would we qualify for an interest only loan if it's our first mortgage? That would put our payment right around $750 a month, and we could use the extra $150 we save for taxes. I know renting is for certain people and its great at certain times. I would much rather get into a nice little condo, the two of us, and go from there. Without getting in over our heads, I think that'd be worth the extra pennies. What do you suggest? Thanks, Shane

Hey Im shane I am still in the market for a house. I havent gotten any further than where I was a few months ago. Still saving my money and waiting for the right time. I hear all the time about first time home buyer programs, are they legit? Some say guarenteed approval or less than 5% down... I have decent credit and I can put down around $15,000. I've even heard of some First time home buyer grants, what are they about? Are there any that wave the pmi? Are there any programs that are better than others? Ill be getting into my first mortgage and anything can help. thank you very much, Shane

That is what my dad has been telling me to do and what he does. He sends in an extra $200 each month and that goes towards principal. That's what I'll do when I get into my mortgage. Right now I am still shopping around, getting as much info as I can, and waiting for the right time. Thank you all for all of your help. Shane

Thank you for the reply, your site gives a great break down in the amortization table of what of your payment will be principle and what will be interest. I am just a little unclear about what happens 10 years from now if you've been only paying interest on your loan... Say you are able to save the extra money each month and have that on hand in the bank, you still pry do not have 100% of the principle in the bank, you'll have to refinance or what happens there? Is interest only for people who intend on paying their house off by the time the interest only payment expires? I understand how it can be a great tool if used right, that’s how a lot of things are in real estate. I am just curious to know if it could work to my benefit when looking to finance my first home. All I can see is the savings of $150 a month. It’s just that paying interest only is doing exactly the opposite of what in reality I want to be doing. I want to be paying for principle only. But that isn’t the case, with any loan; you have to pay the interest, so I guess there are advantages of an interest only loan... I just want to know how you can use it in a wrong way so maybe I will have a heads up and avoid that. And also I'd like to know how else this could benefit me other than keeping $150 each month in my pocket. Thanks again, Shane

Thanks for the reply. One of my main questions was with an Interest only mortgage, are you building any equity? Also is there a way to figure out what your payments will be 10 years from now if you are still in the house? Thanks, Shane

Is there more to it than just saving $125 on your mortgage? What are some other advantages to having a mortgage where you only pay the interest on it for the first 10 years? What happens 10 years from now when you have to start paying to the princible, what are your payments going to be? What if the house doesnt go up in value like it traditionally does? Where am I if I've only been making interest payments towards the mortgage for the last 10 years? A common advantage to the interest only loan is the fact that you can have access to the money where normally it would go towards the princible, you can use that either somewhere else, or put it towards a different property. My question is, is this a decent tool to use on your first mortgage? When would you NOT use an interest only mortgage? Is there any way it can hurt me? Is it harder to get financed for an interest only loan? I can still get locked in at a 30 year rate right? I do not need to refinance 10 years from now right? An interest only loan pry isnt for anyone who is looking to pay off their house in 5 years, but could it work to the advantage of someone just getting started or someone who is going to be renting the house out and looking to get a little positive cash flow each month? Do you build any equity with an interest only mortgage? Interest Only Calculator Another Calculator The 2nd calculator tells you exactly how much of your payment each month is Interest and how little of it at first is princible. The first link tells you how much you'll be saving if you make an interest only payment. Thank you, Shane

I am still thinking about the deal a little bit today. I haven't ruled it out completly. Today I thought of an idea that may help me get started. Do any people who rent the houses out do interest only loans? At first i was against the idea of interest only payments because thats doing the opposite of what I want to do. Really i'd just like to pay off the Principal of the loan. But there are some advantages to an interest only loan. My payment would be $175 less a month. My mortgage would be $560 a month vs $750. Do you think that could be the answer to my problems? What happens if I am making interest only payments on the house for 5 years and the house does not appreciate in value. I dont make any equity do I? Rule of thumb the house will go up in value, but what if it just stays the same, what have I done by paying only the interest? And what are the rates on an interest only loan? Will lenders get me financed with an interest only loan if my intention is to rent the house out? Shane

I heard that also from Greenspan that the rates were going to be rising. My dad and I were just talking about it two nighs ago. I've been following the rates fairly closly as of late. I dont know when I'll be getting into my first mortgage but it isn't far away. I am hoping within the next 6 months. My question is, if this is true about rates, do you suggest getting a fixed rate now over an arm? If your thinking of being there longer than 5 years, a fixed rate is the way to go? I know they have 10 year arms, what are the rates on those? Also where do you see real estate going if these rates do infact increase? Real estate will still be as big as it is now correct? Shane

Will I have to get in at a different rate, or does that just mean it is a longer process? What all will be different from me getting the mortgage and paying it on my own? Also can I get some more info on taxing the money I will be bringing in (say the $900 a month) I am not getting this house for sure I am just seeing what my options are. I am pretty sure the house will rent for at least $900 a month. If you do the math, I would be breaking even after I pay the mortgage and property taxes. If I am just breaking even for the first year do you still see the benifits? Or should you be seeing a positive cash flow before you get into renting a home to someone? Thank you, Shane McKenna