No. of Recommendations: 4
Hi Frank,

I'm currently shopping my mortgage around. I close on 7/27 (about a month) Looking into a 30 yr Fixed 80/15/5...
...I plan to be in the house for 5 - 10 years.

OK... now think this out carefully...
If you're outa there in 5-10 years, WHY would you voluntarily choose to pay an additional $1,000 to $1,500 PER YEAR for a 30 year fixed rather than a 5/1 or 7/1 ARM?

With today's tax and investment environment, the 30 year fixed doesn't even make sense for a real estate buy & hope owner! You want to save the maximum amount away from interest that you can and divert it to higher growth investments. You also want the maximum flexibility to get your equity back out as often as you can to put in those same investment vehicles.

What are everyone's opinions on buying points? Is it dumb? wise? Should I use it to get my monthly payments lower, or prepay princial for more equity (or a larger downpayment for that matter)? Most people I've talked to seem very black or white on this issue.

I used to be "black," and now I'm "white" on the subject. I used to point out that every dollar in discount points you pay is the equivalent of 8-10 dollars of interest over the course of the life of the loan... and while that's true, Ray has exposed it further;

If you take that dollar that might have been spent on discount points and invest it in even a stodgy, boring, safe liquid investment, you're likely to have much MUCH more than $8-10 dollars over 30 years.

Do whatever it takes to own your home AND keep YOUR money OUT of your home... and put it in better investment vehicles! Finance so you pay as little as possible, and can get your accumulated equity out as often as practical.

Real estate is only a profitable investment to the business owner, not the occupant. The rest of us buy it for emotional purposes, and try to justify it financially. The truth is, for purely financial considerations alone, it's usually more appropriate to rent in most markets... but who's interested in that!?!

All the best,
Dave Donhoff
Lic. Mortgage Broker

(ps. you'll never hear another Mortgage Broker be this blunt about buying NOT making sense financially... but if you're going to do it, use a great broker to finance, and do it the best way you can!)
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