Advice, 15 yr vrs 30 yr, shortened my term… - Posted by Tom
Posted by Tom on March 13, 2002 at 14:58:43:
From a real estate investing perspective, did I do the right thing?
I refinanced to shorten my term to 15 yrs on my primary residence (not a rental). I figured let me get done with this ASAP.
That was before I got addicted to this site…Now I’m wondering if I did the right thing.
I went from a 30 yr to a 15 yr paying $135 more a month.
Now, I know you creative real estate problem solvers will have your reasons why shouldn?t have done this but I do believe I did the right thing. Here?s why:
1.) Home prices are out of control (at least in NJ they are), why buy now (unless you flip it), wait till the bubble bursts and then use a creative way by using other people?s money.
2.) I bought my home in 6-99 for $175,000 w/$10,000 down, it just appraised for 235,000, => $70,000 equity. Of the 70,000, my wife doesn?t believe that we should touch it to try something ?risky? at the prices of homes these days. (I?m studying Charltone Sheets, not her).
3.) Do what they do in the stock market, sell into strength, right now people that are selling their real estate are selling into strength. People that are buying are buying at record highs. I figure, shouldn?t we wait for a dip?
4.) Interest rates are at historic lows. By refinancing now to shorten the term, you?re taking advantage of the ?cheap money? lenders are lending.
You may suggest to take that $135 extra I?m paying for the 15 yr and invest it elsewhere?. I don?t think you can beat the refi cost savings:
From doing this I?m saving $198,000 in interest over the 30 yr term.
That of $135 X 12months = 1620 X 15yrs = $24,300?
Even if you made 12% interest every year for 15 yrs, ?=> $60,393
It STILL wouldn?t return as good as paying down your mortgage
That?s my Risk vrs Reward analysis.
For an investment, I?m thinking strictly flipping.
But even if I?m using other people?s money to buy an investment property, why should I buy an income producing rental, now?
Would you have done this? I?m new so be gentle :>)