Real-Estate & Mortgage

From: "Peter & Karen Diamond" <diamond@vsi.net>
Subject: Real-Estate & Mortgage
Date: Thu, 13 May 1999 19:42:15 -0400

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Bill,
The answers to all your questions are based on one other question, how long
do you plan to stay in the house?
If you will only stay a few years, put as little down as possible to avoid
PMI, don't pay points, invest the rest and get an adjustable or balloon
mortgage.
If you plan to stay for a long time, put as much down as possible, pay the
points and get a 30 year fixed. (or maybe a 15 year fixed if you can handle
the payments)
Before you lay down all your savings on a down payment consider if you have
other financial concerns taken care of.  Do you have, an emergency fund,
adequate car, health, life and disability insurance, adequate retirement
savings, a college fund for the kids?  All of these items should be
addressed before you put your last dime into the house.  Remember, the only
way to get the money back is to sell the place.  Sure you could get a home
equity loan, but why pay to borrow your own money back?
With mortgage rates pretty low, your "investment" in the down payment is not
that much.  If you are in the 28% tax bracket, a 7% loan is only "earning"
you 5%.  There are alot of ways to earn more than 5% on your money.  Sure,
they aren't guaranteed, like the larger down payment is, but if you have the
extra money and you haven't taken care of those other items I would
recommend you do that first.
Quicken will calculate some of the numbers you need, many web sites
(quicken.com and others) will also help you run the numbers.
Good luck with the new place.

Peter Diamond


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