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Posted by Rob Garrison on April 3, 2007, 7:26 pm
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> > > I am interested in buying a new home being built in my neighborhood.
> > > Assuming I can get it for $750K, I was trying to decide my options as
> > > to which is better. Currently I have sufficient funds to close on this
> > > house before I sell my existing one. After all the math, these are my
> > > 2 options.
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> > There's a 3rd option...
> > Put 20% down ($150k)
> > Take out a 1st mortgage for $417K
> > Take out a 2nd mortgage for $183K
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> > The goal here is to get the 1st mortgage (the biggest chunk of money)
> > financed at the lowest possible rate. In exchange, you accept a
> > higher rate on the 2nd mortgage. This can be a good tradeoff, since
> > the amount of the 2nd mortgage is less than half the amount of the
> > first. This can be especially beneficial if you accelerate payment of
> > the 2nd mortgage.
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> > --Bill
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> Interesting point. Thank you.- Hide quoted text -
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> - Show quoted text -
I would say option one is the smartest choice even a smaller down
payment I would recommend, as I stated in my email Mike. As you can
see in the analysis i've run, your gross effective interest rate
utilizing Bill's option 3 (no offense to you Bill) would be 6.599% and
would yield a payment $200 higher than option 1. My best advice? put a
small 10% down payment, with or without mortgage insurance (mortgage
insurance is now tax deductible as of Jan 1, 2007), and leverage the
rest of your liquid assets to earn interest and compound for you.
See below:
The blended rate for your first and second mortgage is 6.599%.
This is based on a first mortgage of $417,000.00 at 5.88% and a second
mortgage of $183,000.00 at 8.25%. Your total payment is $3,841.53 per
month.
Mortgage Loan Summary
Purchase Price $750,000.00
Down payment $150,000.00
Loan one amount $417,000.00
Interest Rate 5.88%
Term 30 years
Monthly payment $2,466.71
Loan two amount $183,000.00
Interest Rate 8.25%
Term 30 years
Monthly payment $1,374.82
Total amount financed $600,000.00
Total monthly payment $3,841.53
Blended interest rate 6.599%
======================================= MODERATOR'S COMMENT:
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