Residential property..Mortgages..HELP!

[Got Gear?]

Well guys, It's getting close to being time for me to purchase my first home.

Looking at mortgage calculators It appears as tho the most I'll be able to afford is 180,000. However, I was thinking I'd like to give myself some breathing room if you know what I mean.

I was thinking I'd like to get someting that's a bit of a fixer-upper. I'm good with stuff like that and have family and friends whom are in construction. A bit of a fixer upper tho.. not something that needs to be totally demolished.

Because I have a large downpayment, I think the bank would clear me for $200,000

Anyways.. I was thinking I have 3 options. Was wondering what you all feal is the best option.

1) Buy a small home for around $160,000

2) Buy a larger home with a suite for around $180,000-$200,000 and rent out the suite.

3) There's a couple of oppertunities where the owner has 2 adjacent properties with houses for around $160,000 each. Look into buying BOTH properties, living in 1 and renting out the other. I dunno if the bank would go for this or not...

What do you all think? Any other options I'm not thinking of?

[pudgy]

renters are a pain in the ass and they break your shit.

[Lethal]

IMO one of the rental scenerios would be the best way to go.... that is if there is high demand in your area.

[Morgan]

Renters are a pain, but if it helps you get by for a few years, then see what your level of aggravation is, you might get a decent renter anyway.

I'm on my second home, the first was a bit of a fixer upper, as well as the one I'm currently in.

Consider:

Will you be living in the house for at least the next five years?
Some banks require that you don't sell before that time-they are looking for some income as well.

If you're going to stay for at least five years, remember your salary should increase as well, so you may want to consider a larger/more expensive property to "grow into" as your income increases. I have done this and so far it has paid off because the larger homes/better properties generally hold their value even if the market goes down somewhat.

That being said, if you're not going to stay five years or your job might be less than stable, consider the cheaper property that needs a minimum amount of work and can be sold quickly in the event of a financial emergency.

Best of luck to you.

[Got Gear?]

Thanks guys...

I cannot see myself moving in the next while, so the 5 years thing is no problem.

Yes renters are a pain in the ass. I'm hopeing that by living in the same building or at least next door will help.

That's a good idea Morgan.. having the renters for the first few years. Then if they piss me off, get rid of em, and possibly downsize if the financial burden is too much.

[trefling]

Whatever you do stick with a 15 year mortgage...you'll save yourself tons of money that way. The payment will be a little higher but I would rather have a slightly smaller house on a 15 year term than a slightly bigger on a 30 year note. If you take a 30 year long it will take about 15 years before you really start paying off the principal balance. Where as if you do a 15 year loan you pay a 1/3 of the interest you would pay on the 30

[Got Gear?]

Originally posted by trefling
Whatever you do stick with a 15 year mortgage...you'll save yourself tons of money that way. The payment will be a little higher but I would rather have a slightly smaller house on a 15 year term than a slightly bigger on a 30 year note. If you take a 30 year long it will take about 15 years before you really start paying off the principal balance. Where as if you do a 15 year loan you pay a 1/3 of the interest you would pay on the 30

15 year mortgage and I'd only be able to afford an appartment.

I was planning on doing a 25year, but making extra payments.. particularly at the start.. hoping to be out of it in 20 years..

[Morgan]

Originally posted by trefling
Whatever you do stick with a 15 year mortgage...you'll save yourself tons of money that way. The payment will be a little higher but I would rather have a slightly smaller house on a 15 year term than a slightly bigger on a 30 year note. If you take a 30 year long it will take about 15 years before you really start paying off the principal balance. Where as if you do a 15 year loan you pay a 1/3 of the interest you would pay on the 30

This is good if you really want to stay where you are. Then you've built the equity. However, equity isn't everything and neither is interest. The same can be accomplished by "paying down" the mortgage with additional money toward the principal.
Equity is good if you want to use the house as a future financial tool - say college for the kids or ultimately buying a bigger house. With the interest rates today, a 30 year mortgage would give you a little breathing room as far as monthly payments. Later if you want, then you could put a little money toward the principal

[trefling]

Very true Morgan, both of you guys are right. I just hate the idea of living in some place for 5-10 years and when moving finding out that I still own the bank about the same balance as the beginning.

[Morgan]

Originally posted by trefling
Very true Morgan, both of you guys are right. I just hate the idea of living in some place for 5-10 years and when moving finding out that I still own the bank about the same balance as the beginning.

Most people seem to think that they need to pay off the entire mortgage - and forget that a lot of times equity is automatically built up by the appreciation of the house in the marketplace. It is somewhat rare that after ten years a house doen't appreciate unless you've grossly overpaid or that area of housing takes a real nosedive.

With that in mind, you have really made some money, regardless of what you owe the bank.

[Auriflex]

Buy a nice condo somewhere.

I will do that, and it will be the bachelor pad of delight!

[Morgan]

Originally posted by Auriflex
Buy a nice condo somewhere.

I will do that, and it will be the bachelor pad of delight!

I am fairly close to that right now. I am open to any suggestions as long as it doesn't involve midgets (they really scare me)

[Got Gear?]

What's the resale value of an appartment/condo?

I'd think it'd stay the same or even go down...

[Morgan]

Originally posted by Got Gear?
What's the resale value of an appartment/condo?

I'd think it'd stay the same or even go down...

Almost never as good as a single family house for some reason. Guess it's just the idea of having to live with other people?
The only exception usually is somewhere like NYC or other major metropolitan city.

[Auriflex]

In a positive growth community, I think apt/condo's are perfect 'home investments'.

But I'm just a jeweler too, so wtf do I know?