Posted on 11/20/2005 12:23:42 PM PST by ex-Texan
If you lock in a fixed rate and the rates drop, you can always refinance and lock in a lower rate.
If you stretch your budget to afford a house at a low variable rate and rates climb, you're in trouble.
Although it is a "get property quick" route, for those who need it initially, anyone who doesn't refinance to a fixed when they can afford it do deserve what they get.
I recall when I bought my first property at 12.5% and although I was shaken by the mortgage company to go with a variable, I went with the fixed and 4 years later made a killing on an assumable when selling.
Even at 12.5% at least I knew I could afford it up front and sold the property after Jimma' left office and took advantage of the lower rates in the eighties on a fixed to buy again.
The market is fine now, the mindset of buyers however may be an issue that can be used to make the market appear to be less than desirable.
Everbank is interesting. But it looks like you could get a much higher yield in New Zealand dollars... why'd you choose swiss francs? If you don't mind me being nosy...
It has been true for last 25 years and rates went up and down
Look at the history of rates for past 25 years. Compare the fixed rates for each year to the subsequent variable rates. You will not find one instance where the subsequent annual variable rate has been higher than the fixed rate at the outset.
This is no wonder because those setting fixed rates don't want to get lower rate and charge premiums for fixed rates.
" If you don't mind me being nosy."
It's a very stable, gold-backed currency. I did it to scrub off some currency risk. The dollar has risen of late, which has effectively negated any return. So, from the standpoint of "now," it doesn't look like a particularly desireable move. If, however, there were to be problems in the US, leading to a big drop in the value of the US dollar relative to the Swiss Franc, this would hopefully provide a stable store of value. That's my thinking anyway. I'm comfortable with the decision.
I agree, the budget has to be able to absorb increases but the fatc is the market that sets rates wants a premium for fixing the rate long term. The investors are not stupid, they project what the future will bear for rates and will demand premiums for the risk of lending for longer term at fixed amounts.
In other words the fixed rates provide a guarantee, and that guarantee cost money.
bump for later read . . . bought my house to live in and not for profit. Hopefully, if prices fall (as they should), my son can do the same -- until then, he'll be fine renting. Houses in my neighborhood are NOT selling like they did 6 months ago. The housing fever in Northern Virginia was fueled by speculators (1/4 of the housing sales were to speculators).
bump for reading
I agree, the budget has to be able to absorb increases but the fact is the market that sets rates wants a premium for fixing the rate long term. The investors are not stupid, they project what the future will bear for rates and will demand premiums for the risk of lending for longer term at fixed amounts. In other words the fixed rates provide a guarantee, and that guarantee cost money.
Exactly. The buyer pays a premium just as the buyer of health insurance, liability insurance and life insurance pays an insurance premium.
For those who live from paycheck to paycheck, insurance is a good thing to have even if the cost of your insurance means that you are on a tighter shopping budget.
The problem today is that, in order to afford inflated prices, too many buyers are stretching their budgets to the limit even after they have taken advantage of every risky gimmick that the market offers.
Too many of them have left themselves no margin of safety and too many of them now have mortgages that they won't be able to afford once the "interest only" period expires even if interest rates stay the same.
My own rule of thumb is that, if a buyer cannot afford the price with a standard fixed rate loan, he should be looking at a more affordable piece of property.
true. All the idiots taking the bad loans and the greedy jerks who are offering them are to blame for this impending fiasco.
You run a lot of these "bubble goin' burst" threads. Do you want it to happen? What if it doesn't happen?
My eyes glazed over 'bout halfway through this. Anybody with the background and expertise to analyze this and opine for us with less ability?
For those of us who are not speculating - a drop in housing prices would help with property taxes. That would be a relief.
"Anybody with the background and expertise to analyze this and opine for us with less ability?"
The author is throwing out every conceivable possibility that could be negative for residential real estate in the US, simultaneously, in order to sell his foreign currency investment programs.
Silly me, I forgot to follow the link. Thanks!
(So I can keep my house! Yippee!)
...plus if the tax reform passes whereby mortgage interest is no longer tax deductible, look out below.
"(So I can keep my house! Yippee!)"
If you're in CA, FL or the northeast, you might find that you'll need to stay put for a few years to cover the real estate agent's fee, if you just bought ... flat, in other words, with some instance of decline in the most extreme markets. But, other than that, I honestly don't see anything other than a return to appreciation that roughly keeps pace with the rate of inflation, or around 2 - 5%.
No, sold out of California a long time ago. Managed to lose my mortgage along the way, so interest rates mean little to me.
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