Comments on: The Art of the Small Mortgage http://www.smallist.com/2007/03/28/the-art-of-the-small-mortgage/ Small products, small living, the smallest stuff in the world. Mon, 01 Dec 2008 19:40:54 +0000 http://wordpress.org/?v=2.1.2 By: Josh http://www.smallist.com/2007/03/28/the-art-of-the-small-mortgage/#comment-157 Josh Mon, 02 Apr 2007 17:16:58 +0000 http://www.smallist.com/2007/03/28/the-art-of-the-small-mortgage/#comment-157 So, I'm not sure I entirely agree. If I were planning on living in the same house for a long time (more than 15 years?) it might make sense to lower lifetime payments. But for many people, who don't plan to live in their homes for much more than 5 years, you end up losing money by paying faster. If I put 10% down on a $500k house, the house goes up in value 3% per year, and I sell in 5 years, the house will sell for about $580k. This means that my $50k investment yielded an $80K profit. 160% - not too bad. No matter how much you put down, the value of the home increases by the same amount - $80k. However, as you put down more money, your rate of return decreases. The same thing happens when you pay down your principal faster. So, if the house value increases at 3% per year, every additional dollar of principal you pay back is increasing at only 3% per year. That's lower than what I could get from my conservative investment portfolio (about 8%). So, I’m not sure I entirely agree. If I were planning on living in the same house for a long time (more than 15 years?) it might make sense to lower lifetime payments. But for many people, who don’t plan to live in their homes for much more than 5 years, you end up losing money by paying faster.

If I put 10% down on a $500k house, the house goes up in value 3% per year, and I sell in 5 years, the house will sell for about $580k. This means that my $50k investment yielded an $80K profit. 160% - not too bad.

No matter how much you put down, the value of the home increases by the same amount - $80k. However, as you put down more money, your rate of return decreases. The same thing happens when you pay down your principal faster.

So, if the house value increases at 3% per year, every additional dollar of principal you pay back is increasing at only 3% per year. That’s lower than what I could get from my conservative investment portfolio (about 8%).

]]> By: condour http://www.smallist.com/2007/03/28/the-art-of-the-small-mortgage/#comment-161 condour Tue, 03 Apr 2007 13:29:06 +0000 http://www.smallist.com/2007/03/28/the-art-of-the-small-mortgage/#comment-161 Yeah, but doesn't that all assume appreciation over the first 5 years? Over the next five, that might not be the case. Yeah, but doesn’t that all assume appreciation over the first 5 years? Over the next five, that might not be the case.

]]> By: Josh http://www.smallist.com/2007/03/28/the-art-of-the-small-mortgage/#comment-164 Josh Tue, 03 Apr 2007 15:16:40 +0000 http://www.smallist.com/2007/03/28/the-art-of-the-small-mortgage/#comment-164 Not necessarily - the more money you put down, the more you can lose if the market dips. The biggest risk, I think, would be if after 5 years you either couldn't afford to sell or decided that you didn't really want to move out. Also, while it's not a very diverse investment (and therefore risky) many people use home ownership as their primary vehicle for savings. Not necessarily - the more money you put down, the more you can lose if the market dips. The biggest risk, I think, would be if after 5 years you either couldn’t afford to sell or decided that you didn’t really want to move out. Also, while it’s not a very diverse investment (and therefore risky) many people use home ownership as their primary vehicle for savings.

]]> By: Short Term Rentals http://www.smallist.com/2007/03/28/the-art-of-the-small-mortgage/#comment-316 Short Term Rentals Thu, 19 Apr 2007 06:45:28 +0000 http://www.smallist.com/2007/03/28/the-art-of-the-small-mortgage/#comment-316 <strong>Short Term Rentals...</strong> Some portions of this article sounds interesting. May be you have some links where I could read more about this topic?... Short Term Rentals…

Some portions of this article sounds interesting. May be you have some links where I could read more about this topic?…

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