Think a lot about the kind of mortgage you will get. Mortgages are even more complicated than cell phone contracts but with, obviously, higher stakes. Shop around for the best deal, different mortgage brokers’ contracts are not homogeneous commodities. Make sure you take into account all fees and ask the broker what be the total amount you will be paying each month. To make sure that they are including all taxes, fees, and insurance requirements asked them what will be the amount you will be writing on your monthly check. Some brokers will allow you to lock in an interest rate for a few weeks without having to pay a fee if you change your mind. This can give you some option value on whether interest rates will rise.
When deciding how long to make your mortgage consider taxes. If you have lots of high interest rate debt and are not maxing out your tax preferred retirement accounts then have a low payment each month by getting a long term mortgage.
In the United States at least there is massive uncertainty over the long-term value of homes, the long-term tax treatment of mortgages, and most importantly the long-term inflation.
I’m not certain about the validity of this next piece of advice. If you live in the United States you’re going to have to decide whether to get a fixed or variable rate interest loan. Remember that the banks are setting rates based on what they think will happen and it’s extremely unlikely that you have better information about long-term interest rates than they do. But, in the United States at least, you have the option to refinance loans. Lots of people don’t do this even when it’s rational to do so. Banks take this into account. The ability to refinance has a greater expected value with fixed-rate loans because then you have option value on the fluctuation of nominal interest rates. This might mean that if you will refinance when it’s rational to refinance then you will get a better deal with fixed-rate loans.
My next piece of advice is that given the probable long-term state of the US housing market think of a home as more of a consumption good than investment.
Finally, if you think there is a significant chance of there being a singularity within the next 30 years then you should get a thirty-year mortgage because the singularity will either effectively wipe out your debt (perhaps by killing us all or otherwise eliminating the value of money) or make you so rich that paying off the debt becomes trivial.
My next piece of advice is that given the probable long-term state of the US housing market think of a home as more of a consumption good than investment.
This is an excellent way to phrase that concept. I am now going to use it frequently in real estate-related conversation.
Finally, if you think there is a significant chance of there being a singularity within the next 30 years then you should get a thirty-year mortgage because the singularity will either effectively wipe out your debt (perhaps by killing us all or otherwise eliminating the value of money) or make you so rich that paying off the debt becomes trivial.
Is 30 years the practical limit, then? Buying a house sounds like a horrible idea to me, but if I couldn’t persuade someone else such than it’d be nice to give them advice conditional on their buying into a good chance of either economic collapse or technological singularity. (I know absolutely nothing about mortgages, what an APR is, etc.)
My next piece of advice is that given the probable long-term state of the US housing market think of a home as more of a consumption good than investment.
This is exactly the case. I’m buying it because I want to live in it. It’s not “exactly what I’ve always wanted in a house”, but it’s rather close all things considered, and a very good fit for my lifestyle.
Think a lot about the kind of mortgage you will get. Mortgages are even more complicated than cell phone contracts but with, obviously, higher stakes. Shop around for the best deal, different mortgage brokers’ contracts are not homogeneous commodities. Make sure you take into account all fees and ask the broker what be the total amount you will be paying each month. To make sure that they are including all taxes, fees, and insurance requirements asked them what will be the amount you will be writing on your monthly check. Some brokers will allow you to lock in an interest rate for a few weeks without having to pay a fee if you change your mind. This can give you some option value on whether interest rates will rise.
When deciding how long to make your mortgage consider taxes. If you have lots of high interest rate debt and are not maxing out your tax preferred retirement accounts then have a low payment each month by getting a long term mortgage.
In the United States at least there is massive uncertainty over the long-term value of homes, the long-term tax treatment of mortgages, and most importantly the long-term inflation.
I’m not certain about the validity of this next piece of advice. If you live in the United States you’re going to have to decide whether to get a fixed or variable rate interest loan. Remember that the banks are setting rates based on what they think will happen and it’s extremely unlikely that you have better information about long-term interest rates than they do. But, in the United States at least, you have the option to refinance loans. Lots of people don’t do this even when it’s rational to do so. Banks take this into account. The ability to refinance has a greater expected value with fixed-rate loans because then you have option value on the fluctuation of nominal interest rates. This might mean that if you will refinance when it’s rational to refinance then you will get a better deal with fixed-rate loans.
My next piece of advice is that given the probable long-term state of the US housing market think of a home as more of a consumption good than investment.
Finally, if you think there is a significant chance of there being a singularity within the next 30 years then you should get a thirty-year mortgage because the singularity will either effectively wipe out your debt (perhaps by killing us all or otherwise eliminating the value of money) or make you so rich that paying off the debt becomes trivial.
This is an excellent way to phrase that concept. I am now going to use it frequently in real estate-related conversation.
Is 30 years the practical limit, then? Buying a house sounds like a horrible idea to me, but if I couldn’t persuade someone else such than it’d be nice to give them advice conditional on their buying into a good chance of either economic collapse or technological singularity. (I know absolutely nothing about mortgages, what an APR is, etc.)
This is exactly the case. I’m buying it because I want to live in it. It’s not “exactly what I’ve always wanted in a house”, but it’s rather close all things considered, and a very good fit for my lifestyle.