noisewar internetlainen - games, politics, and sarcasm

The word mortgage comes from French, combining the meanings of the words "mortal" and "engagement" into one dysphemistic way to describe the deathly pact we make when we buy a house. With the ensuing real estate stagnation, which could easily turn into an all-out freefall at any second, I've been looking more seriously at buying. I'm betting on house prices in the Bay Area falling another 10% or more by the election. This year, the economic stimulus package will allow us to borrow up to $729k before getting jumbo loan interest rates (as opposed to $417k).


So over the weekend, I made myself this nifty little fixed mortgage calculator. There are probably some bugs in it, but it helped me a lot. Unlike other Rent vs. Buy calculators out there, this one also compares 15yr to 30yr investment growth. For example, if I took a 15 year mortgage, paid it off, then invested the money I would have spent for the next 15 years, how would that compare to just getting a 30 year mortgage? Unsurprisingly, a simple 30 year mortgage would just beat a 15 year mortgage for the first 15 years, and then the 15 year would take a major lead.

Therefore, my plan is to buy something small, like a condo, with a monthly payment we could afford, on a 15 year fixed mortgage (low interest), and maximize our tax benefit (short time span). If we survive, we'll be able to buy a real house in the future for half the interest, with the only major risk being a real estate rut that lasts over 5 years. Now obviously the better my investment yield the bigger a hit it is to buy a house, and while my yield is pretty good, that's not the only reason to buy a house, and houses tend to be inflation-safe.

And that's how I'll sign my own death warrant.