I would like to share some of my experience with mortgage.

We put deposit to build a new home on November 2001. It took 9 months for the construction to be finished. That turned out to be our benefit cause the rate dropped significant in less than one year.

First we decided to put a significant down payment because we would receive a check from selling the previous home and neither of us wanted to play fire with the stock market. Down payment is the money you put down on the house you want to buy. The cut off is 20%. If you have less than 20% down payment, you need to pay private mortgage insurance (PMI) which can be a couple of hundreds dollars a month depends on your mortgage amount.

After down payment we needed to decide how to finance the rest. Everybody knows that there are fixed rate mortgage (normally 15 years or 30 years term), adjusted rate mortgage (ARM, e.g., 3 year ARM or 5 year ARM) and interest only mortgage. The rates are normally the highest for 30 years fixed. 15 years fixed can be 0.5% lower. ARM will give you low initial rate, but after 3 or 5 years, the rate will change according to the market rate at that time, so potentially can be substantially higher.

We chose 15 years. If you can afford, you should always go with 15 years mortgage. Cause at rate of 5.625%, over 40% of payment goes to the principle, so you own more portion of your home every month. After 9 years you own about 50% of your home, while you only own 15% of your home with a 30 years mortgage after 9 years payment. Please use the link to do your own calculation if you are not convinced. Cause even my real estate teacher had a difficult time to digest the number difference.

One year after we bought the home, we successfully refinanced to 4.875% with no refinance charge. The trick to get a good rate is to monitor the stock and bond market. If the stock market goes down dramatically, more people buy bonds so the yield goes down and so will mortgages rates. My friend got 4.5% free refinance because they have a bigger loan (so the mortgage broker can get more commission without increase the rate to justify the “free” refinance). So I guess she is making more interest from the CD in the bank than the bank charges for her mortgage le. What a life.

[此贴子已经被icyscorpio于2006-6-7 21:44:15编辑过]