Real Estate Ramblings

Did you know that the word Mortgage comes from the Latin morte which means death? Basically a mortgage is a death pledge. It's not surprising, given when most mortgages are usually paid off. We are not getting into the same promise (I hope).



One important bit of advice has been to decide how much we can afford before we apply for the mortgage, instead of relying on the lender to tell us. From what I understand, they're not giving away money willy-nilly as in recent years, but they still might offer more than we really want to borrow. They might be surprised that I understand a little thing called interest (and it works for me, not agaisnt me).



Just compare a 15-year mortgage to a 30-year. If we were to buy a $100k home @ a super small 6% rate our monthly payment for 30 years would be $615, but $844/month with a 15-year mortgage. Go for the 30-year, right? It's cheaper. Oh no! If you multiply each one out, the total payment on the 30-year loan totals (wait for it...wait for it...) $221,655! That's over twice the loan (and quite possibly twice the value of the home at this point). Multiply out the 15-year and you get (wait for it...wait for it...) only $151,894. What a bargain! And a $70,000 difference! In some places, you could buy another house for that! Incredible. Why the difference? Interest, people! The 30-year loan comes with $121,656 worth of interest (the interest alone is more than the death pledge!), while the 15-er has only $51,894.



Ok, ok, so this math I understand. I don't understand the vicious cycle we're in. We can't get a rate locked in until we're under contract with the seller, but we can't get under contract until we're pre-approved for a loan, but we don't know which lender we want until we lock in a rate! It's driving me crazy! Like I'm on this roller coaster, but I can't get off (or on!).