Ironman over at Political Calculations just turned a post of mine into one of his famous calculators.

My post, The True Cost of a Thirty Year Mortgage, compared the cost and advantages of a fifteen-year term mortgage vs. taking out a thirty-year mortgage and paying it off in fifteen.

Ironman’s calculator makes it easier for you to run your own numbers and see whether this option makes sense for you.

He’s written a bunch of other great calculators, including:

• Estimating the Natural Rate of Unemployment
• Converting Amazon Ranks to Book Sales
• Should you quit your job?
• Is Your Personal Grooming Adequate?

Check out his collection of on-line tools.  You’ll surely find something of interest.

Image Credit: TMView on Flickr

Tags: 15-year vs. 30-year mortgage, financial tools on the web, mortgage

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Plot spoiler: Even if you can afford the higher monthly payment of a 15-year mortgage, consider getting a 30-year term, instead.  Invest the difference, and in 15 years (with a 6% return) you’ll have enough to pay off the mortgage, and you’re not locked in to the higher payment

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If you’ve had your current mortgage for more than about two years, now might be a good time to refinance.

This assumes, of course, that you’re planning to own your home for several more years and that you have positive equity (the value of house is more than the amount of the loan that you would be seeking).   Interest rates are being held down by the Fed in an effort to get the economy going again, so it’s a good bet that they’ll stay low at least for the next few months.

I made a few calls and found that going rate for a fixed-rate 15-year term loan is about 4.65%, and the similar rate for a 30-year loan is 5.25%.  If you’re only going to be in your house for a few years, then you can save a few pennies with an adjustable rate loan, but with fixed rates so low, you don’t really save much.

Example:  A $200,000 loan

If you need to finance $200,000, the monthly payment for the 4.65% 15-year loan is $1,545.  The monthly payment for the 5.25% 30-year loan would be $1,104 which is $441/month less.  Over the life of the 15-year loan, you would pay a total of $278,165.  Alternatively, if you chose the 30-year loan, you would pay a total of $397,587  – almost twice the amount borrowed.   You might think that if you can swing the higher payment, you’re better off paying it off quickly.  After all, who wouldn’t want to save $119,422?

However, there are some advantges to paying off your mortgage at the slower rate:

• You have less of your money tied up in a house, and
• If you lose your job, you’ll be grateful that you have a lower monthly payment.

Read the rest of this entry »

Tags: 15-year vs. 30-year mortgage, effect of inflation on mortgage payment, mortgage, mortgage interest tax deduction

Tomorrow evening is the semiannual town meeting where I live, North Reading, Massachusetts.  Everyone gathers in the high school auditorium to vote on matters of local governance.

In preparation for the budget discussions, I thought I’d take a look at the local property tax rates.  The Massachusetts Department of Revenue keeps an online historical record of the rates for every municipality in the state.  It took a little massaging in Excel, but here is a list of property tax rates from 2003-2009. Read the rest of this entry »

Tags: Andover, Massachusetts, Middleton, North Andover, North Reading, property tax, Reading

Ever been stuck at a cocktail party with a blowhard who’s leaning in a little too close? Just launch into a monologue on the relative merits of title insurance and even the most booze-fogged windbag will go running for cover.

Title insurance.  How boring.

How boring, indeed, until two days before closing on the purchase of your first home, and your attorney calls saying that your mortgage has been approved, the former tenants were removed by the sheriff, the radon’s been remediated, and oh, by the way, do you want title insurance?  “Huh?”, you say.  “What tenants?  I thought those were the owners?  And what was that about insurance?”

What is Title Insurance? Read the rest of this entry »

Tags: real estate, title insurance

Didja’ ever notice that how you measure something sometimes changes the outcome?

In the 1980′s CEO’s compensation changed from a salary-and-bonus plan to being directly tied to the stock price, and voila, stock prices rose.  The companies weren’t necessarily managed any better, but since stock price was suddenly the important metric, it improved.

A similar effect can be seen in Massachusetts schools which are ranked by statewide tests (MCAS).  An increase in the scores, doesn’t necessarily mean that the students are any smarter, but they are doing better at passing the exams, leading to much discussion about “teaching-to-the-test.”

Likewise, many financial advisors are paid by a percentage of assets under management.  The rate is typically 0.5-2.0% per year, where the low end of that range is for account values north of $1M.  If you have $200,000 in an advised account that charges 1.5%, you pay $3,000 per year for that advice.

Not only do I think that’s an awful lot of money, it isn’t judging the right metric.  Sure, I want my investments to grow, but what I really want is my net worth to grow.  Designing the advisory fee around just one aspect of your net worth focuses their activity around just your investment — typically brokerage — accounts. Read the rest of this entry »

Tags: advisory fee, financial advisors, real estate

Today the Senate approved a tax credit of 10 %, up to $15,000, towards the purchase of a home.  This is an increase over current law which was written up in a previous post on first-time homebuyers credit, which covers up to $7,500.  The new credit would be available to all home-buyers (not just first-time buyers).  It’s an amendment to the overall stimulus package.  We’ll see if it makes it on through the House.

Tags: credits, economic stimulus, real estate

Now is a great time to refinance your existing mortgage, if you can.  Rates have fallen significantly in the last few months, so if your credit is still good, you’re still employed, not planning on moving soon, and you’re not underwater (have positive home equity), you can save a few bucks. Read the rest of this entry »

Tags: mortgage, points, refinancing

If you’re thinking of buying your first house, this new credit might help.  It’s a credit of up to $7,500 that is repaid (interest-free) over 15 years.  After you receive the credit, you pay 1/15th of it back each year when you file your taxes (e.g. $500/year).

The fine print:  To be eligible, you must buy the house between 8 April 2008 and 1 July 2009.   Individuals filing single and married couples filing jointly are eligible for $7,500; married persons filing separately are eligible for $3,750.  The house must be in the US.  The house must be your primary residence, not a vacation or rental home.   The credit phases out for incomes of $75,000 – 95,000 for individuals filing singly and $150,000 – 170,000 for married couples filing jointly.

IRS Form 5405 and news item of 23 December 2008.

Tags: credits, real estate