al_tanner[at]excite.com (Al) wrote in message news:<744a64af.0308122003.2deee1cb[at]posting.google.com> ...
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I haven't gotten the post your responding to yet, so my advice might
not be in quite the right context (I'll guess it was Michael T Wing,
since I sadly no longer get to read his posts).

Anyway, a 40-year loan means a lower monthly payment but a higher
borrowing cost. I ran the numbers through the handy mortgage
calculator at bankrate.com to get a feel for the cost. For a 200K
loan, based on 30-years at 4.75%, the monthly payment is $1043.29.
After 5 years of payments, you will have paid $62,597.40 of which
$45594.16 is interest and $17003.24 is principle. With a 40-year loan
(you don't give a rate so I'll assume 5.25%), your monthly payment is
$997.74, an apparent savings of about $50/month or $2733 over 5 years.
However, in the 5 years of the $59864.40 you make in
payments,$51463.86 goes to interest and only $8400.54 goes to
principle. So you save $2733 in mortgage payments over 5 years, but
you must pay the bank an extra $8602.70 when you sell the house
($17003-$8400, the difference in the amount applied to principle
between the 2 loans).

While I appear to be making a case for the 30-year, what's better for
you depends on how badly you need the $2733. If it is just going to
sit in your checking account, do the 30-year. If that money is
essential for making a deposit with the builder in 3 years or making a
Roth IRA contribution, do the 40-year.

al_tanner[at]excite.com (Al) wrote in message news:<744a64af.0308121145.42795249[at]posting.google.com> ...
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one point ($2000) the rate would be %4.25 which saves me about $60 a
month = $720 a year. So, the recovery time would take almost 3 years.
Actually, after three years we wanted to start looking for a good
builder in our area. So, I think you are right, it makes no sence
to buy any points in my case. But what about going for 5/1 ARM based
on 40 years? Any advice on that?
Thanks!
Al

Hi,
We could not find our dream home. We are buying a home that we are not
going to keep it more than 4-5 years. We need $200k loan. So, we are
thinking of 5/1 ARM with one point to keep the interest rate as low as
possible. Our Mortgage broker's rate is %4.25 based on 30 years. But
he is advising to go for the higher rate but based on 40 years which
means lower monthly payments. BTW, we are just paying the %20 down
payment but have some cash to buy more points to lower the rate but
the recovery time would be too long.
We would like to hear your suggestions. What's the catch here?
Thanks,
Al