vania-janet/multiturn-rag-retrieval-data huggingface dataset:
You should plan on your monthly payment (Principal + Interest + Escrow) being a conservative percentage of your take home pay.   No matter your cash savings, if your housing is 60% of your take home pay you are going to have trouble keeping up on the house. My target for housing is that a 15 year, fixed rate mortgage should be under 25% of my take home pay.   For some people, they find that too conservative.  I think the exact percent is a risk/reward preference.  Some people like the 25% number but look at a 30 year mortgage. Whatever you do, don't buy a house at the limit of what the bank thinks you can afford :)  Historically, they have been more willing for me to spend my money than I have been.
The rules of thumb are there for a reason. In this case, they reflect good banking and common sense by the buyer. When we bought our house 15 years ago it cost 2.5 times our salary and we put 20% down, putting the mortgage at exactly 2X our income. My wife thought we were stretching ourselves, getting too big a house compared to our income. You are proposing buying a house valued at 7X your income. Granted, rates have dropped in these 15 years, so pushing 3X may be okay, the 26% rule still needs to be followed. You are proposing to put nearly 75% of your income to the mortgage? Right? The regular payment plus the 25K/yr saved to pay that interest free loan? Wow.  You are over reaching by double, unless the rental market is so tight that you can actually rent two rooms out to cover over half the mortgage.  Consider talking to a friendly local banker, he (or she) will likely give you the same advice we are. These ratios don't change too much by country, interest rate and mortgages aren't that different. I wish you well, welcome to SE.
This would also be a good time to talk about condition requirements, in that you want a loan on an as-is basic for a house that is inhabitable but needs cosmetic repair, and you plan to do this in cash on your own time after the purchase closes. Some lenders will be happy to do this at below 75%-80% LTV, and some absolutely do not want to make this type of loan because the house isn't in perfect condition and that's just what their lending criteria is right now. Based on description alone, I don't think you really should need to go into alternate plans like buy cash and then get a home equity loan to get cash out, special rehab packages, etc. So I'd encourage you to try a more straight-forward option of a different lender, as well as trying to get a straight answer on their odd choice of appraisal order that you paid for, before trying anything more exotic or totally changing your purchase/finance plans."
From what I hear, usually not.  Get an amortization schedule for the property, and see what the savings on the interest rate is.  Then see what the interest versus borrowing less is. The consider that you can invest the buy down money, or better yet use it as down payment and borrow less money.  Typically (as experienced by wife who use to be a loan processor) the buy down did not save any money, and just made the broker a bigger commission.
"I haven't heard 30-year mortgages called unwise. As @jared said, the shorter terms often will be cheaper if you are going to pay off within that term anyway, but the extra cost of the 30 may still be justified because it gives you the ""safety net"" of being able to fall back to the lower payment if money gets tight. Cheap insurance if you might need that insurance. That wasn't something I was worried about, so I took a 20-year, later refinanced as 15-year, and got a slightly better rate by doing so. Consider how long you expect to own this house, and shop for the best deal you can find. Remember to figure points into the real cost the loan. There are calculators on many bank/credit-union websites that can help you do this comparison."
Some good and some bad here. The bad amounts to the fact that consumers are missing out on potential opportunity in the markets due to fear. Any financial advisor or analyst can tell you that there are a multitude of ways to enjoy the markets while limiting risk. You may not make a Million but, you will likely beat the savings account rate. On the good news front it is great that Americans continue to shed debt and are hesitant to take on more. Somewhere in the middle is the fact that some borrowers who may be able to qualify for lower rates can't get them due to depreciated home values. The bottom line there is that if you can afford your mortgage, be happy. You don't NEED to refinance for a lower rate, our grandparents never refinanced and they did ust fine.
Generally, interest-only mortgages are a bad idea, because a lot of people get them so that they can buy more house than they could otherwise afford (lower payment = affordable, in their minds).  If the house continues to go up in value, they probably get away with it, because when the balance becomes due, they can refinance.  However, the last few years has shown how risky that strategy can be, and this kind of things is what cost a lot of people their houses. In your case, if the house is something you could afford on a regular 15 or 30-year mortgage, and you really are as disciplined as you say you are, you might get away with it.  But you have to take into account the risk, and consider what happens if there is a job loss or similar difficulty in the future. Another thing to consider is the term of the mortgage.  How many years will you get this lower interest rate?  Interest rates are at historic lows right now, and pretty much everyone thinks they're going up soon.  You might be better off locking in a higher rate for 15 years.
"I second DJClayworth's suggestion to wait and save a larger down-payment.  I'll also add: It looks like you neglected to consider CMHC insurance in your calculation.  When you buy your first home with less than 20% down, the bank will require you to insure the mortgage. CMHC insurance protects the bank if you default – it does not protect you.  But such insurance does make a bank feel better about lending money to people it otherwise wouldn't take a chance on. The kicker is you would be responsible for paying the CMHC insurance that's protecting the bank.  The premium is usually added on to the amount borrowed, since a buyer requiring CMHC insurance doesn't, by definition, have enough money up front.  The standard CMHC premium for a mortgage with 5% down, or as they would say a ""95% Loan-to-Value ratio"" is 2.75%.  Refer to CMHC's table of premiums here. So, if you had a down-payment of $17,000 to borrow a remaining $323,000 from the bank to buy a $340,000 property, the money you owe the bank would be $331,883 due to the added 2.75% CMHC insurance premium. This added $8883, plus interest, obviously makes the case for buying less compelling.  Then, are there other closing costs that haven't been fully considered? One more thing I ought to mention: Have you considered saving a larger down-payment by using an RRSP?  There's a significant advantage doing it that way: You can save pre-tax dollars for your down-payment. When it comes time to buy, you'd take advantage of the Home Buyer's Plan (HBP) and get a tax-free loan of your own money from your RRSP. You'd have 15 years to put the money back into your RRSP. Last, after saving a larger downpayment, if you're lucky you may find houses not as expensive when you're ready to buy.  I acknowledge this is a speculative statement, and there's a chance houses may actually be more expensive, but there is mounting evidence and opinion that real estate is currently over-valued in Canada.  Read here, here, and here."
In general, it makes sense to go for the 15 year fixed if you can afford it, as you'll pay down far more principal than if you go for a 30 year. Take a peek at the amortization tables for two loans, keeping in mind that the average American lives in a house for 7 years.
If you have a 20,000 balance and a 8.75% interest rate, you should be paying between $145 and $150 in interest each month, with the balance going to principal. (0.0875/12=0.007292, and that times 20,000 is 145.83; as interest is compounded daily, it'll be a little higher than that.) If the minimum is below $145, then you are not covering the interest; I suspect that is what is happening here, and they're reporting interest paid that wasn't covered in a prior month (assuming you have some months where you only pay the statement minimum, which is less than the total accrued interest). Assuming you're in the US (or most other western countries), your loan servicer should be explaining the exact amount each payment that goes to principal and interest. I recommend calling them up and finding out exactly why it's not consistent; what should be happening, assuming you pay more than the amount of interest each month, is the interest should go down (very) slowly each month and the amount paying off principal should go up (also slowly). EG: Etc., until eventually the interest is zero and your loan is paid off. It probably won't go this quickly for this size of loan - you're only paying off a tiny percentage of principal each month, $50/$20000 or 1/400th - so you won't make too much headway at this rate. Even adding another $25 would make a huge difference to the length of the loan and the amount of interest paid, but that's another story. You will eventually at this rate pay off the loan (at $200 a month for all 12 months); this isn't dissimilar to a 30 year mortgage in terms of percent interest to principal (in fact, it's better!). $50 a month times twelve is $600; 400 payments would take care of it (so a bit over 30 years). However, as you go you pay more principal and less interest, so you will actually pay it off in 15 years if you continue paying $200 a month exactly.
Should I seek a house on limited income? No. my income in intermittent Lenders want consistent income.  And a down payment. a little over 10 grand a year That's less than $1,000/month.  (I won't even ask whether or not it's after taxes.) https://www.investopedia.com/terms/d/dti.asp A debt-to-income ratio smaller than 36%, however, is preferable, with no more than 28% of that debt going towards servicing a mortgage.  Thus, you could hypothetically afford a $300 mortgage payment, which means -- ignoring mortgage insurance -- you can afford a $27,000 house.
I recommend you ask this question to a qualified mortgage broker.  We just closed on our first house.  My wife & I have had several years of stable jobs, good credit scores, and a small side business with 1040 Schedule-C income... and we were surprised by the overwhelming amount of documentation we needed for the loan.  For example, we had 3 checks deposited to our bank account for $37.95.  We had to provide copies of the checks, deposit slip and a letter explaining the deposit.  One reason we might have had so much trouble:  the mortgage broker we selected sold our loan to a very picky lender.  On the plus side, we obtained a competitive rate with extremely low closing costs on a 30 year fixed mortgage.  However, I can't imagine the headaches we would've incurred if one of us were changing jobs to 1099 income.
"The loan-to-value ratio (LTV Ratio) is a lending risk assessment ratio that financial institutions and others lenders examine before approving a mortgage. It sounds like your lender has a 60% requirement. Remember the home is the collateral for the loan. If you stop making payments, they can take the house back from you. That number is less than 100% to accommodate changing market prices, the cost of foreclosure, repairing and reselling the home. They may be a safety factor built in depending on the home's location. If you want to buy a $1.8 million dollar home you will have to come up with 40% down payment. That down payment is what reduces the risk for the lender. So no, there is no way to cheat that. Think about the transaction from the view of the lender. Note: in some areas, you can still get a loan if you don't have the required down payment. You just have to pay a monthly mortgage insurance. It's expensive but that works for many home buyers. A separate insurance company offers a policy that helps protect the lender when there isn't enough deposit paid. Update: Er, no. Keep it simple. The bank will only loan you money if it has collateral for the loan. They've built in a hefty safety margin to protect them in case you quit paying them your monthly payments. If you want to spend the money on something else, that would work as long as you provide collateral to protect the lender. You mention borrowing money for some other purpose then buying a home. That would be fine, but you will have to come up with some collateral that protect the lender. If you wanted to buy a new business, the bank would first ask for an appraisal of the value of the assets of the business. That could be applied to the collateral safety net for the lender. If you wanted to buy a business that had little appraisal value, then the bank would require more collateral from you in other forms. Say you wanted to borrow the money for an expensive operation or cosmetic surgery. In that case there is no collateral value in the operation.
FHA insured loans must 'go hand in hand' with PMI, because the FHA element is the insurance itself. The FHA isn't actually giving you a loan, that's coming from a lender; instead, the FHA is insuring the loan, at some cost to you - but allowing a loan to folks who may not be able to afford it normally (lower down payment requirements and a somewhat cheaper PMI). FHA-insured loans may be lower rates in some cases than non-FHA insured loans because of this backing; that's because they make it easier for people of poorer credit histories with smaller down payments to get a house in the first place. Those people would tend to have a harder time getting a loan, and be charged sometimes usurious rates to get it. Low down payment and mediocre credit history (think 580-620) mean higher risk, even beyond the risk directly coming from the poor loan to value ratio. Comparing this table of Freddie Mac rates to this table of FHA-backed loan rates, the loan rates seem comparable (though somewhat lagging in changes in some cases). FHA loans are not nearly the size or complexity of loan population as Freddie Mac, so be wary of making direct comparisons. Looking into this in more detail, pre-collapse (before 12/07), FHA rates were a bit lower - average rate was about .5 points lower - but starting with 12/07, FHA average rates were usually higher than Freddie Mac rates for 30 year fixed loans: in 1/2009 for example they were almost a point higher. As of the last data I see (5/13) the rates were within 0.1 points most months. This may be in part because Freddie Mac had looser requirements to get a loan pre-collapse, then tightened significantly, then started to loosen some (also around June 2013, rates climbed significantly due to some signals from the Fed, although they're almost back to their lows thanks to the Fed again). These are averages across all loans, so you get some noise as a result. Loan interest rates are very personal, in general: they depend on your credit, your house and down payment, and your bank (which varies by your location).
If I was an upside down homeowner and I went to my bank to refinance the mortgage at a lower rate and they declined, I'd give them the middle finger by not paying the mortgage and declaring bankruptcy.    A homeowner has no incentive to continue paying a mortgage for a home that is no longer the value of the mortgage and if the bank is unwilling to work with the upside down homeowner to get the home owner a lower interest rate (that is the least the bank could do) - then make the home the bank's problem and let them eat their cake.   This home owner is not asking the bank to forgive part of the mortgage or write it off, but asking for his mortgage to be refinanced at the lower rate - that is pretty straight forward and simple. We as taxpayers bailed the banks out in 2008, the least they could do is help upside down homeowners. The banks reluctance to help upside down homeowners is why we have a stagnant housing market.   **The bank by not working with this home owner to refinance his mortgage at a lower interest rate is a bank that indicates they don't care about having a paying customer.**
A bigger down payment is good, because it insulates you from the swings in the real estate market.  If you get FHA loan with 3% down and end up being forced to move during a down market, you'll be in a real bind, as you'll need to scrape up some cash or borrow funds to get out of your mortgage.
A home equity loan (not a HELOC home equity line of credit) typically comes with far lower fees, but a slightly higher rate.  As rates fell over the last decade, I saw a choice of the Equity Loan with no cost at all, or a refinance with a few thousand in closing costs. We refinanced 3 times with the home equity loan, the last one was 5%. As the 15 year regular mortgage hit 3.5%, it seemed worth the costs, about $1800, to get the low rate, and expecting that rates would go lower. The 1.5% savings on the balance put our breakeven at fewer than 6 months.  If you truly meant HELOC, the variable aspect is the risk, as rates how little room down from here, but much room to rise.
"For the mortgage, you're confusing cause and effect. Loans like mortgages generally have a very simple principle behind them: at any given time, the interest charged at that time is the product of the amount still owing and the interest rate. So for example on a mortgage of $100,000, at an interest rate of 5%, the interest charged for the first year would be $5,000. If you pay the interest plus another $20,000 after the first year, then in the second year the interest charge would be $4,000. This view is a bit of an over-simplification, but it gets the basic point across. [In practice you would actually make payments through the year so the actual balance that interest is charged on would vary. Different mortgages would also treat compounding slightly differently, e.g. the interest might be added to the mortgage balance daily or monthly.] So, it's natural that the interest charged on a mortgage reduces year-by-year as you pay off some of the mortgage. Mortgages are typically setup to have constant payments over the life of the mortgage (an ""amortisation schedule""), calculated so that by the end of the planned mortgage term, you'll have paid off all of the principal. It's a straightforward effect of the way that interest works in general that these schedules incorporate higher interest payments early on in the mortgage, because that's the time when you owe more money. If you go for a 15-year mortgage, each payment will involve you paying off significantly more principal each time than with a 30-year mortgage for the same balance - because with a 15-year mortgage, you need to hit 0 after 15 years, not 30. So since you pay off the principal faster, you naturally pay less interest even when you just compare the first 15 years. In your case what you're talking about is paying off the mortgage using the 30-year payments for the first 15 years, and then suddenly paying off the remaining principal with a lump sum. But when you do that, overall you're still paying off principal later than if it had been a 15-year mortgage to begin with, so you should be charged more interest, because what you've done is not the same as having a 15-year mortgage.
Keep in mind the number of months or years before you break even. You pay money to lower the interest rate, and lower the monthly cost. But it takes a number of months, using your numbers $7,000 to save $160 a month will take ~43 months. That is before figuring in the future or present value. If you sell or refinance the mortgage, the initial points to lower the rate is gone.
The complicated answer is when the benefits (rent, appreciation) relative to the costs (maintenance, interest, taxes, etc.) and risks (lost rent, bad renters, home value variance) give you a better return that you could find in investments of similar risk. The simple answer is when you can pay cash for it. That takes interest and lost rent out of the equation. Again, some are willing to take those risks and pay 20% down on rental property. Some are able to make it work. Some of those go broke or lose their properties. when calculating the 20% down of a new property, does that need to be liquid funds, or can that be based on the value of the home you are selling You can make the purchase of the new home contingent on the sale of the first if you need to get the equity out of it to make the 20%. Do NOT refinance the first just to pull out the equity to make a down payment. It's not worth the fees of a refinance.
Other people have belabored the point that you will get a better rate on a 15 year mortgage, typically around 1.25 % lower. The lower rate makes the 15 year mortgage financially wiser than paying a 30 year mortgage off in 15 years.  So go with the 15 year if your income is stable, you will never lose your job, your appliances never break, your vehicles never need major repairs, the pipes in your house never burst, you and your spouse never get sick, and you have no kids. Or if you do have kids, they happen to have good eyesight, straight teeth, they have no aspirations for college, don't play any expensive sports, and they will never ask for help paying the rent when they get older and move out.  But if any of those things are likely possibilities, the 30 year mortgage would give you some flexibility to cover short term cash shortages by reverting to your normal 30 year payment for a month or two. Now, the financially wise may balk at this because you are supposed to have enough cash in reserves to cover stuff like this, and that is good advice. But how many people struggle to maintain those reserves when they buy a new house?  Consider putting together spreadsheet and calculating the interest cost difference between the two strategies. How much more will the 30 year mortgage cost you in interest if you pay it off in 15 years? That amount equates to the cost of an insurance policy for dealing with an occasional cash shortage. Do you want to pay thousands in extra interest for that insurance? (it is pretty pricey insurance) One strategy would be to go with the 30 year now, make the extra principal payments to keep you on a 15 year schedule, see how life goes, and refinance to a 15 year mortgage after a couple years if everything goes well and your cash reserves are strong. Unfortunately, rates are likely to rise over the next couple years, which makes this strategy less attractive. If at all possible, go with the 15 year so you lock in these near historic low rates. Consider buying less house or dropping back to the 30 year if you are worried that your cash reserves won't be able to handle life's little surprises.
"The Solicitor involved up front should be able to place constrictions as your suggesting.  I think you should look carefully at the desired wording. You deserve a return on your £100k. Say, the day after you buy (this is hypothetical, please bear with me) a developer says he needs the property and will give you £460k. Your wording here says you get £100k, and then, after the mortgage split £230k, but it seems more reasonable that your deposit doubles to £200k, the remaining £260k pays the mortgage, and the £130k left is split, £65k each.  My method accounts for the value of your £100k. Some would ask, why not apply the mortgage rate to that deposit? Because the home value may grow at a different rate. In my opinion, it's fair to apply the home value growth to the £100k deposit.  ""Fair"" means different things to different people. This is my opinion, and a suggestion. Consider it, and do what you and your partner wish. Use a solicitor. Put it in writing."