Archive for the 'Mortgages' Category
Shopping for your first apartment is such and exciting time. In addition to choosing which neighborhood to move to and seeing all that is out on the market, you are invariably confronted with the question: should you go for a condo or a co-op?
The first thing you’ll notice is that condos usually cost more. That’s because buying a condo is more like buying a house. Buyers own their deeds and pay taxes. The good news is the percentage down-payment requirements are smaller and you can sublet condos more readily than co-ops.
Co-op is short for “cooperative housing project,” and you technically don’t own your apartment, as you do with a condominium. Instead, you own shares of the co-op corporation that owns your building. The larger the living unit, the more shares you own in that corporation.
While you’ll pay less money for a co-op you need to keep in mind the board, run by other shareholders, will have a bigger say in almost every facet of living.
As thus, everything that happens in a co-op must be approved. From purchase, when the board checks personal background and finance information, as well as comprehensive employment history and background checks; to any renovation that goes on in the apartment; to subleasing, which in many cases, is not allowed at all. Moreover, co-ops require larger down payments than condos, and those all-encompassing maintenance fees are higher than in condos, although they are tax-deductible.
Finally, selling a co-op can be little harder than selling a condo. Some boards assess a “flip tax” if you resell within a set period, such as one to three years.
So, depending on your financial status, how much money you have for a down payment and how much you want to be part of a group, you can decide for yourself whether you wish to go condo or co-op.
When I look at my assets these days — and it’s a quick look, trust me, I think I can look directly at the sun longer — I don’t even consider the value of my home.
Why not? Because I don’t even see it as part of my investment mix. Sure, when I sell, I hope I see a gain. But when I bought the home a couple years ago (yep, I nailed the top of the market, please keep your comments to yourself….) I looked at it as a pure financial decision: over the course of 10 years, even if we lost money on the house, would we pay more in rent, or pay more for the mortgage?
Unless I’m forced to load up the jalopy and head out West ‘Grapes of Wrath’ style, I think the answer is that I’d pay more in rent.
The thing is, I’m just not good at timing the market. Even with stocks, I buy high, sell low. That’s why I put my investing on auto-pilot and make regular investments, and do the same with selling positions that run a little hot.
I try to have the same clear-eyed view when considering housing. I knew the market was overheated and likely to come down, but I didn’t know when. And with a new Johnson on the way, I knew I needed more space. Going from a one-bedroom to a two-bedroom in New York is shockingly expensive, and doing the math, buying instead of renting made more sense (as did moving to the suburbs from the City).
So when I hear the debate about whether now’s a good time to buy a house, I think the same thing:
If you can afford it, preferrably keeping real estate costs to less than 30% of your take-home pay (yes, take-home).
and
If you would pay less on housing costs over 10 years than you would pay in rent,
Then buying a home might be for you.
I’m doing a mortgage refinance and have been silently mocking my mortgage broker’s laments about all the documentation the government is now requiring on mortgages.
Of course, if the banks had actually been CHECKING homebuyers’ documentation over the past decade, we wouldn’t be in the terrible mess we are today.
Still, she did clarify her statement. Wherease before they checked NOTHING, now they’re checking EVERYTHING. That, in turn, is raising the costs of doing a refinance for the banks, who (surprise, surprise) are turning over the costs to borrowers in the form of higher rates than they might normally get.
The next few years are going to bring a real balancing act between getting solid borrowers the funds they need, with the banks’ need to make money (at least make money that they don’t give back in future years because of awful investments).
