Thursday, July 12, 2012

House it being a loan?

I love puns.

So with the new "big boy" job we were trying to decide whether to 1. move to a bigger apartment for a year or more,  2. Stay where we are a few months until we can buy a house.

You see in our modern spend before you earn society you can buy a house for as little as 5% down. There are ways to buy them for 0% down I hear. Anyway our credit union (America First) offers as low as 5% down, but for anything under 20% down (which includes 5% to save you the math :P) you must pay morgage insurance until 20% is paid and the closing costs are higher, as well as the payments being bigger (since you have to pay 95% of the cost rather than 80% in the same 30 years).

Well, we like money and would like to end up with a house and the most money possible (who doesn't?). So I made this matlab/octave script. It calculates the total amount paid in the end for your house including your rent for the time it took you to save up the down payment. Look after the break.

%Spencer Jackson
%home loan cost calculator thing

%%This is without mortgage insurance
HT = 125000;%home cost
r = 3.25/100;%interest rate annual (not APR)
cp = 1127.32;%amount put in house each month (not nec. min. pay)
f = 33.33+110.25;%monthly fees that do not build equity
cc = 4940.73;%closing costs
DP = 20;%down payment (per cent)
rent = 650*12;%total rent paid until DP is saved

r = r/12;
c = cp-f;
P = HT-DP/100*HT;
TA = cp*log((-c)/(P*r-c))/log(1+r) + cc + rent%total amount paid for house

%%This is counting mortgage ins. until 20% paid
HT = 125000;%home cost
r = 3.25/100;%interest rate Annual
cp = 1390.74;%amount available to put in house each month (not nec. min. pay)
mi = 55;%78.97;%mortgage insurance
f = 222.55-mi;%monthly fees that do not build equity
cc = 5234.81;%closing costs
DP = 15;%down payment (per cent)
rent = 450*9;%total rent paid until DP is saved

r = r/12;
c = cp-f-mi;
P = HT-DP/100*HT;
A = HT*.80;
N20 = log((A*r-c)/(P*r-c))/log(1+r)
TA20 = cp*N20;
%A20 = P*(1+r).^N20 - ((1+r).^N20-1)./r.*c;
TA = (cp-mi)*log((-c)/(A*r-c))/log(1+r) + cc + rent + TA20%total amount paid for house

If you don't know how to run a script in octave (which is free and cross-platform) you can google. Leave a comment if you have any trouble. Also I take no responsibility in your financial decisions. I just thought I'd share the tools I made to try to help people.

We are going for a 15 year loan, since interest rates are so stinky right now you make almost as much by burying your money as leaving it in the bank. So we want to invest it in real estate. Even if it's our own house. This will work for any loan though.

Naturally it's best to get in a house asap, right? Stop throwing your money at the landlord and build some equity. And the rates are going to skyrocket soon, right? Jump on it now!! NOW!!!

Not so fast Mr. Agent. We've found that if we can keep our expenses down (no new jogging strollers) we can save up to 20% in just under a year. The savings from 15% less of the house accruing interest far outprice the years rent. And interest rates rarely turn on a dime, so we probably won't miss out on the low rates.

So we're moving, but not into a house.

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