A New York Mortgae Planners View:

Cntd

3. Would you advise to take out an Interest only?

Answer. It depends why you want and interest only loan. If you want an interest only loan because otherwise the payment is too high I would say NO way! Rather don't refinance or purchase the house its way to expansive for you.

However if you want an interest only loan because you want more flexibility with your money for example to save the deference in payment, I would say yes please, and tell your friends too. As in matter of fact I advise my clients to get an interest only loan and keep paying the same like a full interest and principle loan. The interest you pay to the bank and the principle part to pay to themselves and deposit it into a side fund that yields at least a rate of 4% and let it sit as an emergency fund.

4. Is it a good time to buy now?

Again let me answer it with a question! Will it be a good time to start saving money now or should I wait a little? Are there seasons when it pays to save and when not to? Ludicrous! Always, start saving right now!

When you buy a house especially to live in it, you are essentially saving money! You are deducting the whole mortgage interest and it is like if you never earned that money when it comes to taxes. You can deduct up to 1,000,000 dollars on mortgage interest and yes you heard me right! So if you are paying taxes and paying rent you seriously need to rethink your financial structure. A person, who earns a $150,000 income and is a renter, will pay an average of 1500 dollars a month rent in the area I live in. That is 18,000 dollars a year spend on rent that is not deductable. That means if you are in a tax bracket of 34% that will be 6,400 dollars to the IRS. If the 1500 would be payment to mortgage interest, there will be no 6,400 to the IRS. Now are you ready to save money?

5. But shouldn't I wait until the market bottoms out!

Oh yeah? What is the bottom? How much should a single family cost for you to see that it is already rock bottom? There is no answer to this. Many times the in markets like this we notice the bottom when it already passed us.

And every house has a different bottom depending what the previous owner paid for it or borrowed against it. The owner doesn't care about the market, he wants to wrap around his debt in the selling price. Which marked bottom will persuade him? So the bottom you should be focused on, is your bottom line

Ask yourself the following question to determine if it is time to buy.

Can I afford this mortgage payment?

Can I save in taxes on this purchase?

Will this property go up in value in the next 5 to 10 years? 

If the Answer is yes then grab it!

Joel Silberstein

The Silberstein Group at Trump Financial

718.732.0383

917.660.3630

www.joelsilberstein.com

 Real estate and financing frequently asked question continued

I will write about the most frequently asked questions by many of my clients with regard to real estate financing, and let this serve as a general guide.

•1.    I have $300,000 cash should I put it all down to get a lower mortgage or better yes to have no mortgage at all?

Answer it depends. If you will buy a more expensive home just because you have $300,000 cash and without putting down more money you will not afford the payments then you should consider putting it down

However if you can afford the mortgage payments, and the only reason you are putting down more money is because you don't want to deal with the mortgage bills let me ask you these questions.

Would you burry money in a tight sealed pot somewhere on community property?

By paying for the house all cash you did just that! You paid for an asset that doesn't belong to you essentially the government can foreclose on your property if you owe them $2500 in water charges or environmental fees, in my book that's community property.

Would you deposit money in a bank account that does not always allow you to withdraw it? Well it's not to say that you will not be able to withdraw your money only to say that you have to qualify before you do. Would you? Or when coming to the bank to withdraw your money a very pleasant person will politely tell you we are very very sorry but the bank is tight in cash now and we cannot give you your money back at the present time. Would you invest in such a place?

That's exactly what you do if you pay off your house, most people go back to their property when they are in need of cash thinking they have enough money in it. But guess what the bank will deny you a loan if the market is though will you put $300,000 in such a position? Staying liquid is key Look at all the banks that survived this crazy market only the ones that remained liquid so you do the same!

But I hate bills what should I do?

By having this money invested you can have money paid to you monthly basis for as long as the money stays invested and that can even help you pay your mortgage.

        2. I am a Senior Citizen and I want to buy a house what type of mortgage should I get?

Answer. You should get a Reverse Mortgage, even if you have money to put down for the house don't use that money, have that money invested and out away for case of emergency. In addition, let it earn for you a rate of return.

A reverse mortgage is a mortgage that is in reverse. Normal mortgage you borrow lump sum and pay it off (exactly what amortization) A reverse mortgage is the bank gives you a lump sum or smaller monthly sums, and you balance slowly grows upward reverse from paying it off. The bank will give you a reverse on either a house you want to buy or on a house you already own to free up some cash. What A great way for freeing up cash for people on a fixed income i.e. retired folks.

But Blame we still assign to the institutions, like the feds and investment banks.

In an article in Bloomberg today UBS a Swiss based investment banker, is to cut 5500 jobs due to clients i.e. investors withdrew 12.2 billion dollars from their accounts Leaving them with significant less capital, leaving them no choice but to cut back o n their expenses.

Let stop and think for a second.  

Question: Why would investors take out money from UBS?

The Answer: Subprime mortgage losses!

Question: Why didn't you take out the money before the investment into sub-prime mortgage loans took place?

Answer:  Because I am an investor and I take risk! I felt that UBS had a strong reason for diving in head first I wanted to see if the UBS Strategy will ultimately pay off

Question: Did you feel comfortable about the newly found underwriting guideline at the time?

Investors answer: At the time I taught that since Home prices are on the rise, a lot of baby boomers are soon to be retiring therefore new second homes will be bought pushing the real estate prices further up, therefore the 100% loans and the no doc loans made sense because even if the loan is a 100% of the value this year, Next year the loan will only amount to 95% and so on year after year.

Question: Have you considered the potential of the need to repossess the house due to foreclosure and in that case your money will not perform even if your principal investment might be protected but it won't bring you a rate of return

Investors Answer: you right I didn't look into that, but I had faith in UBS and in their experience!

Question: so why change of heart now?

Investors Answer: I don't know I don't feel right!

Conclusion: The Investors does not feel right with having money with UBS but he did feel right before. So I have to quote Robert Kiyosaki, "There is no such thing as a risky investment, the investor is risky. By not educating himself correctly about the investment he is risky"  So he will withdraw money  look for a safer place to park it into like bonds (Mortgage bonds included) driving risky stock market down for a day or two and driving the bond market up for a day or two. In the interim, better rates for consumers.

Sincerely

Joel Silberstein

The Silberstein Group Mortgage Team

At Trump financial.