Enb5499 Posted January 19, 2019 Share Posted January 19, 2019 Does anyone have any experience with a physician assistant mortgage to purchase a home? A presentation prior to graduation by a financial advisor told us these exist, however he only had experience doing this for physician mortgages. Is it something worth considering? Link to comment Share on other sites More sharing options...
Boatswain2PA Posted January 19, 2019 Share Posted January 19, 2019 They are low down payment, but higher cost mortgages. Something that "financial advisors" would push, but are generally not a good idea for your long term finances. Best way to buy a house is cash. Next best way is by putting down a large percentage, and then with a short term note. This will get you the best interest rates and lowest fees. Link to comment Share on other sites More sharing options...
Moderator ventana Posted January 19, 2019 Moderator Share Posted January 19, 2019 2 hours ago, Boatswain2PA said: They are low down payment, but higher cost mortgages. Something that "financial advisors" would push, but are generally not a good idea for your long term finances. Best way to buy a house is cash. Next best way is by putting down a large percentage, and then with a short term note. This will get you the best interest rates and lowest fees. Not sure this is sound advice best way in my opinion to buy a house 20% down (avoid PMI) 30 yr fixed affordable monthly payment go onto the paying 50% of your monthly payment every two weeks and throw in between $50 and $200 extra each payment.... That builds equity, allows a set expense, and takes 99% of the risk away from a long term mortgage Other points - don't jump houses frequently - easy to take cash out and actually loose your equity Live with in your means - means spending less then you make Link to comment Share on other sites More sharing options...
Boatswain2PA Posted January 20, 2019 Share Posted January 20, 2019 22 minutes ago, ventana said: Not sure this is sound advice best way in my opinion to buy a house 20% down (avoid PMI) 30 yr fixed affordable monthly payment Why isn't it? $200K house, paid in cash, will cost you about $210K after fees, etc. $200K house, with $40K down, 30 year mortgage at 3.5% will cost you $308,650. I'll keep the extra $98,650 instead of giving it to a bank. Want to know why the biggest buildings in town usually have bank names on them? Cause of that $98,650 you give them for a $200K home. Link to comment Share on other sites More sharing options...
Cideous Posted January 20, 2019 Share Posted January 20, 2019 ^^^. Good grief, who can pay $200k cash for a house? Especially someone younger. I bought our house on 30 year loan and paid if off in 8 years. Similar to what Ventana is recommending. If I had a bad month I just made a regular payment. Took all the risk out. PLUS I didn't pay rent for 8 years while "saving up" the $200k cash. Remember, the original poster still needs a place to live. Link to comment Share on other sites More sharing options...
Moderator EMEDPA Posted January 20, 2019 Moderator Share Posted January 20, 2019 Agree with 20% + down. Also agree that Most folks don't have hundreds of thousands of dollars lying around though to pay cash for a house. What has worked for us was to find the lowest rate possible and figure the max payment we could afford every month. This ended up being a 15 year loan at 2.75%. This way, we will have our house paid off many years before retirement, allowing me to gradually transition into retirement by cutting a few shifts/month every year starting around age 60 or so. We also make an extra payment here and there when we can so may actually have it paid off in my late 50s. I have not done the math yet on exact payoff date. Link to comment Share on other sites More sharing options...
Enb5499 Posted January 20, 2019 Author Share Posted January 20, 2019 5 hours ago, ventana said: Not sure this is sound advice best way in my opinion to buy a house 20% down (avoid PMI) 30 yr fixed affordable monthly payment go onto the paying 50% of your monthly payment every two weeks and throw in between $50 and $200 extra each payment.... That builds equity, allows a set expense, and takes 99% of the risk away from a long term mortgage Other points - don't jump houses frequently - easy to take cash out and actually loose your equity Live with in your means - means spending less then you make Yes! So this is how I was taught/what I underatans to be the most reasonable way to purchase a house, because while yes it’s obviously cheaper to buy a house in cash.... I most definitely don’t have that kind of money saved to do. However saving for a down payment takes time, which is why I thought about the PA mortgages. If they will offer no PMI at a lower down payment, say 10-15%, that would allow me to buy a house faster. With the income of myself and my spouse, we would be able to make larger monthly payments. Basically I’m trying to get around the 20% to avoid PMI! But I don’t want that to come with other consequences Link to comment Share on other sites More sharing options...
Administrator rev ronin Posted January 20, 2019 Administrator Share Posted January 20, 2019 You don't actually NEED a 15 year loan to pay your house off as if it were a 15 year loan... Hence I recommend 30 year plus as much in extra principal payments as you can afford. Link to comment Share on other sites More sharing options...
Moderator ventana Posted January 20, 2019 Moderator Share Posted January 20, 2019 13 hours ago, Boatswain2PA said: Why isn't it? $200K house, paid in cash, will cost you about $210K after fees, etc. $200K house, with $40K down, 30 year mortgage at 3.5% will cost you $308,650. I'll keep the extra $98,650 instead of giving it to a bank. Want to know why the biggest buildings in town usually have bank names on them? Cause of that $98,650 you give them for a $200K home. Sorry this is just not true..... You have to look at true costs for house purchase and ability to leverage and taxes I am no going to do all the calculations here but these are the items you have not taken into consideration (besides the fact that most people do not have a spare 210k laying around) Tax effect - the mortgage interest tax deduction will take between 20-30% off your $98,650 Reinvestment potential - if you took the $200,000 and put it in the stock market it would on average return a little over 7% (historical average of stock market) this compounded over the 30 year life of the mortgage gives you a nest egg of just over 1.5million The opportunity cost of not having the 200k to invest somewhere else So you have saved about $80,000 over 30 years, but cost yourself about 1.5 million in retirement savings.... Nope not sound advice Now getting mortgage free as retirement approaches is very sound advice - an this is different category of minimizing fixed expenditures and living in your means on retirement to minimize long term financial risks while protecting from inflation and market down turns. Sorry but your statement of paying cash for a house is some of the most over simplified and worst financial advise I have heard in a while. Leveraging with a mortgage is a requirement for young professionals, as is maxing out the retirement contribution and savings in 529 plans and rainy day accounts. You have to take into consideration tax benefits and compounding in any calculation. (two business degrees, only debt is mortgage, on track to retire early with a multi million retirement nest egg, with a state pension and health insurance for ever, with diversified investments in and out of market....) Link to comment Share on other sites More sharing options...
Boatswain2PA Posted January 20, 2019 Share Posted January 20, 2019 13 minutes ago, ventana said: Now getting mortgage free as retirement approaches is very sound advice - If all of you say is true (and it is...but you ignore the element of risk)....why would being mortgage free in retirement be good advice? Why not continue to pay the 3.5% interest on a mortgage and put that money into the stock market at 7%? Why not take a 2nd mortgage on your house and invest that money in the stock market? Using your ideology, this would be a good idea. I understand virtually nobody can pay cash for a house they want to live in. The OP asked a question about a bad market product (high cost, high interest, low down payment mortgage). I gave the other relatively extreme answer to that (pay cash), and then gave the much more traditional answer (large amount down, low cost, low interest). Lots of people with business degrees have leveraged the future of our nation to the tune of $20T in debt. Doesn't make them right. Debt = risk. Link to comment Share on other sites More sharing options...
Boatswain2PA Posted January 20, 2019 Share Posted January 20, 2019 7 hours ago, rev ronin said: You don't actually NEED a 15 year loan to pay your house off as if it were a 15 year loan... Hence I recommend 30 year plus as much in extra principal payments as you can afford. When we build our dream house in about a year we will be doing a 15 year loan (better interest rates, lower fees), with plan to pay off in 5. Link to comment Share on other sites More sharing options...
Moderator EMEDPA Posted January 20, 2019 Moderator Share Posted January 20, 2019 13 hours ago, rev ronin said: You don't actually NEED a 15 year loan to pay your house off as if it were a 15 year loan... Hence I recommend 30 year plus as much in extra principal payments as you can afford. you get a much lower rate though at 15 vs 30. like 2 points lower... Link to comment Share on other sites More sharing options...
Boatswain2PA Posted January 20, 2019 Share Posted January 20, 2019 41 minutes ago, EMEDPA said: you get a much lower rate though at 15 vs 30. like 2 points lower... But using this logic, with the "common sense" that today's society teaches us that it's better to borrow at 4% and invest at 7%, wouldn't it STILL be better to mortgage for 30 years and invest the difference? How about a 45 year mortgage at 5%? Still a 2 point spread between that and what you average on the stock market? If it's better to invest than pay off debt, why don't people go into debt just to invest? If leveraging debt is such a great idea, why wouldn't someone cash out the equity in their home every couple of years to "leverage" that money into the stock market? After all, their house is still going up in value, and the stock market always goes up in the long run. You wouldn't take out a mortgage on your paid-off house to invest in the stock market, so why would you NOT pay the house off asap, even if it means reducing your investments? Over the past 60 years banks have taught us that debt isn't dangerous, it's "leverage!". We have been taught through advertisements showing how "fun" people can have while putting their dinner/drinks/vacations on credit cards, or how we can cash out our equity in our homes to "pay off other bills" or have that vacation we've always wanted, or buy that $70K truck for ONLY $1200 a month (for 108 months). It's so inculcated in our society now that people often don't care about the cost of their education, but simply care if their student loans will cover everything. Look at how many people on these boards graduate with >$200K in student loan debts for a career that only starts at $100K/year! Course, that's why so many people, including folks like us who make good money, couldn't come up with $1000 to cover an emergency. But yet look at the closest Bank of America building. Them buildings are usually realllllll nice...because of all that interest they get. Link to comment Share on other sites More sharing options...
mgriffiths Posted January 21, 2019 Share Posted January 21, 2019 Boatswain2PA: time is huge factor here. I'm not saying you're wrong, I think it's a difference of philosophy. The reason it is helpful to have a paid off home during retirement, or when approaching retirement, is that it mitigates risk - and the nest egg you need to be able to retire is MUCH smaller because your monthly budget is that much smaller. For me at 29, I have time on my side. It is WAY better to invest any extra $$$$$ I have into the stock market at a higher return rate than pay of my mortgage early, but of course that return rate is NOT guaranteed. Therefore that is where it comes back to philosophy. What level of risk is someone willing to take on? And of course, we are also ignoring that most people don't take all of the extra money they have at the end of the month and invest it, while they may take 100% of it to pay toward a mortgage. Some gets spent on new toys, vacations, home maintenance, etc. So for the general population, it is absolutely better to pay off the home early because that money has a defined use that is a positive financial decision, as opposed to spending that money on other items that should have been invested. So, in my opinion the idea of paying off a mortgage early is based on philosophy and how much risk someone is willing to take on. This changes as one gets older and therefore closer to retirement. As a 29 year old I can afford to be somewhat risky with my investments as I have time to recover. I lost approximately 7% in the stock market in 2018, which sucks, but overall not the end of the world. In reality it is just the perfect time for me to drop as much cash as possible into the stock market (assuming it doesn't continue to fall). For my father, who is in the process of setting up his timeline to retire, losing 7% is a bigger issue. He doesn't have the time to "catch up." So unless the stock market goes gangbusters like it did after 2008, he is likely going to have to work an extra year that otherwise he would not have needed. Link to comment Share on other sites More sharing options...
Moderator ventana Posted January 21, 2019 Moderator Share Posted January 21, 2019 Boatswain2PA You are so far out of the norm and accepted financial advice I don't even know where to start.... Maybe you should take some Business Courses or Financial Management courses to gain some expertise in the field of finance as you are lacking a few of the basic tenants. Although this is a helpful PA site I am not willing able or motivated to do into a lecture on financial planing and goals.... Link to comment Share on other sites More sharing options...
Moderator EMEDPA Posted January 21, 2019 Moderator Share Posted January 21, 2019 The other reason to pay off the mortgage early is in case $hit happens. I am healthy and active now, but the reason I have disability insurance and want to pay off my house by 60 or so is that there is no guarantee that I will be able to work 200 hrs/month until I am 70. My goal is to gradually taper down to the point that I am working because I want to work, not because I need to work. Things happen. People get sick, family members have accidents, etc. If I inherited a big chunk of change today I would seriously consider paying off all my debt, not investing it. We don't own a boat or buy fancy cars or $5000 TVs, so most of our debt is in the form of our mortgage. We have been saving for the kids college since they were born, so hopefully those years will not put too much of a dent in our lifestyle. Link to comment Share on other sites More sharing options...
Enb5499 Posted January 21, 2019 Author Share Posted January 21, 2019 30 minutes ago, ventana said: Boatswain2PA You are so far out of the norm and accepted financial advice I don't even know where to start.... Maybe you should take some Business Courses or Financial Management courses to gain some expertise in the field of finance as you are lacking a few of the basic tenants. Although this is a helpful PA site I am not willing able or motivated to do into a lecture on financial planing and goals.... I was not looking for someone to tell me how to plan my finances. This is something I mostly understand, and what I don’t understand I can research on my own. I was simply wondering if anyone had any experience with these specific mortgages, and this site offers a range of PAs to ask that I would not be able to get otherwise. Link to comment Share on other sites More sharing options...
Boatswain2PA Posted January 21, 2019 Share Posted January 21, 2019 2 hours ago, mgriffiths said: It is WAY better to invest any extra $$$$$ I have into the stock market at a higher return rate than pay of my mortgage early I agree with everything you said except this. Like everything in life, it is better in some ways (likely increased return), and worse in other ways (increased risk). 30 minutes ago, ventana said: Maybe you should take some Business Courses or Financial Management courses to gain some expertise in the field of finance as you are lacking a few of the basic tenants. I have a firm understanding of finances and business, thanks. Have you refinanced your house yet to cash out and invest in the market? Of course not.... 21 minutes ago, EMEDPA said: The other reason to pay off the mortgage early is in case $hit happens. I am healthy and active now, but the reason I have disability insurance and want to pay off my house by 60 or so is that there is no guarantee that I will be able to work 200 hrs/month until I am 70. My goal is to gradually taper down to the point that I am working because I want to work, not because I need to work. Things happen. People get sick, family members have accidents, etc. If I inherited a big chunk of change today I would seriously consider paying off all my debt, not investing it. We don't own a boat or buy fancy cars or $5000 TVs, so most of our debt is in the form of our mortgage. We have been saving for the kids college since they were born, so hopefully those years will not put too much of a dent in our lifestyle. So you are balancing your risk and investments which is the best way of doing it. Our culture often ignores the risk of debt. Link to comment Share on other sites More sharing options...
Boatswain2PA Posted January 21, 2019 Share Posted January 21, 2019 4 minutes ago, Enb5499 said: I was not looking for someone to tell me how to plan my finances. This is something I mostly understand, and what I don’t understand I can research on my own. I was simply wondering if anyone had any experience with these specific mortgages, and this site offers a range of PAs to ask that I would not be able to get otherwise. I think Ventana was more trying to insult my intelligence instead of offering to be your financial planner. Link to comment Share on other sites More sharing options...
PC2ED Posted January 21, 2019 Share Posted January 21, 2019 have you thought about investing your cash for the next 5-7 yrs in a Roth IRA as you save up for a sizable down payment? or maybe you could save up your down payment cash in an Online Bank and make more interest yearly rather than saving them in a brick and mortar bank and make pennies. Link to comment Share on other sites More sharing options...
cbrsmurf Posted January 21, 2019 Share Posted January 21, 2019 To answer OP's original question, there are no loans with no PMI <20% down payment like they offer for physicians at least in Southern California. I have not heard of any other PA's getting any other special loans when purchasing their homes either. Another factor when considering buying a new home is the recent tax bill changes. Depending on what state you are in, property taxes and home value can be a big factor as well. Link to comment Share on other sites More sharing options...
Boatswain2PA Posted January 21, 2019 Share Posted January 21, 2019 11 minutes ago, PC2ED said: have you thought about investing your cash for the next 5-7 yrs in a Roth IRA as you save up for a sizable down payment? or maybe you could save up your down payment cash in an Online Bank and make more interest yearly rather than saving them in a brick and mortar bank and make pennies. You can only invest $6k a year in a Roth, and there are income restrictions as well. Worse yet, ya cant withdraw from Roth to buy a home. Best way to save for down payment is the online bank. Synchrony bank has 2.8% interest (or close to that) on savings accounts. That's what I'm using. Link to comment Share on other sites More sharing options...
PC2ED Posted January 21, 2019 Share Posted January 21, 2019 11 minutes ago, Boatswain2PA said: You can only invest $6k a year in a Roth, and there are income restrictions as well. Worse yet, ya cant withdraw from Roth to buy a home. Best way to save for down payment is the online bank. Synchrony bank has 2.8% interest (or close to that) on savings accounts. That's what I'm using. I use synchrony too. I think I have heard that you can use a Roth for home purchase Link to comment Share on other sites More sharing options...
Enb5499 Posted January 21, 2019 Author Share Posted January 21, 2019 1 hour ago, Boatswain2PA said: You can only invest $6k a year in a Roth, and there are income restrictions as well. Worse yet, ya cant withdraw from Roth to buy a home. Best way to save for down payment is the online bank. Synchrony bank has 2.8% interest (or close to that) on savings accounts. That's what I'm using. 1 hour ago, PC2ED said: I use synchrony too. I think I have heard that you can use a Roth for home purchase I do have a Roth, and from what I understand you can withdraw up to $10,000 of invested money- Not earnings- to purchase a home. I will have to look into synchrony! I am doing some research on where to put my money so it grows but where I can still use it. Thanks! Link to comment Share on other sites More sharing options...
Boatswain2PA Posted January 21, 2019 Share Posted January 21, 2019 There is a way to take up to $10k out of a Roth (each) of you, and I think ya have to have the account open for >5 years. Link to comment Share on other sites More sharing options...
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