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XBoxBoy
ParticipantBeen watching this thread, and maybe I’m wrong, but I get the sneaking suspicion that what ncounty4 really wants to know is why don’t 90% jumbo loans exist any more? (Not why can’t they personally get the loan) If my hunch is correct, here’s my quick stab at that question.
Banks (and mortgage companies) generally don’t hold mortgages these days. Thus they are only willing to make mortgages that they can sell to someone else. Given that neither investors nor the government are interested in buying jumbos, that means they are not available.
Why don’t investors or the government buy jumbos? The government only buys mortgages for political reasons, but helping people who make a good living but aren’t fabulously wealthy campaign contributors isn’t politically very popular right now. And investors don’t want to buy mortgages for the following reasons.
1) Too much risk. No one knows how far down housing prices are going to go.
2) Government interference. There is lots of concern among investors that any loan you write will get changed for political reasons by the government and the person holding the loan will get screwed. As an investor this simple reason would drive me away from owning mortgages.
3) Lots of investors have had their fingers burned by mortgage backed securities in the last couple of years. After being burned like that it takes a while for people to come back into the kitchen.
Bottom line here is that why in the world would anyone want to hold mortgage backed securities at this time and at the current rates? The profit just doesn’t justify the risks. Thus they aren’t available. (Or when available, only scarcely and at higher rates)
XBoxBoy
ParticipantBeen watching this thread, and maybe I’m wrong, but I get the sneaking suspicion that what ncounty4 really wants to know is why don’t 90% jumbo loans exist any more? (Not why can’t they personally get the loan) If my hunch is correct, here’s my quick stab at that question.
Banks (and mortgage companies) generally don’t hold mortgages these days. Thus they are only willing to make mortgages that they can sell to someone else. Given that neither investors nor the government are interested in buying jumbos, that means they are not available.
Why don’t investors or the government buy jumbos? The government only buys mortgages for political reasons, but helping people who make a good living but aren’t fabulously wealthy campaign contributors isn’t politically very popular right now. And investors don’t want to buy mortgages for the following reasons.
1) Too much risk. No one knows how far down housing prices are going to go.
2) Government interference. There is lots of concern among investors that any loan you write will get changed for political reasons by the government and the person holding the loan will get screwed. As an investor this simple reason would drive me away from owning mortgages.
3) Lots of investors have had their fingers burned by mortgage backed securities in the last couple of years. After being burned like that it takes a while for people to come back into the kitchen.
Bottom line here is that why in the world would anyone want to hold mortgage backed securities at this time and at the current rates? The profit just doesn’t justify the risks. Thus they aren’t available. (Or when available, only scarcely and at higher rates)
XBoxBoy
Participant[quote=ncounty4]No, we don’t think that renting is a wise financial choice in our tax bracket.[/quote]
Actually ncounty4, I suggest you reconsider that. Compare these two case: 1) you buy an 800k property now, 2) you rent an equivalent property for two years, then buy.
In the first case, you will receive a tax deduction worth about 1/3rd or what you pay in interest on your loan. Depending on your interest rate, and the exact amount of your loan, I figure that deduction will be worth about 15k per year, or 30k for two years. ($720k loan times 6% interest times 34% tax bracket = $14688)
In case 2 you get savings because rents in that price range are significantly lower than your mortgage payments. (I’m gonna guess a thousand and a half to a couple thousand a month savings) But here’s the kicker. How much value will that $800k house lose over the next two years. If that house looses even 30k then the tax advantage does not outweigh the loss. And chance are high that an 800k house will lose more than 30k in the next two years.
Consequently, I don’t believe that you should tell yourself that because of your tax bracket renting doesn’t make sense. Quite the contrary, I think that regardless of your tax bracket, buying an 800k house today doesn’t make financial sense.
Just my two cents though, feel free to ignore me.
XBoxBoy
Participant[quote=ncounty4]No, we don’t think that renting is a wise financial choice in our tax bracket.[/quote]
Actually ncounty4, I suggest you reconsider that. Compare these two case: 1) you buy an 800k property now, 2) you rent an equivalent property for two years, then buy.
In the first case, you will receive a tax deduction worth about 1/3rd or what you pay in interest on your loan. Depending on your interest rate, and the exact amount of your loan, I figure that deduction will be worth about 15k per year, or 30k for two years. ($720k loan times 6% interest times 34% tax bracket = $14688)
In case 2 you get savings because rents in that price range are significantly lower than your mortgage payments. (I’m gonna guess a thousand and a half to a couple thousand a month savings) But here’s the kicker. How much value will that $800k house lose over the next two years. If that house looses even 30k then the tax advantage does not outweigh the loss. And chance are high that an 800k house will lose more than 30k in the next two years.
Consequently, I don’t believe that you should tell yourself that because of your tax bracket renting doesn’t make sense. Quite the contrary, I think that regardless of your tax bracket, buying an 800k house today doesn’t make financial sense.
Just my two cents though, feel free to ignore me.
XBoxBoy
Participant[quote=ncounty4]No, we don’t think that renting is a wise financial choice in our tax bracket.[/quote]
Actually ncounty4, I suggest you reconsider that. Compare these two case: 1) you buy an 800k property now, 2) you rent an equivalent property for two years, then buy.
In the first case, you will receive a tax deduction worth about 1/3rd or what you pay in interest on your loan. Depending on your interest rate, and the exact amount of your loan, I figure that deduction will be worth about 15k per year, or 30k for two years. ($720k loan times 6% interest times 34% tax bracket = $14688)
In case 2 you get savings because rents in that price range are significantly lower than your mortgage payments. (I’m gonna guess a thousand and a half to a couple thousand a month savings) But here’s the kicker. How much value will that $800k house lose over the next two years. If that house looses even 30k then the tax advantage does not outweigh the loss. And chance are high that an 800k house will lose more than 30k in the next two years.
Consequently, I don’t believe that you should tell yourself that because of your tax bracket renting doesn’t make sense. Quite the contrary, I think that regardless of your tax bracket, buying an 800k house today doesn’t make financial sense.
Just my two cents though, feel free to ignore me.
XBoxBoy
Participant[quote=ncounty4]No, we don’t think that renting is a wise financial choice in our tax bracket.[/quote]
Actually ncounty4, I suggest you reconsider that. Compare these two case: 1) you buy an 800k property now, 2) you rent an equivalent property for two years, then buy.
In the first case, you will receive a tax deduction worth about 1/3rd or what you pay in interest on your loan. Depending on your interest rate, and the exact amount of your loan, I figure that deduction will be worth about 15k per year, or 30k for two years. ($720k loan times 6% interest times 34% tax bracket = $14688)
In case 2 you get savings because rents in that price range are significantly lower than your mortgage payments. (I’m gonna guess a thousand and a half to a couple thousand a month savings) But here’s the kicker. How much value will that $800k house lose over the next two years. If that house looses even 30k then the tax advantage does not outweigh the loss. And chance are high that an 800k house will lose more than 30k in the next two years.
Consequently, I don’t believe that you should tell yourself that because of your tax bracket renting doesn’t make sense. Quite the contrary, I think that regardless of your tax bracket, buying an 800k house today doesn’t make financial sense.
Just my two cents though, feel free to ignore me.
XBoxBoy
Participant[quote=ncounty4]No, we don’t think that renting is a wise financial choice in our tax bracket.[/quote]
Actually ncounty4, I suggest you reconsider that. Compare these two case: 1) you buy an 800k property now, 2) you rent an equivalent property for two years, then buy.
In the first case, you will receive a tax deduction worth about 1/3rd or what you pay in interest on your loan. Depending on your interest rate, and the exact amount of your loan, I figure that deduction will be worth about 15k per year, or 30k for two years. ($720k loan times 6% interest times 34% tax bracket = $14688)
In case 2 you get savings because rents in that price range are significantly lower than your mortgage payments. (I’m gonna guess a thousand and a half to a couple thousand a month savings) But here’s the kicker. How much value will that $800k house lose over the next two years. If that house looses even 30k then the tax advantage does not outweigh the loss. And chance are high that an 800k house will lose more than 30k in the next two years.
Consequently, I don’t believe that you should tell yourself that because of your tax bracket renting doesn’t make sense. Quite the contrary, I think that regardless of your tax bracket, buying an 800k house today doesn’t make financial sense.
Just my two cents though, feel free to ignore me.
XBoxBoy
ParticipantTell me why this won’t work….
Split the legislature into two houses. The house of revenue and the house of spending. Voters elect different representatives to both houses. The house of revenue can tax and raise money in whatever way they see fit, but can not spend money. The house of spending can spend money as they see fit, but can’t raise or change taxes or revenue generation. Nor can the house of spending spend more than the house of revenue provides them. (No funny accounting tricks here. The house of revenue provides X dollars and the house of spending can only spend up to X dollars, no more)
The way I see it, suddenly we have one batch of candidates that will campaign and answer for how little they will tax, and another group that will campaign and answer for how they spend. This will force the voters to face this problem and find a balance.
XBoxBoy
ParticipantTell me why this won’t work….
Split the legislature into two houses. The house of revenue and the house of spending. Voters elect different representatives to both houses. The house of revenue can tax and raise money in whatever way they see fit, but can not spend money. The house of spending can spend money as they see fit, but can’t raise or change taxes or revenue generation. Nor can the house of spending spend more than the house of revenue provides them. (No funny accounting tricks here. The house of revenue provides X dollars and the house of spending can only spend up to X dollars, no more)
The way I see it, suddenly we have one batch of candidates that will campaign and answer for how little they will tax, and another group that will campaign and answer for how they spend. This will force the voters to face this problem and find a balance.
XBoxBoy
ParticipantTell me why this won’t work….
Split the legislature into two houses. The house of revenue and the house of spending. Voters elect different representatives to both houses. The house of revenue can tax and raise money in whatever way they see fit, but can not spend money. The house of spending can spend money as they see fit, but can’t raise or change taxes or revenue generation. Nor can the house of spending spend more than the house of revenue provides them. (No funny accounting tricks here. The house of revenue provides X dollars and the house of spending can only spend up to X dollars, no more)
The way I see it, suddenly we have one batch of candidates that will campaign and answer for how little they will tax, and another group that will campaign and answer for how they spend. This will force the voters to face this problem and find a balance.
XBoxBoy
ParticipantTell me why this won’t work….
Split the legislature into two houses. The house of revenue and the house of spending. Voters elect different representatives to both houses. The house of revenue can tax and raise money in whatever way they see fit, but can not spend money. The house of spending can spend money as they see fit, but can’t raise or change taxes or revenue generation. Nor can the house of spending spend more than the house of revenue provides them. (No funny accounting tricks here. The house of revenue provides X dollars and the house of spending can only spend up to X dollars, no more)
The way I see it, suddenly we have one batch of candidates that will campaign and answer for how little they will tax, and another group that will campaign and answer for how they spend. This will force the voters to face this problem and find a balance.
XBoxBoy
ParticipantTell me why this won’t work….
Split the legislature into two houses. The house of revenue and the house of spending. Voters elect different representatives to both houses. The house of revenue can tax and raise money in whatever way they see fit, but can not spend money. The house of spending can spend money as they see fit, but can’t raise or change taxes or revenue generation. Nor can the house of spending spend more than the house of revenue provides them. (No funny accounting tricks here. The house of revenue provides X dollars and the house of spending can only spend up to X dollars, no more)
The way I see it, suddenly we have one batch of candidates that will campaign and answer for how little they will tax, and another group that will campaign and answer for how they spend. This will force the voters to face this problem and find a balance.
XBoxBoy
Participantbump – hoping more piggy’s will chime in with other alternatives. (Can never have too many choices)
Participantbump – hoping more piggy’s will chime in with other alternatives. (Can never have too many choices)
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