From: "John Weiss" 
Newsgroups: misc.consumers.house
Subject: Re: Mortgage rates
Date: Fri, 21 Sep 2007 20:20:05 -0000
Bytes: 2721

"Slain"  wrote...
>
> Finally, I made a spreadsheet to get perfect comparisons of closing
> costs versus interest rate. In my opinion interest rate always wins
> unless you sell the house within 1-2 years. So make a table to check
> where you are paying more. You should see that how much more you are
> paying each year cause of the interest rate. The reason I say this is
> that the lenders keep playing with these two values to make one deal
> look better than the other.

What you describe is often referred to as the "payback time" for additional 
points/closing costs used to bring down the interest rate.  It is a good 
strategy, especially if you have a good idea of how long you will be in 
that house.  If it's a "temporary" or "starter" house that you will only 
live in for 2 or 3 years, a low-rate ARM with low closing costs and 
reasonable rate caps ofr the first 3-5 years may be preferable.


> One of the things you can do is ask for cash back from seller. In this
> case, the cash is not given to you but put towards closing costs. The
> advantage of this is that the cash back or closing costs get added to
> the mortgage and hence spread over 30 years, with a not that bad
> interest rate.

That is just another gimmick!  Why would you take out a 30-year loan for 
current cash needs?!?  While the interest RATE might be low, the TOTAL 
interest paid is quite high -- more than the initial cash you receive!

OTOH, it MIGHT work for that starter/temporary house...

OTOOH, if the market goes down, you might have a mortgage in 3 years that 
is more than the house is worth, and you'll have to look elsewhere for a 
down payment to afford a bigger/better house!