You can send your kids to a private school. That is what is happening in PG county these days. Of course, that takes additional funds too!
Having just bought, I can tell you that the market is still pretty healthy, but at least in the condo segment, there wasn't the obscene amount of competition that there was last year. Obviously, it's cooled some, but whether that is going to lead to the "bubble popping" remains to be seen.
A serious quetion. We bought in March, and we put down 10% but did get "creative". I am starting to worry about our Interest Only loan. The question is, do we refinance to a 30 year, 15 year fixed now to take advantage of not having the interest rates go up, or do we just ride this out?
Fixed......... but I'm going to check for how long............ If it's for five years I'm going to sit on what I have since I don't plan on living at my house longer than that.
That's the right thing to do. Just be sure you start looking for a new place in about 3-4 years. But keep a very close eye on property values for properties similar to yours instead of the market as a whole. If they start declining, you may want to sell or refinance immedately. The last thing you want is to be stuck with a rising mortgage payment in a market when your property value is decreasing. You can easily end up underwater (where the price of your mortgage is greater than value of your house). Sachin
If you have a fixed-rate, interest only loan, your narrow concern is not rising interest rates. It is obviously a huge concern on the macro level as in normal economic times it will have a direct influence on your home’s value (normally, the lower the rate, the more people can pay for your house).. However, if you have a fixed rate, interest rates will not have more of an effect on you than someone else in the housing market that has a fixed rate loan (whether interest-only or one that amortizes principal). You are in the same position as before as refinancing will not impact the value of your house. If you have a non-recourse loan (i.e. banks can’t go after you for the deficiency), you may be better off in a declining market with an interest only loan as you are not making payments towards evaporating equity (in that you can walk away with less of a loss if the house goes down in value). One thing to remember is that refinancing in a declining market does not protect you from being underwater in your house value. Even if you assume that refinancing in a declining market may lower your payment (which is a huge assumption given the likelihood that one of the main causes of this decline will be increasing rates), this has nothing to do with the underlying price of your home. You could still be underwater even if you drastically lower your mortgage payment (as you are not changing the amount you owe on the principle, but simply what you are paying in interest). The real question at the end of 3-4 years is whether it is better for you to hold on to or sell the house. Once you make this calculation, you then add in any potential benefit from refinancing to see if it changes the analysis. With an interest only loan, the question you are asking yourself is whether you will have a greater return paying down your loan or investing it somewhere else. If you pay down a 5% loan, you ask yourself whether you could get greater than 5% in another investment.
Rereading my post, I should realize that I should have been more specific that I do think there are scenerios where a refi in 3-4 years could help you. This is what I was saying about the real analysis being whether you should stay in the house or not. If, for instance, in 3-4 years you conclude that housing prices have bottomed out and are going to start appreciating again, you may very well conclude that it makes financial sense to stay in the house for another couple of years. If that is the case, and there is cheaper money out there compared what you are paying (after factoring in fees and costs), then you should go ahead and refi.