I bought my house in February. The credit union gave me 100% financing at 0.75% interest (this is Tokyo, interest rates are unusually low) for 20 years. Just talking round numbers, the house was about $180,000, and the monthly payments are about $700. The balance after this and that extra payments at closing is about $165,000 now.
My original idea was to make the payments for 10 years, and then pay off the balance. Before 10 years there is a $900 pre-payment penalty. Some people might say at that interest rate why not stick it out for 20 years. But I'm 63 years old and so have to consider that as well.
In addition to the main house on the 2nd and 3rd floors, there is also an empty downstairs which can be rented out as an office or even just a storeroom, with potential rent potential of $800 to $1,000/month. Or I could divide it and use part myself and rent out the rest for about $500/month.
All in all a good deal. Tokyo has some bargains.
But this is where I get confused. I'm expecting to come into some money over the next few years - about $160,000. In other words, enough money to pay off the balance.
I'm thinking that even with the extremely low interest rate, wouldn't it be a good idea to just pay it off and then I would have the $700/month I'm using for payments each month to save or use for living expenses. Or would it be better to stick with the loan for 10 years and invest the $160,000 for 10 years in the market and then pay it off? I can't figure out which way I would come out ahead in 10 years.
Any thoughts?
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source https://www.reddit.com/r/RealEstate/comments/c6yd6z/confused_about_what_to_do_about_an_existing_house/
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