Mortgage Blog

I talked to my clients about the planning of the future loans after the refinance. I found that a lot of people will plan for the future finance with today's income, which I do not think it is correct.

Let's talk about every 10 years. I found that my assets was a few times higher ay age 40 then the age 30. And also, a few times higher at age 50 than that of age 40. So a big payment of 10 years ago will be nothing 10 years later.

About 10 years, a loan of $400k is a big loan, most of the loans around 200k to $300k. There are some $400k loans, or even $600k loan, those were jumbo loans.  And check the market now, $800k loan is a small loan. And average purchase price is over 1.5M(or at least 1M).

And in 2008, the salary of $120k was ok in the companies like Cisco/Oracle etc. And the now it is easy for the graduates to get $140k entry level jobs. And $180k is very common, with a few years experience.

So when we think about the refinance, especially for the small loans(Or those become a rental property now). We do not have to worry too much about the future increase of the ARM rate. A little bit increase of the ARM rate on a small loan (like $250k) is nothing, compared to the income a few years later.

Also, let's talk about the rental income. 10 years ago, $2500 is normal for the bay area rentals. And now it's about $3500 to $4000. It is more than enough to cover the rental debt.

I just convinced one of friends to take 30 yr fixed rates on all his rentals. I just asked him one question, what's your goal for the Real Estate investment. He said that he would buy as many properties as possible. Then why should he choose a 15 yr fixed? Payoff the loan earlier? We do not have to payoff the rental loans, we need the cash reserve to purchase more properties, right?