DROdio Real Estate

We have many, many clients who are thoroughly confused by all the different loan options out there.

This FAQ is our attempt to help you figure out what's important to you. Once you figure that out, picking the right loan will be easy.

The first question you should ask yourself is this: "What is my appetite for risk?" If the answer is "low", then the second question should be, "Am I willing to live in a smaller home, in a less desirable area to lower my risk?" If your answer is "yes" then your decision is easy: You should get the most conservative loan out there, typically a 30 year loan with principal and interest payments, and put at least 20% down. End of story.

If, however, you're willing to explore some other options which may raise your risk, then you'll probably appreciate some of the perspectives we're about to give you.

Before you delve into this material, you should educate yourself on "The 30 year loan principal myth". Here is the first point we want to convey: You're better off keeping your hard-earned money out of the house. Well-known financial advisor Ric Edelman agrees - you can read his musings, titled, "10 Great Reasons to Carry a Big Mortgage." Here's why we both feel this way:

Let's say you're going to live in your house for 10 years (or you can pick any number less than 30) and you decide to pay off both principal and interest . If you buy a house for $500,000, the remaining balance in 10 years will be about $424,000, meaning you've paid off about $76,000 (assuming a 30-year loan at a 6.5% rate). If the property appreciates by 7% annually, in 10 years it will be worth about $984,000.

Let's say you sell it at this point. You basically stored ~$76k in your house that you'll now be pulling out when you sell it! You were using your house as a piggy bank. You made regular payments to lower the amount you owed on the house, and then when you sold the house for ~$984k ten years later, you pulled all of it back out.

This is the main point we want to convey: If you don't live in a house for 30 years, you're not going to pay off a 30 year loan! You're only going to pay down part of the mortgage, and then when you sell the house, you'll get that money back that you paid into the house.

But what if you could have gotten a loan that was interest-only for the first 10 years? This loan type is one of the most popular with our clients: a 30 year loan, with a fixed rate, with the first 10 years being interest-only. This way, you get the best of both worlds: You can buy a bigger house or a house in a better location for you because you're only paying the interest on the loan, so your payments are lower than they would otherwise be. You have the security of a fixed rate for 30 years.

There is, of course, risk involved in this approach. What if you stay in the house longer than 10 years, for example? Your payments will go up in year 11, so you would either have to refinance the loan, be able to afford the payments, or sell the house. This is why we ask you up-front what your appetite for risk is.

If you're wondering how much a property will be worth in X years at Y interest rate, you can use this compound interest calculator. And if you're wondering how much of that loan you'll pay off in X years by paying principal, you can use this amortization tool.

Here's the amortization table for the example above:

month interest payment principal payment remaining balance 1 $2,708.33 $452.01 $499,547.99 2 $2,705.88 $454.46 $499,093.54 3 $2,703.42 $456.92 $498,636.62 4 $2,700.95 $459.39 $498,177.23 5 $2,698.46 $461.88 $497,715.35 6 $2,695.96 $464.38 $497,250.97 7 $2,693.44 $466.90 $496,784.07 8 $2,690.91 $469.43 $496,314.64 9 $2,688.37 $471.97 $495,842.67 10 $2,685.81 $474.53 $495,368.15 11 $2,683.24 $477.10 $494,891.05 12 $2,680.66 $479.68 $494,411.37 13 $2,678.06 $482.28 $493,929.09 14 $2,675.45 $484.89 $493,444.20 15 $2,672.82 $487.52 $492,956.69 16 $2,670.18 $490.16 $492,466.53 17 $2,667.53 $492.81 $491,973.71 18 $2,664.86 $495.48 $491,478.23 19 $2,662.17 $498.17 $490,980.07 20 $2,659.48 $500.86 $490,479.20 21 $2,656.76 $503.58 $489,975.62 22 $2,654.03 $506.31 $489,469.32 23 $2,651.29 $509.05 $488,960.27 24 $2,648.53 $511.81 $488,448.46 25 $2,645.76 $514.58 $487,933.89 26 $2,642.98 $517.36 $487,416.52 27 $2,640.17 $520.17 $486,896.35 28 $2,637.36 $522.98 $486,373.37 29 $2,634.52 $525.82 $485,847.55 30 $2,631.67 $528.67 $485,318.89 31 $2,628.81 $531.53 $484,787.36 32 $2,625.93 $534.41 $484,252.95 33 $2,623.04 $537.30 $483,715.64 34 $2,620.13 $540.21 $483,175.43 35 $2,617.20 $543.14 $482,632.29 36 $2,614.26 $546.08 $482,086.21 37 $2,611.30 $549.04 $481,537.17 38 $2,608.33 $552.01 $480,985.16 39 $2,605.34 $555.00 $480,430.15 40 $2,602.33 $558.01 $479,872.14 41 $2,599.31 $561.03 $479,311.11 42 $2,596.27 $564.07 $478,747.04 43 $2,593.21 $567.13 $478,179.91 44 $2,590.14 $570.20 $477,609.71 45 $2,587.05 $573.29 $477,036.42 46 $2,583.95 $576.39 $476,460.03 47 $2,580.83 $579.51 $475,880.52 48 $2,577.69 $582.65 $475,297.86 49 $2,574.53 $585.81 $474,712.05 50 $2,571.36 $588.98 $474,123.07 51 $2,568.17 $592.17 $473,530.90 52 $2,564.96 $595.38 $472,935.51 53 $2,561.73 $598.61 $472,336.91 54 $2,558.49 $601.85 $471,735.06 55 $2,555.23 $605.11 $471,129.95 56 $2,551.95 $608.39 $470,521.57 57 $2,548.66 $611.68 $469,909.88 58 $2,545.35 $614.99 $469,294.89 59 $2,542.01 $618.33 $468,676.56 60 $2,538.66 $621.68 $468,054.89 61 $2,535.30 $625.04 $467,429.84 62 $2,531.91 $628.43 $466,801.42 63 $2,528.51 $631.83 $466,169.58 64 $2,525.09 $635.25 $465,534.33 65 $2,521.64 $638.70 $464,895.63 66 $2,518.18 $642.16 $464,253.48 67 $2,514.71 $645.63 $463,607.84 68 $2,511.21 $649.13 $462,958.71 69 $2,507.69 $652.65 $462,306.07 70 $2,504.16 $656.18 $461,649.88 71 $2,500.60 $659.74 $460,990.15 72 $2,497.03 $663.31 $460,326.84 73 $2,493.44 $666.90 $459,659.93 74 $2,489.82 $670.52 $458,989.42 75 $2,486.19 $674.15 $458,315.27 76 $2,482.54 $677.80 $457,637.47 77 $2,478.87 $681.47 $456,956.00 78 $2,475.18 $685.16 $456,270.84 79 $2,471.47 $688.87 $455,581.97 80 $2,467.74 $692.60 $454,889.36 81 $2,463.98 $696.36 $454,193.01 82 $2,460.21 $700.13 $453,492.88 83 $2,456.42 $703.92 $452,788.96 84 $2,452.61 $707.73 $452,081.22 85 $2,448.77 $711.57 $451,369.66 86 $2,444.92 $715.42 $450,654.24 87 $2,441.04 $719.30 $449,934.94 88 $2,437.15 $723.19 $449,211.75 89 $2,433.23 $727.11 $448,484.64 90 $2,429.29 $731.05 $447,753.59 91 $2,425.33 $735.01 $447,018.58 92 $2,421.35 $738.99 $446,279.59 93 $2,417.35 $742.99 $445,536.60 94 $2,413.32 $747.02 $444,789.58 95 $2,409.28 $751.06 $444,038.52 96 $2,405.21 $755.13 $443,283.39 97 $2,401.12 $759.22 $442,524.17 98 $2,397.01 $763.33 $441,760.83 99 $2,392.87 $767.47 $440,993.36 100 $2,388.71 $771.63 $440,221.74 101 $2,384.53 $775.81 $439,445.93 102 $2,380.33 $780.01 $438,665.92 103 $2,376.11 $784.23 $437,881.69 104 $2,371.86 $788.48 $437,093.21 105 $2,367.59 $792.75 $436,300.46 106 $2,363.29 $797.05 $435,503.41 107 $2,358.98 $801.36 $434,702.05 108 $2,354.64 $805.70 $433,896.34 109 $2,350.27 $810.07 $433,086.28 110 $2,345.88 $814.46 $432,271.82 111 $2,341.47 $818.87 $431,452.95 112 $2,337.04 $823.30 $430,629.65 113 $2,332.58 $827.76 $429,801.89 114 $2,328.09 $832.25 $428,969.64 115 $2,323.59 $836.75 $428,132.88 116 $2,319.05 $841.29 $427,291.60 117 $2,314.50 $845.84 $426,445.75 118 $2,309.91 $850.43 $425,595.33 119 $2,305.31 $855.03 $424,740.30 120 $2,300.68 $859.66 $423,880.63 121 $2,296.02 $864.32 $423,016.31 122 $2,291.34 $869.00 $422,147.31 123 $2,286.63 $873.71 $421,273.60 124 $2,281.90 $878.44 $420,395.16 125 $2,277.14 $883.20 $419,511.96 126 $2,272.36 $887.98 $418,623.98 127 $2,267.55 $892.79 $417,731.18 128 $2,262.71 $897.63 $416,833.55 129 $2,257.85 $902.49 $415,931.06 130 $2,252.96 $907.38 $415,023.68 131 $2,248.04 $912.30 $414,111.39 132 $2,243.10 $917.24 $413,194.15 133 $2,238.13 $922.21 $412,271.94 134 $2,233.14 $927.20 $411,344.74 135 $2,228.12 $932.22 $410,412.52 136 $2,223.07 $937.27 $409,475.25 137 $2,217.99 $942.35 $408,532.90 138 $2,212.89 $947.45 $407,585.45 139 $2,207.75 $952.59 $406,632.86 140 $2,202.59 $957.75 $405,675.11 141 $2,197.41 $962.93 $404,712.18 142 $2,192.19 $968.15 $403,744.03 143 $2,186.95 $973.39 $402,770.64 144 $2,181.67 $978.67 $401,791.97 145 $2,176.37 $983.97 $400,808.01 146 $2,171.04 $989.30 $399,818.71 147 $2,165.68 $994.66 $398,824.05 148 $2,160.30 $1,000.04 $397,824.01 149 $2,154.88 $1,005.46 $396,818.55 150 $2,149.43 $1,010.91 $395,807.64 151 $2,143.96 $1,016.38 $394,791.26 152 $2,138.45 $1,021.89 $393,769.38 153 $2,132.92 $1,027.42 $392,741.95 154 $2,127.35 $1,032.99 $391,708.96 155 $2,121.76 $1,038.58 $390,670.38 156 $2,116.13 $1,044.21 $389,626.17 157 $2,110.48 $1,049.87 $388,576.31 158 $2,104.79 $1,055.55 $387,520.76 159 $2,099.07 $1,061.27 $386,459.49 160 $2,093.32 $1,067.02 $385,392.47 161 $2,087.54 $1,072.80 $384,319.67 162 $2,081.73 $1,078.61 $383,241.06 163 $2,075.89 $1,084.45 $382,156.61 164 $2,070.01 $1,090.33 $381,066.29 165 $2,064.11 $1,096.23 $379,970.06 166 $2,058.17 $1,102.17 $378,867.89 167 $2,052.20 $1,108.14 $377,759.75 168 $2,046.20 $1,114.14 $376,645.61 169 $2,040.16 $1,120.18 $375,525.43 170 $2,034.10 $1,126.24 $374,399.19 171 $2,028.00 $1,132.34 $373,266.84 172 $2,021.86 $1,138.48 $372,128.36 173 $2,015.70 $1,144.64 $370,983.72 174 $2,009.50 $1,150.84 $369,832.87 175 $2,003.26 $1,157.08 $368,675.79 176 $1,996.99 $1,163.35 $367,512.45 177 $1,990.69 $1,169.65 $366,342.80 178 $1,984.36 $1,175.98 $365,166.82 179 $1,977.99 $1,182.35 $363,984.46 180 $1,971.58 $1,188.76 $362,795.71 181 $1,965.14 $1,195.20 $361,600.51 182 $1,958.67 $1,201.67 $360,398.84 183 $1,952.16 $1,208.18 $359,190.66 184 $1,945.62 $1,214.72 $357,975.93 185 $1,939.04 $1,221.30 $356,754.63 186 $1,932.42 $1,227.92 $355,526.71 187 $1,925.77 $1,234.57 $354,292.14 188 $1,919.08 $1,241.26 $353,050.88 189 $1,912.36 $1,247.98 $351,802.90 190 $1,905.60 $1,254.74 $350,548.16 191 $1,898.80 $1,261.54 $349,286.62 192 $1,891.97 $1,268.37 $348,018.25 193 $1,885.10 $1,275.24 $346,743.01 194 $1,878.19 $1,282.15 $345,460.86 195 $1,871.25 $1,289.09 $344,171.77 196 $1,864.26 $1,296.08 $342,875.69 197 $1,857.24 $1,303.10 $341,572.60 198 $1,850.18 $1,310.16 $340,262.44 199 $1,843.09 $1,317.25 $338,945.19 200 $1,835.95 $1,324.39 $337,620.80 201 $1,828.78 $1,331.56 $336,289.24 202 $1,821.57 $1,338.77 $334,950.47 203 $1,814.32 $1,346.03 $333,604.44 204 $1,807.02 $1,353.32 $332,251.13 205 $1,799.69 $1,360.65 $330,890.48 206 $1,792.32 $1,368.02 $329,522.46 207 $1,784.91 $1,375.43 $328,147.04 208 $1,777.46 $1,382.88 $326,764.16 209 $1,769.97 $1,390.37 $325,373.79 210 $1,762.44 $1,397.90 $323,975.89 211 $1,754.87 $1,405.47 $322,570.42 212 $1,747.26 $1,413.08 $321,157.34 213 $1,739.60 $1,420.74 $319,736.60 214 $1,731.91 $1,428.43 $318,308.17 215 $1,724.17 $1,436.17 $316,872.00 216 $1,716.39 $1,443.95 $315,428.05 217 $1,708.57 $1,451.77 $313,976.28 218 $1,700.70 $1,459.64 $312,516.64 219 $1,692.80 $1,467.54 $311,049.10 220 $1,684.85 $1,475.49 $309,573.61 221 $1,676.86 $1,483.48 $308,090.12 222 $1,668.82 $1,491.52 $306,598.61 223 $1,660.74 $1,499.60 $305,099.01 224 $1,652.62 $1,507.72 $303,591.29 225 $1,644.45 $1,515.89 $302,075.40 226 $1,636.24 $1,524.10 $300,551.30 227 $1,627.99 $1,532.35 $299,018.95 228 $1,619.69 $1,540.65 $297,478.29 229 $1,611.34 $1,549.00 $295,929.29 230 $1,602.95 $1,557.39 $294,371.90 231 $1,594.51 $1,565.83 $292,806.08 232 $1,586.03 $1,574.31 $291,231.77 233 $1,577.51 $1,582.83 $289,648.94 234 $1,568.93 $1,591.41 $288,057.53 235 $1,560.31 $1,600.03 $286,457.50 236 $1,551.64 $1,608.70 $284,848.80 237 $1,542.93 $1,617.41 $283,231.40 238 $1,534.17 $1,626.17 $281,605.23 239 $1,525.36 $1,634.98 $279,970.25 240 $1,516.51 $1,643.83 $278,326.41 241 $1,507.60 $1,652.74 $276,673.67 242 $1,498.65 $1,661.69 $275,011.98 243 $1,489.65 $1,670.69 $273,341.29 244 $1,480.60 $1,679.74 $271,661.55 245 $1,471.50 $1,688.84 $269,972.71 246 $1,462.35 $1,697.99 $268,274.72 247 $1,453.15 $1,707.19 $266,567.54 248 $1,443.91 $1,716.43 $264,851.10 249 $1,434.61 $1,725.73 $263,125.37 250 $1,425.26 $1,735.08 $261,390.30 251 $1,415.86 $1,744.48 $259,645.82 252 $1,406.41 $1,753.93 $257,891.89 253 $1,396.91 $1,763.43 $256,128.47 254 $1,387.36 $1,772.98 $254,355.49 255 $1,377.76 $1,782.58 $252,572.91 256 $1,368.10 $1,792.24 $250,780.67 257 $1,358.40 $1,801.94 $248,978.73 258 $1,348.63 $1,811.71 $247,167.02 259 $1,338.82 $1,821.52 $245,345.50 260 $1,328.95 $1,831.39 $243,514.12 261 $1,319.03 $1,841.31 $241,672.81 262 $1,309.06 $1,851.28 $239,821.53 263 $1,299.03 $1,861.31 $237,960.23 264 $1,288.95 $1,871.39 $236,088.84 265 $1,278.81 $1,881.53 $234,207.31 266 $1,268.62 $1,891.72 $232,315.60 267 $1,258.38 $1,901.96 $230,413.63 268 $1,248.07 $1,912.27 $228,501.37 269 $1,237.72 $1,922.62 $226,578.74 270 $1,227.30 $1,933.04 $224,645.70 271 $1,216.83 $1,943.51 $222,702.19 272 $1,206.30 $1,954.04 $220,748.16 273 $1,195.72 $1,964.62 $218,783.54 274 $1,185.08 $1,975.26 $216,808.27 275 $1,174.38 $1,985.96 $214,822.31 276 $1,163.62 $1,996.72 $212,825.59 277 $1,152.81 $2,007.53 $210,818.06 278 $1,141.93 $2,018.41 $208,799.65 279 $1,131.00 $2,029.34 $206,770.31 280 $1,120.01 $2,040.33 $204,729.97 281 $1,108.95 $2,051.39 $202,678.59 282 $1,097.84 $2,062.50 $200,616.09 283 $1,086.67 $2,073.67 $198,542.42 284 $1,075.44 $2,084.90 $196,457.52 285 $1,064.14 $2,096.20 $194,361.32 286 $1,052.79 $2,107.55 $192,253.77 287 $1,041.37 $2,118.97 $190,134.81 288 $1,029.90 $2,130.44 $188,004.36 289 $1,018.36 $2,141.98 $185,862.38 290 $1,006.75 $2,153.59 $183,708.79 291 $995.09 $2,165.25 $181,543.54 292 $983.36 $2,176.98 $179,366.56 293 $971.57 $2,188.77 $177,177.79 294 $959.71 $2,200.63 $174,977.17 295 $947.79 $2,212.55 $172,764.62 296 $935.81 $2,224.53 $170,540.09 297 $923.76 $2,236.58 $168,303.51 298 $911.64 $2,248.70 $166,054.81 299 $899.46 $2,260.88 $163,793.93 300 $887.22 $2,273.12 $161,520.81 301 $874.90 $2,285.44 $159,235.37 302 $862.52 $2,297.82 $156,937.56 303 $850.08 $2,310.26 $154,627.30 304 $837.56 $2,322.78 $152,304.52 305 $824.98 $2,335.36 $149,969.16 306 $812.33 $2,348.01 $147,621.16 307 $799.61 $2,360.73 $145,260.43 308 $786.83 $2,373.51 $142,886.92 309 $773.97 $2,386.37 $140,500.55 310 $761.04 $2,399.30 $138,101.25 311 $748.05 $2,412.29 $135,688.96 312 $734.98 $2,425.36 $133,263.60 313 $721.84 $2,438.50 $130,825.11 314 $708.64 $2,451.70 $128,373.41 315 $695.36 $2,464.98 $125,908.42 316 $682.00 $2,478.34 $123,430.08 317 $668.58 $2,491.76 $120,938.32 318 $655.08 $2,505.26 $118,433.07 319 $641.51 $2,518.83 $115,914.24 320 $627.87 $2,532.47 $113,381.77 321 $614.15 $2,546.19 $110,835.58 322 $600.36 $2,559.98 $108,275.60 323 $586.49 $2,573.85 $105,701.75 324 $572.55 $2,587.79 $103,113.96 325 $558.53 $2,601.81 $100,512.16 326 $544.44 $2,615.90 $97,896.26 327 $530.27 $2,630.07 $95,266.19 328 $516.03 $2,644.31 $92,621.87 329 $501.70 $2,658.64 $89,963.23 330 $487.30 $2,673.04 $87,290.20 331 $472.82 $2,687.52 $84,602.68 332 $458.26 $2,702.08 $81,900.60 333 $443.63 $2,716.71 $79,183.89 334 $428.91 $2,731.43 $76,452.46 335 $414.12 $2,746.22 $73,706.24 336 $399.24 $2,761.10 $70,945.14 337 $384.29 $2,776.05 $68,169.09 338 $369.25 $2,791.09 $65,378.00 339 $354.13 $2,806.21 $62,571.79 340 $338.93 $2,821.41 $59,750.38 341 $323.65 $2,836.69 $56,913.69 342 $308.28 $2,852.06 $54,061.63 343 $292.83 $2,867.51 $51,194.12 344 $277.30 $2,883.04 $48,311.08 345 $261.69 $2,898.66 $45,412.43 346 $245.98 $2,914.36 $42,498.07 347 $230.20 $2,930.14 $39,567.93 348 $214.33 $2,946.01 $36,621.92 349 $198.37 $2,961.97 $33,659.94 350 $182.32 $2,978.02 $30,681.93 351 $166.19 $2,994.15 $27,687.78 352 $149.98 $3,010.36 $24,677.42 353 $133.67 $3,026.67 $21,650.75 354 $117.27 $3,043.07 $18,607.68 355 $100.79 $3,059.55 $15,548.13 356 $84.22 $3,076.12 $12,472.01 357 $67.56 $3,092.78 $9,379.23 358 $50.80 $3,109.54 $6,269.69 359 $33.96 $3,126.38 $3,143.31 360 $0.00 $3,143.31 $0.00

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