Rambling Thoughts on Small Lots and `No-Costs'
Vandevanter, Peter, The Washington Times (Washington, DC)
This week, I'm going to take it one thought at a time. (Must be spring fever, is it possible?)
William Devereaux, founding architect of Devereaux & Associates in McLean, had some very trenchant points to make at the fall meeting of the Urban Land Institute in Philadelphia.
He observed that one of the reasons for market acceptance of smaller lot sizes is that "Ozzie and Harriet" families no longer dominate the residential market. Urban Land, ULI's monthly magaizine, reports that Mr. Devereaux said the singles, childless couples, divorcees and single parents who make up the market today "don't necessarily need a quarter-acre to go play catch with the kids."
He pointed out, however, that in designing for small-lot communities, window placement is crucial: You don't want dining-room windows facing each other or second-floor windows looking into bathrooms.
I keep getting a lot of questions about so-called no-cost loans that are becoming more popular because there are no closing costs and no points to pay. I say so-called no-cost loans because, of course, you are paying for the loan in a higher loan rate.
The most recent question I got is a good one.
If you compare how much money you saved in cash at settlement with how much higher a monthly payment you will be making on a 30-year fixed-rate loan, how long is the tyical payback period? One year? Two years? Three years? Four? Five?
The answer, according to Henry Savage, president of PMC Mortgage in Alexandria, is five years.
A typical example: On a $200,000 loan, you would save $4,300 at settlement if you didn't pay the typical closing costs and one point. Your higher rate would cost you $69.10 a month. Your payback period then is 62 months, or a little more than five years.
In other words, if you keep the loan for more than five years, then you will have kept the loan too long. …