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yes, but you make the assumption that you don't have to sell the house due to factors such as sudden job loss, unplanned events such as accident/injury causing
by codegeek 10y ago
yes, but you make the assumption that you don't have to sell the house due to factors such as sudden job loss, unplanned events such as accident/injury causing disability etc. The point of 20% down is that you have enough equity even for a turbulent market and if you do need to sell quickly due to possible factors above, you still should be ok. Otherwise, you are assuming that nothing bad will happen and you can continue paying the mortgage.
- muninn_ 10y agoTo your point I think that you just always have that risk. But I'd rather have that 20% I would have spent either invested in a 401k or a retirement fund or even using it for other things like getting another degree. Now I'm not saying those are necessarily the wisest options, but I like the opportunity. I mean this in the kindest way but all you're arguing against here is the risk/reward. In the same token, what I'd home values appreciate 30% in 10 years and all the while I'm renting the place and having somebody else pay the mortgage? Just different risk factors is all. If I find it impossible to get a job as an engineer doing the work I do, than the entire country is probably in another depression. I'm just betting against that.
- cmdrfred 10y agoI think together my fiance and I had about 8% down. Thing was, to rent our current house would be about $1600/month. Even a shitty 2 bedroom was $1200, mortgage with insurance and taxes is $1100. For some people it's not a matter of can we afford to, it's can we afford not to. Even if rent dropped 10% (that has never happened in my area, they were still going up in 2008-2009) it would be a better deal to have a mortgage.
- jackcosgrove 10y ago"can we afford not to" Bubble alert!
- cmdrfred 10y agoRents have to fall a lot to put us in a situation were that's a bad thing (we aren't moving for a long time), and then at that point we can just let the bank foreclose and move into a $500 a month 2 bedroom.
- mattmanser 10y agoYour mortgage is temporarily low because interest rates are low. http://www.bankrate.com/finance/mortgage-rates-history-0112.aspx http://www.bankrate.com/finance/mortgage-rates-history-0112.... If your interest rate doubled, could you afford to? Do you know how much you'd have to pay?
- dragonwriter 10y agoIf you get a fixed-rate loan, you don't have to worry about that.
- toomuchtodo 10y agoInterest rates go up, your home value goes down.
- dpark 10y agoSure. That's a real risk. There are probably much bigger risks to worry about, like the market crashing again or losing your job. The risk of interest rates going high enough to significantly push home prices down seems really small for the next several years.
- fulafel 10y agoHistorically both real estate prices and interest rates are procyclical. Central banks raise rates when inflation becomes too fast (which is closely correlated to house price appreciation). But of course you can sometimes have a local economic decline while the currency area is experiencing overheating and high inflation.
- toomuchtodo 10y agoAgree, but as long as Chinese money is seeking sanctuary as quickly as it is, I don't see any sign of SFBA real estate cooling off.
- mattmanser 10y ago