4 ms·

Gotcha. That's the boat I've been in. I want to avoid debt as much as possible, but unless I'm willing to live in a really rough neighborhood, I will need to

Gotcha. That's the boat I've been in. I want to avoid debt as much as possible, but unless I'm willing to live in a really rough neighborhood, I will need to buy a home that is roughly 3.5x my gross yearly pay (before taxes). That's a lot of debt. The payments however, are manageable. So I suppose it is helpful to frame "low debt" in that way.

wutbrodo 8y ago
At some level, it's a pretty reasonable definition: having all your liquidity tied up in a single asset doesn't make a lot of sense, so having a house with a mortgage secured on it is just a way of getting somewhere between renting and buying outright without having to swing to the other extreme. The main risk you're faced with is a drastic drop in value right after you buy it, but that shouldn't affect your day-to-day if your payments were affordable in the first place.
- mark-r 8y ago
  That was the point of the article though, payments that are affordable today may not be tomorrow if your income takes a hit.
  - wutbrodo 8y ago
    Right of course, which is why some estimate of future expected income is important, including a buffer for lowered income in the future.
itronitron 8y ago
3.5x your gross yearly pay sounds fairly typical. You should really only care about your monthly mortgage payments. If you have student loan debt then you should try to roll that into your mortgage if it has a much lower rate.
- dalyons 8y ago
  Not typical everywhere... The median wage / house price in sydney & melbourne are 13x and 10x respectively. And you pretty much have to live in one of those two cities if you want a decent job in Australia. The country’s in for a lot of pain if there’s a big recession.
- acjohnson55 8y ago
  Through the new school student loan consolidation firms, you may be able to get better interest rate on your student loan debt than your mortgage. This was the case for me. I used Common Bond.
neumann 8y ago
Come to Australia, where in capital cities, the median house prices are ~8x the median income!

wutbrodo 8y ago

At some level, it's a pretty reasonable definition: having all your liquidity tied up in a single asset doesn't make a lot of sense, so having a house with a mortgage secured on it is just a way of getting somewhere between renting and buying outright without having to swing to the other extreme. The main risk you're faced with is a drastic drop in value right after you buy it, but that shouldn't affect your day-to-day if your payments were affordable in the first place.

mark-r 8y ago
That was the point of the article though, payments that are affordable today may not be tomorrow if your income takes a hit.
- wutbrodo 8y ago
  Right of course, which is why some estimate of future expected income is important, including a buffer for lowered income in the future.

itronitron 8y ago

3.5x your gross yearly pay sounds fairly typical. You should really only care about your monthly mortgage payments. If you have student loan debt then you should try to roll that into your mortgage if it has a much lower rate.

dalyons 8y ago
Not typical everywhere... The median wage / house price in sydney & melbourne are 13x and 10x respectively. And you pretty much have to live in one of those two cities if you want a decent job in Australia. The country’s in for a lot of pain if there’s a big recession.
acjohnson55 8y ago
Through the new school student loan consolidation firms, you may be able to get better interest rate on your student loan debt than your mortgage. This was the case for me. I used Common Bond.

neumann 8y ago

Come to Australia, where in capital cities, the median house prices are ~8x the median income!