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I'm so happy I have no debt. Had $20k of student debt at one point. After that experience, I decided to live mostly without debt. The only exception might be
by jimmychoozyx 3y ago
I'm so happy I have no debt.
Had $20k of student debt at one point. After that experience, I decided to live mostly without debt.
The only exception might be a mortgage of 25-33% of a house value, I'd put 75-66% in cash.
- oblio 3y agoYou're very lucky, I'd say. Someone who can put up 66-75% for a desirable home generally is.
- jimmychoozyx 3y agoIt would be about a $200k house in a low-medium cost of living area. Or, a $150k empty lot and $50k house (with a later $50k-$100k expansion via cash, once the cash is earned)
- turnsout 3y agoI realize this is hypothetical, but I’d run the numbers before putting that much down… If you do 20%, you can put the rest in an index fund which will probably earn more than the interest rate on the loan. (Though at this point it’s going to be close.)
- Beached 3y agothis depends on the rates. with high interest rates, if they have bad credit and get a rate 7% or higher for a mortgage, it may be better to put more down. historical average is 7% over. long period of time (30 years). if OP thinks refinancing into a low rate isn't an option 10 years from now, lower mortgage may be the way to go
- maerF0x0 3y agoIMO the real value of a high leverage mortgage is that you can buy sooner. Saving even 20% ($100k) could take many people 5 years. so saving 60% would take 15. Part of the trade off is life momentum. We can't be spending 15 years with life goals/dreams on hold, renting means a lot of moving, being subject to landlords' whims, and generally being treated as commodity cattle for profit.
- lotsofpulp 3y ago> We can't be spending 15 years with life goals/dreams on hold, renting means a lot of moving, being subject to landlords' whims, and generally being treated as commodity cattle for profit. This is reality for a lot of people.
- turnsout 3y agoRenting is also a better deal for a lot of people (no building maintenance, no special assessments, flexibility to move around more, etc). The idea that home ownership is a good investment is a crapshoot at best and a myth at worst. It works out well for some people, but they may have done even better renting and investing in equities. I say this as a homeowner who (perhaps irrationally) likes the idea of owning a home.
- incahoots 3y agoI'd argue renting is best for those who aren't looking to stay in a place longer than 5 years. If you're sticking to the community for 10+ years, its evident to purchase a home/condo.
- bluefirebrand 3y agoI dunno. I bought my house in 2018 for 400k and now it's being appraised at 550k and I'm planning to sell and buy a house elsewhere with my girlfriend. Pretty lucky for sure, but even if the increase wasn't this dramatic it would have still been better than renting...
- maerF0x0 3y agoBtw this a fallacy/bad accounting that many home owners fall into. Most say $550K sale price minus $400K purchase price == $150K profit. But you need to remove: Taxes, maintenance, cost of your time (if you value that at all), realtors fees, HOA, bank fees/insurance, home insurance, depreciation on purchases you only had because of home ownership (tools, lawn mower etc). Once you remove those it's hard for home ownership to make financial sense relative to investing in the stock market + renting. However, and this is discussed in another thread, homeownership is a lifestyle choice, and we should be ok with making financially suboptimal choices for the sake of a quality life. We just need to keep clear it's an expense for a purpose, not an investment for financial gain. If we overspend on house liability it's no different than overspending on cars or food or travel.
- NoboruWataya 3y agoUnless it doesn't, of course. Viewed from this perspective, putting more cash down so as to lower your mortgage is effectively an investment with a guaranteed X% return, where X% is the interest rate on your mortgage. I realise that on average the index fund is likely to outperform it over the long run, but a lot will depend on your attitude to risk.
- turnsout 3y agoYes, true—the difference is, if the market stagnates you can take money out of the index fund and apply it to your mortgage at any time, whereas if you do a large down payment upfront, you can't change your mind later.
- bgirard 3y agoYou have to look beyond the interest rate. If you have a 2.5% rate, your mortgage will inflate away while you could be earning 8-12% returns. If your mortgage rate is 6%, your marginal tax rate is 50% and you're earning 4-8% returns after tax, then a risk free, tax free return of 6% by paying off your mortgage is more attractive.
- SomeHacker44 3y agoi like my 2.8% mortgage in a high inflation environment.
- rqtwteye 3y agoMe too! And the fact that it's lower than any decent rental in my area.
- SoftTalker 3y agoOwning a house is almost always cheaper than renting, at least in terms of mortgage payment vs. rent payment.
- xeromal 3y agoCan't beat a $1,200$ a month mortgage on a 150k salary most of the time. I guess I'll never move. lol
- manicennui 3y agoNot all debt is bad. I have enough cash to buy a car, but the manufacturer was willing to give me a loan at 0% interest. I pay for as many things as possible on my credit cards and then pay them off every time I get paid while accumulating rewards. There are tax benefits to having a mortgage, and the loan is backed by the house; it is usually a far better situation than renting. On the other hand, taking out massive loans (several times what you had) for education is questionable in most cases. I've known people who are reasonably intelligent who think it is a good idea to send their children to private universities with high tuition for undergrad degrees in fields that the school isn't known for, which I find baffling.
- el_nahual 3y ago> The only exception might be a mortgage of 25-33% of a house value, I'd put 75-66% in cash. Can you explain your rationality for this? You're still allowing the bank to have senior ownership of your house except... for less money. If you default, they keep your house, no matter what the debt-to-value is. Like, I understand saying "I couldn't make my mortgage payments so the bank took the house, but I guess they did pay for 90% of it". But this seems like all the insecurity of a mortgage for a lot less money?
- nbar1 3y agoThe bank doesn't "keep" your house, they foreclose on it and sell it. Once they sell your home, any liens and associated costs are satisfied and the remainder of the money is given to the borrower.
- deleted 3y ago[deleted]