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Old 07-01-2012, 10:28 AM
 
3,914 posts, read 3,954,000 times
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The woman who wrote this based her entire conclusion to get into and stay in debt by making the statement that it would take the average middle class family 20 years to save up a 20% down payment. However she doesn't cite any real examples. I say it's nonsense.

If you have 20% to put on a house, then the question you have for yourself is that if you don't spend the money on retiring the debt that you owe, then what are you going to do with it? Any investment that you make that is going to beat the interest you won't pay if you use it for your mortgage, after taxes no less, is going to carry substantial risk. On the other hand if you place this money on your mortgage, you have a guaranteed tax free return on the money and you also take years of payments off the other end.
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Old 07-01-2012, 10:51 AM
 
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I feel if it takes you 20 years to save 20% for a down payment you may need to look for a home that is less expensive. I believe soon banks are going to start requiring 15-20% down for a home. Which may not be a bad idea.

I am a follower of Dave Ramsey who advises people to pay their home off as quickly as possible and live debt free (which is doable and not that hard if you budget and live within your means). Many other people in finance believe that you should never pay your home off. I think it depends on each person situation and what they are planning to do with the home. I think we all agree if buying a home is going to take all of your savings then you need to rethink things.

Does anyone know about the program House Charlotte?

Quote:
Originally Posted by frewroad View Post
The woman who wrote this based her entire conclusion to get into and stay in debt by making the statement that it would take the average middle class family 20 years to save up a 20% down payment. However she doesn't cite any real examples. I say it's nonsense.

If you have 20% to put on a house, then the question you have for yourself is that if you don't spend the money on retiring the debt that you owe, then what are you going to do with it? Any investment that you make that is going to beat the interest you won't pay if you use it for your mortgage, after taxes no less, is going to carry substantial risk. On the other hand if you place this money on your mortgage, you have a guaranteed tax free return on the money and you also take years of payments off the other end.
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Old 07-01-2012, 11:19 AM
 
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I'm in the market for a new house. We are looking at the top of our price range.

I'll be putting down 20% or more to keep my monthly payments as low as possible. Of course, I'm not planning on buying in the suburbs either. To me, that's a riskier move. If I was looking at brand new construction I'd probably downgrade my purchase ceiling and try to borrow as much as I could. As it stands I feel confident that houses in the neighborhoods I'll be looking in will appreciate in value.

OTOH, I really have *no* clue what investments are consistently earning more than 4%.
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Old 07-01-2012, 11:47 AM
 
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Quote:
Originally Posted by frewroad View Post
Correct. It was absolutely irrelevant to what I had to say.
You are too funny. Here are some of your previous quotes:

Quote:
Originally Posted by frewroad View Post
The point was about putting down 20% on a house plus having a year's emergency expenses in the bank. You sound as if you took offense at this so if so, then I apologist for getting you so upset. Your hypothetical examples, including this one does not show by any means this isn't a good plan.
Quote:
Originally Posted by frewroad View Post
My comments were directed towards the OP and not meant to instruct you on the debt that you already have.
So how exactly was my original post in this thread, which was also directed at the OP, and for the most part agreed with you, irrelevant?

Here it is, since you don't seem very good at reading:

Quote:
Originally Posted by GoPhils View Post
I don't agree with those that say "NEVER BUY A HOUSE WITHOUT 20% DOWN," but if you are fortunate enough to have the 20% , I would put down the 20%, as was already mentioned mainly because of the PMI/MIP you'd have to pay without it. Yes there are ways to get around it (LPMI or 80/15/5) but putting down the full 20% will get you the best rate and the lowest payments.
For the last time, I did say that putting down 20% was a good plan. I just didn't say it was the only plan.

Quote:
Originally Posted by frewroad View Post
The woman who wrote this based her entire conclusion to get into and stay in debt by making the statement that it would take the average middle class family 20 years to save up a 20% down payment. However she doesn't cite any real examples. I say it's nonsense.

If you have 20% to put on a house, then the question you have for yourself is that if you don't spend the money on retiring the debt that you owe, then what are you going to do with it? Any investment that you make that is going to beat the interest you won't pay if you use it for your mortgage, after taxes no less, is going to carry substantial risk. On the other hand if you place this money on your mortgage, you have a guaranteed tax free return on the money and you also take years of payments off the other end.
Sorry, have to correct you again. How is it nonsense? Especially for a family that needs to rent a bigger house/apartment, it's going to be tough to save up for a down payment. The only way to save up for a 20% downpayment reasonably quickly is to find somewhere to live rent-free.

And I'm not sure why you keep implying that putting down 20% magically makes you pay off the house quicker. Yeah, if you make the same payments that you would have been making had you put down less, you could, but that doesn't mean that everyone that puts down 20% does that although I'm sure many do. A 30-year loan is still a 30-year loan no matter how much money you put down, and again, no one is stopping someone that put down less than 20% from paying their loan off just as early as the people that did put down 20%. Yes, putting 20% down may make it easier to get a 15-year loan, but you don't even seem to specify that.
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Old 07-01-2012, 04:40 PM
 
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Quote:
Originally Posted by GoPhils View Post
You are too funny. Here are some of your previous quotes:
I didn't read your post because I was responding to the OP and not you, and what I had to say had no dependence upon what you already posted. Furthermore, you haven't said anything that changes what I said or the conclusions. Your notion that people only say this who made money on homes is completely irrelevant to it. This sounds more like sour grapes than anything else.

-----------------------------------------

A person who puts down 20% (minimum), and pays off their home as fast as possible, as part of a plan to get out of debt as early as they can in life, is going to be far ahead of anyone who puts down the minimum and pays the minimum on a home which is the maximum they qualify for. if they do this by their 40s, they will be financially independent by their 50s and won't need to worry about retiring, job losses or what the economy is doing. This sort of approach forces you to live within your means, which isn't the house payment you can afford. People who took this approach were not burned by the current housing crises because they didn't buy an over priced over sized home.

For anyone who has already made this mistake then my advice is to start paying ahead. You won't get there as fast, but this plan for debt retirement is the most important thing you can do for your financial future. Failure to do this is why there are so many Americans who are of retirement age, or approaching retirement and they have no money to do so.
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Old 07-01-2012, 05:22 PM
 
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Quote:
Originally Posted by frewroad View Post

A person who puts down 20% (minimum), and pays off their home as fast as possible, as part of a plan to get out of debt as early as they can in life, is going to be far ahead of anyone who puts down the minimum and pays the minimum on a home which is the maximum they qualify for.
And a person who puts down less than 20% and pays off their home as fast as possible, as part of a plan to get out of debt as early as they can in life, is going to be far ahead of anyone who puts down 20% and pays the minimum monthly payment.
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Old 07-01-2012, 07:50 PM
 
Location: Charlotte NC
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I bought my first home with 3.5 down and plan on paying more than the minimum to pay it off faster. With rates this low it didn't make sense to pay 20% down with rates this low. That would have really put a dent in our savings.

we locked into a great rate and we can always increase our payments in the future.
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Old 07-02-2012, 03:15 AM
 
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Quote:
Originally Posted by Feltdesigner View Post
I bought my first home with 3.5 down and plan on paying more than the minimum to pay it off faster. With rates this low it didn't make sense to pay 20% down with rates this low. That would have really put a dent in our savings.

we locked into a great rate and we can always increase our payments in the future.
So you would rather have your money sitting in a bank account drawing 0.5% interest if you are lucky and paying 3.5% to the banksters for the privilege? You can immediately make a 3% return on this money by putting it on your mortgage.

You can't get more than a 3.5% return on money without incurring significant risk.

There are all kinds of reasons that people give for not paying off their mortgage and this is one of them. Remember the rule is to first put emergency savings in the bank, max out retirement savings, pay off all short term debt, and then put your surplus against the mortgage. Obviously if you borrow less in the first place then retirement of this debt becomes easier. Remember once the house is paid for, you will have the entire house payment to put into savings or anywhere else you want to invest.
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Old 07-02-2012, 03:17 AM
 
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Originally Posted by GoPhils View Post
And a person who puts down less than 20% and pays off their home as fast as possible, as part of a plan to get out of debt as early as they can in life, is going to be far ahead of anyone who puts down 20% and pays the minimum monthly payment.
I'm glad you finally agree with me. This is what I stated above.
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Old 07-02-2012, 06:51 AM
 
Location: Charlotte NC
11,723 posts, read 9,374,209 times
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Quote:
Originally Posted by frewroad View Post
So you would rather have your money sitting in a bank account drawing 0.5% interest if you are lucky and paying 3.5% to the banksters for the privilege? You can immediately make a 3% return on this money by putting it on your mortgage.

You can't get more than a 3.5% return on money without incurring significant risk.

There are all kinds of reasons that people give for not paying off their mortgage and this is one of them. Remember the rule is to first put emergency savings in the bank, max out retirement savings, pay off all short term debt, and then put your surplus against the mortgage. Obviously if you borrow less in the first place then retirement of this debt becomes easier. Remember once the house is paid for, you will have the entire house payment to put into savings or anywhere else you want to invest.
I'd rather pay down credit card debt before aggressively paying down my mortgage....

We also had a bogus car accident that forced us to get a lawyer to beat the case... I'm glad we had money set aside instead of putting it on our mortgage.

In a year or 2 we will be in a place where we can aggressively pay down our mortgage but right now it's not our most pressing debt.
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