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I just assigned a purchase agreement on a house less than 250K. How much downpayment I should put, 20% or 35%, if I have the cash? I need 20% to avoid PMI. But will we be better off if we put more down? In this case, we won't really live on a very tight budget since both my wife and I are full-time professionals.
On one hand, if putting more downpayment, we can pay less interest. We will probably move in 3-5 years and putting more down may be helpful to reduce our debut by the time we move in 3-5 years down the road. On the other hand, I heard putting too much cash down will miss other investment opportunities (actually I don't know what to invest given the current economy).. Thanks in advance!
But why buy a house if you plan to move in 3 years? Might as well rent if its a foregone conclusion
According to online buy vs rent calculators (yahoo or bankrate etc), it will be better for me to buy. Maybe that is because the house I plan to buy is not very expensive and with a large down payment, I won't pay a lot of interest.
I hear people saying cash is king. But in the current economy I simply don't know where to put the cash other than using it for the down payment.
I would not buy a house if you think you might move within the next five years-not the most prudent thing to do at this time...unless the market you're in is severely underpriced and you are getting a great deal and are guaranteed to make money in the next three years...the last thing you want to have to deal with when wanting to move is getting rid of a house. And there are MANY more expenses to tag on with a house vs. renting...I know people say renting is throwing money away, but with the current environment it is possible to be better off renting. keep in mind transaction costs to get in and out of a house too...and your local rental market. I bought my house with the intention of being here for a very long time, otherwise I would have continued renting.
No. Can you buy down the interest rate with more than 20% down? I don't think so, and if not, remember the house is yours regardless of how much of it you buy. Use your money on additional investing.
The more money you put down, the better as you will have a good amount of equity should something happen and you have to sell.
Not that I believe the situation is a dead-nuts probability, they way many do, but if real estate prices in general decline and the property you buy fails to appreciate at all, then I really don't see how buying beats renting. If the property must be sold and the price fails to meet what you have into it, through either a downpayment or the pay down of the mortgage principle then it really does not matter as your capital is still lost...
Personally I do endorse the practice of going into a mortgage with the INTENT of selling the property very early, as that has only worked well for a few years in the recent past. Beyond the problem of potential decline, even when prices are generally rising it can be rough to have a sale cover all the costs that 'homeowners' typically incur. Too many people assign too little weight to the various costs of selling a house, the various expenses that tend to be higher for home owners than renters, and even the fact with a home ownership there is mindset that all the 'stuff' I am buying is like money in the bank -- simply not true. Often the "improvement" that cost the most have the least impact on resale revalue. I have seen LOTS of people loss their shirt over improving houses in even HOT real estate markets. Some times it happens when they put deluxe "infra structure" type upgrades that most buyers will not adequately price in an offer (windows are in this category). Other times there are forces that 'suck up the buyers' -- from a new development selling for LESS than existing homes to changes in near by land use that have a negative impact on nearby homes to increases in crime.
You'd be surprised how many "rules of thumb" end up costing a couple of digits!
Thanks much for the replies from all of you. Yes, even after putting 25% or 30% down, we will still be abel to max out our retirement accounts. Now it seems to me it would be better to put down as much as possible to save mortgage interest. The only situation I can image to have a good deal by having low downpayment is to get a foreclosure in the future, which I don't expect at all. Other than that, it requires a very good investment to beat the interest.
What do you think to pay off the loan as early as possible, say, in 3 or 4 years instead of 15 or 30 years? Is it financially wise to do so?
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Counter argument -- less to loose...
