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30K would hardly get ANYONE through a year of unemployment....
Spoken like someone who is unable to envision life on the other side of the tracks.
Due to a recent career change that's caused me to go back to an entry-level wage, I currently make $32K a year GROSS. By the time you subtract my work-related expenses (child care, wardrobe maintenance, 90% of the mileage I put on my car, lunches out because I don't have time to pack anything to bring from home, suppers out because I get home to late to fix anything) along with health insurance (I'd be eligible for Medicaid), part of my grocery bill (food stamps), and add my unemployment benefits, I could probably live for three years on $30K cash while maintaining or even possibly improving my current lifestyle.
And there are lots of people who make less than I do. They're not taking big vacations or driving late-model cars, but they get by.
All that being said, if you meant that it's unlikely that anyone who makes enough to be able to sock away $30K in the first place would be able to get by on a year of unemployment, I would likely agree. But that's a result of feeling the need to maintain the high-end lifestyles they've created for themselves.
If you inherited a paid for home, would you take a loan on it to invest in the stock market?
If you inherited a paid for car, would you take a loan on it to invest in the stock market?
If you had a low interest (5.5%) unsecured credit line, would you max it out to invest in the stock market?
Those are actually quite different questions that cannot be answered in isolation without surrounding facts. Kind of straw man arguments to be honest.
I will say this though: In general I am not afraid to take on a low-interest loan in order to leverage that money to make more money elsewhere. That's the entire operating principal of almost all start-up companies.
It has worked out quite well for my wife and I so far. For a quick example, we put down 10% on our house instead of 20%. On that other 10%, I invested it and I have made over 20% return on that money whereas our mortgage interest is 4.75% (which is also actually effectively lower than 4.75% because we get to write that off). After all taxes on both ends are accounted for, it's probably about a +15% in comparison to putting it toward the house.
Similar story over the past 4 years. We do put a little extra toward the mortgage each month, but I have invested more money each month than we put extra into the house. Obviously paying off your house is better than going into foreclosure and it is piece of mind for many, but at the same time, with historically low rates, you can also leverage the mortgage to come out more positive than paying extra toward the mortgage. We could almost pay our house off cash (not even using retirement accounts whose values total more than our house) if I wanted but we choose not to.
I'd put as little as possible on/into the house.
Bank/save the rest.
Emergency fund would be a priority, over putting more money than necessary into the house.
Most important question here: Are the parents ok with any of their $200k NOT going toward the purchase of the house?
If I gifted someone money so that they could buy a house, and then found out they used it for something else, I wouldn't be too happy about it. So I think that conversation needs to take place.
My parents actually did this for me and for my sister (although on a smaller scale). They gifted each of us the 20% down for our houses. Actually they built the houses and gifted us their profits, so it didn't even cost them anything out of pocket, they just didn't make anything on the construction of the houses. Worked out great for all of us.
At the time, I had no emergency savings, either, but didn't even consider using part of the money for any other purpose. It was the down payment on the house, pure and simple. They weren't "giving me money", they were helping me buy a house. Not the same thing.
Having said all that, I would hope that the OP makes enough money that the $200k mortgage is well below his means and he could save up a substantial emergency fund pretty quickly. If not, then he shouldn't be buying this house, with or without parental help.
as someone in the industry, stats can be skewed. I would like a hero putting a 4 or 5 year ytd return for my fund
Really---you are denying that historical gains over the lifetime of your investments is not 8%? That's pretty much common knowledge "in the industry". You are really only getting your clients 4-5% THIS YEAR...on what kind of fund???
I would put everything into the mortgage if I had a stable and reliable job... Basically it would save me 5% interest which actually translate to putting it into an investment account with 5% interest for 30 years (if it was a 30-year mortgage). Since mortgages are front loaded, maybe it worth more than just 5%? Either way, it doesn't really matter... I like the peace of mind of owning a home than paying a mortgage... the tax benefits of it are pretty pathetic since it is a below the line deduction with AMT... One less bill (a rather large bill) is always better in my mind and it frees me to do other things like life insurance/disability policies...
Health insurance premiums, unemployment if they qualify is hardly helpful since if you are lucky you get 1/4th of your take home pay, maybe, bills, etc. Maybe you have cheep rent but as you get older those things change. $5000/month just doesn't go very far to pay bills for most families... Do you have room to take in tenants/roommates in your apartment/house? Does your apartment/neighborhood allow that? You can only cut out so much....
Sorry, it's not prudent to plan for 6 months of unemployment....12-18 months is the standard these days. Besides, what is wrong with saving more??
Saving more is never a bad thing. A person with no savings has no business buying a house in the first place.
But,
The bolded shows that you are pretty out of touch with how most people live. Most people in this country make far less than that. When I was a SAHM we brought home less than that and lived pretty well compared to most people in the country. Plus, this person seems to be single. His expenses are going to be considerably lower than for a family.
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People need to look at the stock market for the long term and not day to day though....
