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If you do not like the idea of being tied down to a place, you should not buy a house.
The OP doesn't want to buy a house right now.
OP, I see nothing wrong with this as long as you put your savings in a good long term investment vehicle. If you have the savings sitting in a bank account however, inflation will burn you, and might even prevent you from ever being able to pay for the house outright.
I also hate the idea of being tied down to one place.
This is the most important factor.. if you see a nomad lifestyle for the upcoming years, do not buy. Every time you buy its more closing costs and realtor commissions.
I am a computer guy and have in the back of my mind the idea of being a nomad... grab computer consulting gig in some other city, rent for a year, and then say to my wife "where do you want to live next year?"
Location: Chapel Hill, NC, formerly NoVA and Phila
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There is nothing wrong with renting until you are ready to buy a house, if and when you are ready to "settle down." On the other hand, I wouldn't hold off on buying a house just so I could buy one for 100% cash.
If you do not like the idea of being tied down to a place, you should not buy a house.
If you do not want to be house poor, then do not overbuy.
I should have given more context.
I live in Toronto. Houses in the city cost WELL over 700 000, for anything more than a shed. Most condos cost around 300 000-320 000 for 1 bedroom. Condo fees are usually an additional 400, I think. So it's rather pricey. It's not Manhattan or anything, but it's more expensive than usual.
Conversely, rent for a 1-2 bedroom apartment/condo is probably around 1200-1800 per month.
And the burbs aren't cheap enough to justify the torment.
On the topic of renting vs buying, it's important to remember that even in the same neighborhood, these are two completely seperate markets, each with a supply of and a demand for inventory. The result is that there can easily be a large disparity between the going rate for rent and what an equivalent mortgage payment would be on a similar property. In my hometown, which has a large population of working class people with bad credit, a very modest $50,000 house can easily rent for $800+/month. Buying is usually a better deal if you can get the loan. If renters, who usually lack the ability to buy, weren't so inclined to destroy property and neglect to pay rent, it would be ideal for investors. Long story short, the ratio of total cost to rent vs buy varies substantially by location and is a critical piece of the calculus. Sometimes, the ratio is surprisingly lopsided.
While you are saving money, you will be taxed on the profits. If you take out a mortgage, you get a tax break.
But the tax break for mortgage interest is a deduction, not a credit. If your marginal tax rate is 25% you'll save $250 for every $1000 spent in interest, for a net loss of $750. Seems like it would make more sense not to spend the $1000 in interest at all.
While you are saving money, you will be taxed on the profits. If you take out a mortgage, you get a tax break.
Quote:
Originally Posted by duster1979
But the tax break for mortgage interest is a deduction, not a credit. If your marginal tax rate is 25% you'll save $250 for every $1000 spent in interest, for a net loss of $750. Seems like it would make more sense not to spend the $1000 in interest at all.
Where did he say it was a credit? I have no idea why this comes up so often on this forum. Just because it is a deduction and not a credit does not mean it isn't a tax break. How much of your rent did you deduct?
With interest rates so low, it can make sense to have a mortgage even if one has the cash to buy outright.
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