Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Based on looking through many of your past posts I would suggest that you give up your search for a house and accept the fact that you will never find a home that you like at a price that you consider acceptable.
It appears that you have spent a lot of time and energy looking over the past 7 years, made offers and backed out of a number of deals and just can not commit. Let go of this frustrating endeavor and find some ways to spend your time doing something that you can enjoy.
Take it from someone who has lost more money in the stock market than I care to admit. Put a large down payment on your house. You have to live somewhere, and there's no sense of taking a chance on losing your money in the market. And yes, that can happen.
Honestly, just means you don't know what you're doing.
Anyone with a 10+ year horizon playing it smart will be better off in stocks than cash/home equity in a not hot area.
40 years old, first time homebuyer. I have $400K saved in credit unions getting basically no interest. I have about $320K in my retirement-related accounts (401K and Roth IRA). I want my house paid for and the option to retire in 10 years if I want to.
Bellingham is expensive. I hate the thought of spending $375K for a house, but that's about the price range where options open up for homes I'd be interested in. I'm not looking for a starter home. My first home may be my last. I like living here and am looking for something long-term.
Since I want to retire and have the house paid off in 10 years, and because I don't like large mortgages and being house-poor, I want to finance only $100K. So...I will be putting down $275K on a $375K house. That's a significant chunk of my savings.
Does this sound financially sound? People say I should put down less and invest the rest, but honestly, I don't have the stomach for playing games with investments. I've seen too many people savvier than me lose money. A lot of money.
I guess reality is sinking in. I'm approaching middle age, and I haven't enjoyed the money I've worked so hard for and saved. Like I said, it's just sitting in bank accounts, getting no interest. I'm ready for a lifestyle upgrade, but want to do so the right way.
Curious to what others' thoughts may be before I take the plunge...
If you don't have the stomach for investing, then you may make poor choices if there's a bad day in the market. But, if you were willing to have a financial advisor manage your investments for you, then maybe you'd avoid that.
Bottom line is, putting $275K down to avoid something like a 4% mortgage, when you can easily beat that in a diversified portfolio that would have very low volatility is not a great financial decision.
But....if you truly don't have the stomach to invest it, then maybe it's the right move for you.
not sure how you're going to retire in 10 years though with only $320K as your present value of retirement accounts.
If i were you, I'd get yourself a 10 or 15 year mortgage, which will get you even better rates, put 30% down, and keep maybe $25,000 of the remained $287,500 in a money market account earning around 1% (even better would be to set up a CD latter, and get yourself a slightly better interest rate). then, take the $262,500, and put it somewhere with a financial planner who can manage it for you. earning 6-8% shouldn't be difficult.
First off congrats on saving 400k that's more than most people at your age and more than likely higher than most that are telling in this thread to dump it into the market or a balanced fund. If someone does not have the risk appetite to tolerate these investments they are not suitable and shouldn't be recommended.
I personally have the risk appetite and therefore invest mostly in the s&p 500 through the SPY and write covered calls against it every week. If you can stomach the market then don't get in, although I will tell you that it will be very hard to grow your assets as you prep for retirement. Currently your asset growth comes from current cash flow due to employment however where would the growth come from at retirement? You didn't mention any retirement accounts but I'd hope that if you are covered by a 401k you are contributing at least to get the match even if it's in a money market within your plan
Edit: I just read the op and don't know how I missed it the first time but the 340k in retirement accounts, you are far ahead of 95% of people in general and probably higher for your age group. Most 40 year olds don't have a 750k net worth. Look around online citbank and American Express are both paying closer to 1% FDIC insured. Park it there and at least get something. Also something to consider would be downsizing at retirement to free up that capital. A paid off house at retirement doesn't mean much if it ties up most of your net worth
i'm not sure what the stats are, but that's very sad if most 40 yr olds don't have $750k net worth (i'm assuming college grads mostly). my wife and i are 32. $310,000 in 401k/IRAs. about $100,000 equity in our house. we've got some student loans that chunk into the "net worth", but if i'm not well past $750,000 in 8 years I'll be grossly disappointed.
I would at least put down 20% to avoid paying PMI. PMI is just money being thrown away for someone in your position. After that it's a numbers game of what you save on mortgage interest vs what you are making by investing the money.
I will say that unless your income increases greatly over the next ten years retiring on what you will have will be tough. You really need to be more aggressive with the money you have. Time's a wastin'.
i'm not sure what the stats are, but that's very sad if most 40 yr olds don't have $750k net worth (i'm assuming college grads mostly). my wife and i are 32. $310,000 in 401k/IRAs. about $100,000 equity in our house. we've got some student loans that chunk into the "net worth", but if i'm not well past $750,000 in 8 years I'll be grossly disappointed.
This is a total no-brainer:
- you are earning 0% interest on 400k in the bank
- if you buy a house, every penny you put towards the down payment is effectively earning the current mortgage rate, which is about 4%
- So your $275k you put down, will in effect be earning 4% interest!
In fact, I would pay cash for the house and not finance any of it. You will have a lot more bargaining power with cash for one thing.
If you do the above, make sure you pull the amount of what would have been a monthly mortgage payment, from your check every month, and put that into an investment account. Hopefully a 401k.
Last edited by TwoByFour; 05-22-2014 at 10:42 AM..
Reason: typo
Curious to what others' thoughts may be before I take the plunge...
I would NOT do it.
It's a good thing to do - but ONLY IF you really have a whole lot of excess cash AFTER you have maxed your retirement, taxable investments, and emergency funds. You should have a much higher net worth than what you're indicating.
You have a lot more you need to put in for your retirement funds, and you need the benefit of time NOW to weather market cycles and to reap the benefits of compound growth. That is where I would be investing excess cash after 20% down to avoid PMI. You put it into the house now, and you can be costing yourself a whole ton in future net worth. You can't eat your house, use it to pay for emergencies, or get healthcare from it down the road.
Mortgage interest rates are still around historically low levels, and you stand a good chance on beating those rates over time in the markets. And you still have the option to make bigger/more frequent payments on the house down the road or even put in a big chunk and get the bank to recast the loan payment (most ate willing to do it even if they don't advertise, you'd need to ask about it during the financing process).
All of this assumes, though, that you're not buying more house than you can handle in your ongoing monthly payments.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
