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Old Yesterday, 10:42 AM
 
3 posts, read 709 times
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Hi,


My wife and I currently make $135 between us, and we do not plan to have children. We give 10%, invest 11% into retirement, both have no debt, and currently share a 700 sq ft apartment for $1,200 all-in.


We do not want anything ridiculously large, and are fine with a 'starter home' as our 'end home' as well. In our area, this would be about $200-$225 for a 1,400 sq ft ranch style which we would like.


If we currently have $45 saved, how absurd is it to want to save the full amount? We both do not like debt, and we are (realistically) happy in our current setting. But, it would be nice to own and have something permanent and not owe anything other than property taxes.


We just don't know if it's stupid to do this instead of, say, putting the usual 20% down and carrying a rather large (160-180 ish) mortgage that will be oppressive.


Thanks for all input!
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Old Yesterday, 11:13 AM
 
362 posts, read 304,911 times
Reputation: 281
Well there are often tax advantages in taking out a mortgage and you may do better investing the cash. Run the numbers both ways.
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Old Yesterday, 11:19 AM
 
2,115 posts, read 4,391,281 times
Reputation: 3624
It's not always stupid, but it is sometimes.

Trying to save the full price of a house while at the same time paying 1200/month rent may not be realistic.

Ask yourself: how does the total cost of owning a house with a mortgage compare with the rent?

(This assumes, of course, stable job and an intention to stay in the house for years.)
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Old Yesterday, 11:35 AM
 
Location: East of Seattle since 1992, originally from SF Bay Area
26,486 posts, read 46,171,030 times
Reputation: 24693
By the time you save the money, that house can be 25% more expensive than now. With a mortgage, your house payment would remain the same during those years, while the value goes up, and you would be missing that increase in equity. Meanwhile your rent is likely to increase every year. I wouldn't count on the tax deduct-ability lasting forever, but even after the new 2018 tax plan it is still a big help with up to 10,000 of mortgage interest deductible.
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Old Yesterday, 12:21 PM
 
Location: The Triad (NC)
24,680 posts, read 53,015,702 times
Reputation: 25135
Quote:
Originally Posted by JC4E View Post
We just don't know if it's stupid to do this instead of, say,
putting the usual 20% down and carrying a mortgage that will be oppressive.
This comes down to where you are in the accumulation phase.
If you're still earning carrying a mortgage usually makes sense.

But even a mortgage by choice needs to be affordable.
So... if oppressive is real then keep renting.
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Old Yesterday, 12:28 PM
 
Location: Dallas, TX and Las Vegas, NV
4,433 posts, read 3,100,971 times
Reputation: 8186
Do a comparison with some assumptions of the increasing value of a home you may purchase with the increasing value of however you’d use your savings (various options) and factor in the assumed increase in rent and tax credits for your mortgage interest.

It usually makes sense to buy a house when you run the numbers.

Owning one’s home isn’t always a financial decision. Some people are interested in modifying their properties, landscaping, etc. Those things are difficult to do for renters.
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Old Yesterday, 01:18 PM
 
Location: Denver CO
15,168 posts, read 7,842,102 times
Reputation: 21576
What is your wife going to say when you get engaged to your girlfriend? And do you have 45K in savings but still are trying to save up enough for an engagement ring? I feel like I'm missing some of the details here

Quote:
Originally Posted by JC4E View Post
Hey everyone, first post here


I just received a $1,000 "bonus" through my company as a result of the Tax Law, but it is being offered in one of three ways: 1) cash, 2) 401(k) contribution, 3) HSA contribution


What are the pros and cons of each?


I don't currently have any debt, and am saving for an engagement ring as my girlfriend and I are moving towards an engagement / wedding within a year (hopefully)


Other than that, I have no immediate need for the money


Thanks
What to do with $1,000 "bonus"?
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Old Yesterday, 02:06 PM
 
Location: God's Country
4,115 posts, read 2,541,137 times
Reputation: 6477
Everybody and I mean everybody, including our atty., told my late wife and I that we were stupid to pay for our house. They pointed-out all the things we could do with the extra cash if we borrowed, not to mention tax deductions.


Maybe so, but we ignored them and had no regrets.
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Old Yesterday, 02:36 PM
 
1,038 posts, read 392,097 times
Reputation: 1640
Let's look at 3 scenarios:

-if you own outright (no mortgage), you 'pay' for tying that money up in a property rather than in bonds or the bank (or stocks) - you expect to be no worse off than tying up that money at the current cost of borrowing.
-if you own and have a mortgage, you pay the bank for use of their funds (tied to the going cost of borrowing)
-if you rent, your landlord has capital tied up in the property and expects to get a return equal to the cost of borrowing plus his risk premium. So indirectly, you pay for the cost of his capital.

In other words, the difference between these three scenarios is not as great as everyone may believe. Yes, there is a difference and you need to do the math but conceptually, they all follow similar rules in that they are tied to some degree to interest/borrowing rates.
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Old Yesterday, 02:49 PM
 
7,191 posts, read 4,668,716 times
Reputation: 7706
Get the mortgage maybe a 15 year one for a lower rate and then pay it off as soon as you want or make extra payments monthly.
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