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That may be true, however, being debt free in your 30s minimizes your risk to any downturns and increases your ability to grow your wealth exponentially (my opinion) in comparison to being strapped with debt. Would I be "shooting myself" if its only a few years (i.e., 3-4 years - max)?
To this point financially, you're to be commended for really taking great care to not have debt.
bolded, this is the 2nd BIG monetary judgement you've given your opinion on. So, question - are you employed as a financial analyst, or have similar skills?
You've said you feel the market is over-valued, and since you included some nebulous geography, presumably you're speaking in your specific Rust Belt location (which, btw, you're only helping get better answers btw if you provide the city you're in). R/E may be overvalued if:
1. population and jobs in your locale are dropping.
2. the lower of the median or average house price is 110%+ (my choice of numbers) the ability of the median income to afford said house
3. the median value in your locale is 30%+ above whatever its peak was in the mid-2000's.
Right now, you should be able to borrow < 4.25%. You should be able to invest above that (especially if you don't max the 401K/employer contribution right now).
I'm not going to try the compounding equation, but I can only assume that if you invest $40K now, and $10K/year for 4 years, that on day 1 of year 5, it will be worth more than than 80K. And that $80K can thus NEVER grow exponentially more than the $80K you contributed over the same 4 years.
Buy a house now. Pay it off as quickly as possible. This business of making more money on investments is bull****. You could just as easily lose your butt with investments. The chances of losing your paid off house are slim to none.
There is also the emotional satisfaction of knowing you don't have to write checks every month to the mortgage company or deal continuously with their mistakes or draconian requirements.
My house has been mortgage free for 20 years. It's a good feeling.
I do believe the amount of interest you will pay on your house in the first two years is not calculated correctly due to mortgage amortization (https://www.bankrate.com/calculators...alculator.aspx) On a 15 year loan, I'm getting about 40% of the payment going toward interest and gradually decreasing to about 35% towards interest at the end of 2 years. In the first 2 years, on a loan of $270k, it's almost $20k going towards interest.
Don't forget to factor in closing costs, ours came to about $8k and then we put an additional $5k towards points.
We are in a similar position as you. We live off of my income and have been saving hers for a couple of years. We have money for a big down payment, closing costs, money to buy points. We were looking for a house around 400k. We also have no debt, fairly new cars paid off, and are looking good for retirement and college fund.
We also debated waiting another year and paying off nearly half the house or just putting down what we have this year. We also have a school-age child, so that was a big part of the decision. We wanted a long-term house for her and us. We are 10 years older than you are, which does impact the decision as well.
We decided to go for a house this year and put extra money down towards the principal. Retirement does come first, but I would like to get the house paid off fairly quickly. I did opt for the 30 year loan instead of 15 because the interest rate wasn't that much different and life can happen. If someone gets sick or injured and you are down to one paycheck, I still want to be able to make my payments.
While I don't think buying a house is a great investment, if you are eventually going to buy one anyway, there are some things to consider. In those 2 years, how much will you put towards rent and how much will the house increase in value? Granted, on the flip side you have property taxes, maintenance, and interest, which you wouldn't have while renting. How much interest are you saving if you get the house now and then pay off the entire house in 4-5 years versus waiting 2 years for a bigger down payment and then paying the remainder of the loan in a year or two. Is that worth it to continue to rent for 2 more years?
I would consider everything, but in the end realize that life is here to enjoy. Calculating everything based on what makes you the most money isn't the key to happiness. It looks like you are trying to convince yourself logically that buying a house now makes more sense. Personally I think you should do what you want in this situation. If you want a house now, get one and then pay it off in 4-5 years. Will you waste more money rather than saving another 2 years? Probably. However, you can't take all that extra money with you when you die.
I would consider everything, but in the end realize that life is here to enjoy. Calculating everything based on what makes you the most money isn't the key to happiness. It looks like you are trying to convince yourself logically that buying a house now makes more sense. Personally I think you should do what you want in this situation. If you want a house now, get one and then pay it off in 4-5 years. Will you waste more money rather than saving another 2 years? Probably. However, you can't take all that extra money with you when you die.
this.
Buying a house should be more than a financial calculation. It should also be about where and how you want to live. For instance, do you plan to have kids and what time frame. It's great when you live in a family friendly neighborhood with lots of other families with young kids when you have your own kids. It's also nice to put down roots, and start to become a part of that kind of community now, so you can be more established once your kids do come. That's a lifestyle decision, not a financial one.
I've seen better deals in the market during September- January market . Less competition with the buyer with kids who want to be settled before school starts. Get pre-qualified can. Make sure no early pay off penalties. Get a 30 year with the thought of making 1 and a half payments per month minimum, double even better.
I would buy now, I always do a 30 year loan and pay extra to get it paid in 15 years..just in case. You never know when one could lose a job, become disabled, etc. We owned a home 4 years and my husband was involved in a life changing motor vehicle accident.
That may be true, however, being debt free in your 30s minimizes your risk to any downturns and increases your ability to grow your wealth exponentially (my opinion) in comparison to being strapped with debt. Would I be "shooting myself" if its only a few years (i.e., 3-4 years - max)?
You still need a place to live and while rent is not a debt, it is still a payment.
If you're not planning to move to a different location in the near future, I'd say go ahead and buy a house now if you can find something that you like. Also, however, rethink whether you really need to buy a house costing $400K+. If you're living in a lower cost area, there are probably a great many good houses that could be bought for considerably less. Just because you can afford something more expensive doesn't mean that it's the best thing to do.
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