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I just turned 29 and am looking at buying my first home over the next year. I work in Indianapolis but don't want to live in the inner city. I'm looking at reasonably priced condos and small SFHs in the better parts of the city and suburbs and am finding quite a bit I can afford, but I can go to small towns outside of Indy and probably save considerable amounts of money. I'm currently renting a 2BR and with rent, water/sewer, and electric, I'm up to $1,000/month. It's a decently kept but very dated apartment, and it's money down the drain. There are smokers/animals beside me and I want neither, and I want something on one level, with a basement possibly for optional use. There is a possibility of me getting married but can't foresee any kids.
I have been thinking of buying with a small mortgage ($50k-$110k or so) and trying to pay it off as fast as possible (hopefully by 40-45). This would give me the ability to be completely debt free for ten to twenty years prior to retirement, and to contribute a considerable amount.
Did you pay off a mortgage early and find it helpful or that the money was better allocated elsewhere? Even if it was better allocated elsewhere, did you find the peace of mind of being debt free worth it?
I've always paid cash for houses, and it's a huge life simplifier. You buy what you can afford, of course. It certainly makes you more realistic in terms of how much you spend, and allows actual investment saving to mount up once you don't have rent.
The tricky thing on the back end, assuming a person doesn't have any interesting in leaving an estate, is how best to pull out the value for living expenses.
Homes have maintenance costs so do not assume they are cheaper.
Interest is low now so I would not rush to pay off a mortgage. Probably 30 year mortgage.
Start your retirement savings now. Do not delay and do not pay off the house before you start saving. You want your savings to have a lot of years to earn money.
You want as little in the way of fixed monthly payments as you can in retirement.
I've always paid cash for houses, and it's a huge life simplifier. You buy what you can afford, of course. It certainly makes you more realistic in terms of how much you spend, and allows actual investment saving to mount up once you don't have rent.
The tricky thing on the back end, assuming a person doesn't have any interesting in leaving an estate, is how best to pull out the value for living expenses.
I make about $60k and live in Indiana. I would probably be around 40 before I could pay cash for even a modest house.
I just turned 29 and am looking at buying my first home over the next year. I work in Indianapolis but don't want to live in the inner city. I'm looking at reasonably priced condos and small SFHs in the better parts of the city and suburbs and am finding quite a bit I can afford, but I can go to small towns outside of Indy and probably save considerable amounts of money. I'm currently renting a 2BR and with rent, water/sewer, and electric, I'm up to $1,000/month. It's a decently kept but very dated apartment, and it's money down the drain. There are smokers/animals beside me and I want neither, and I want something on one level, with a basement possibly for optional use. There is a possibility of me getting married but can't foresee any kids.
I have been thinking of buying with a small mortgage ($50k-$110k or so) and trying to pay it off as fast as possible (hopefully by 40-45). This would give me the ability to be completely debt free for ten to twenty years prior to retirement, and to contribute a considerable amount.
Did you pay off a mortgage early and find it helpful or that the money was better allocated elsewhere? Even if it was better allocated elsewhere, did you find the peace of mind of being debt free worth it?
Finally ---- someone who GETS it! I paid off my mortgage last year at age 45. Done for good with banks, mortgage statements, and interest being flushed down the drain.
You are on the right track.
1. Small mortgage. Yes sir! Buy a moderate sized house you can afford rather than trying to keep up with the Jones's
2. You didn't mention this one, but put 20% down when you purchase, if you can, in order to avoid PMI, private mortgage insurance (a good deal/bad deal: good deal for the bank. bad deal for you).
3. Take out a 20 year mortgage -- yes, they exist, and then pay it down as quickly as you can. It took me about 12 1/2 years.
4. Ditch the landlord. Another person you can do without in your life, making rules for you and making life more complicated than it needs to be. Raising your rent, and tying you into a lease. Run your own life, your way, in your own house.
5. Disregard some of the advice of rjm1cc. Do not take out a 30 year mortgage just because interest rates are low. It's more important to get the house paid off, than to be throwing a ton of money into your retirement account when you won't be able to touch the money for another 30 years. He/she is correct about maintenance costs, so do your homework on whatever house you do decide to buy.
i agree with all except the don't take a 30 year mortgage part.
that can be a mistake . you can pay a 30 year off in 15 or 20 years years but if money gets tight you cannot pay a 15 or 20 year off in 30.
take a 30 and pay it off earlier , at least you have that choice .
Mathjak you're one of the posters I most respect on here but we'll agree to disagree on this one.
MOST people won't have the discipline to continue to pay extra on a 30 year mortgage.
The OP can easily afford a 15 yr mortgage. There's a break on the interest rate and in all reality most of us don't have the discipline or get distracted. The OP should have a savings plan too, which I realize takes discipline as well but a cushion can be achieved in less that a year at that salary.
Nice thing about the lower price ranges is you could rent it out and make money/break even if necessary due to job transfer.
But remind me why we are having this conversation in the retirement thread?
I am a bit surprised that Mathjak didn't also point out as one poster did, that saving smaller now, for a longer time will allow you to accumulate more savings than starting later and saving more. So try to do both.
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