U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Economics
 [Register]
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.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 01-29-2020, 07:24 PM
 
Location: SoCal
15,939 posts, read 7,573,006 times
Reputation: 13066

Advertisements

You can start a family while renting. Honestly, the two decisions are not linked.
Reply With Quote Quick reply to this message

 
Old 01-29-2020, 10:02 PM
 
5,068 posts, read 1,343,772 times
Reputation: 5981
Quote:
Originally Posted by Southbound16 View Post
Hello everyone! I'd like a fresh perspective from others. I will keep it short and sweet. For our purpose, a 20% down payment and the student loan balance are the same amount with similar interest rates.

Option A: Buy a house with 20% down and continue paying the minimum on your student loans.

Option B: Pay off the student loans completely and buy the house with 3.5% down and the added PMI.

Ideally, it would be amazing to pay off the loans AND save up the 20% down for the house, but we want to start a family soon and biologically, time is not on our side. Factoring in parental leave, household income will be lower for a few years.

Which one would YOU chose? Thoughts??
Student loans are often vague in the term length when you pay only the stated amount due each month.

I'd first get rid of student loans for two reasons, personally:

1. It's an unsecured debt (I don't care if the interest rate is "only" 4%)
2. It is not discharged in bankruptcy

That should be all you need to make the wiser choice.
Reply With Quote Quick reply to this message
 
Old 01-30-2020, 02:02 AM
 
8,882 posts, read 5,525,825 times
Reputation: 15027
As a child-free person, it's easy for me to blather with untutored advice. That said, start that family now - as in, tonight, so to speak. Everything else - all financial considerations - can be altered and delayed.

Quote:
Originally Posted by artillery77 View Post
...Overall though, you ask any of your parents or their friends how much they paid for their homes a generation ago and it's most likely no more than what you'd pay for a new car now.
The median new-car is on the order of $30K. The median house in my general area, not counting the "hood", is around $120K. 20 years ago it was also around $120K; maybe $100K. 30 years ago - is that a generation, or more? - it was probably around $75K. To reach down to $30K for a house, we'd have to go back a full two generations. Why? Because back then, housing prices were more or less uniform nationwide, excluding of course places like Manhattan. The Clevelands and St. Louises of America had housing prices comparable to those of Los Angeles. A $30K house would be in the "Madmen" era - at least, towards the conclusion of the Madmen era.
Reply With Quote Quick reply to this message
 
Old 01-30-2020, 08:19 AM
 
5,059 posts, read 2,170,899 times
Reputation: 10005
Quote:
Originally Posted by ddm2k View Post
Student loans are often vague in the term length when you pay only the stated amount due each month.

I'd first get rid of student loans for two reasons, personally:

1. It's an unsecured debt (I don't care if the interest rate is "only" 4%)
2. It is not discharged in bankruptcy

That should be all you need to make the wiser choice.
I have not rushed to pay my student loans off. The interest rate has never been above 4% and has been between 1.25-3.75% the entire time. Right now they are under 3%. It seems like a waste to pay them off. I put a lot into retirement. That said, the 20% requirement is no longer the the norm. The OP needs to go talk to a few lenders to see what is actually needed.
Reply With Quote Quick reply to this message
 
Old 01-30-2020, 09:00 AM
 
1,646 posts, read 1,083,529 times
Reputation: 3710
I didn't see this answered above, apologies if I missed it- what are the interest rates for the student loans? That's really all that matters. Mortgages are relatively cheap, even with PMI, so I'd imagine the student loans should be the first to go.

With respect to the mortgage interest deduction, the standard deduction is so high now that the incremental benefit of itemizing solely for taxes and interest often isn't very much for homes ~<$600k. My home is above that and my itemized deductions are still only a few thousand over the standard deduction, so the net impact on my total tax bill is quite low.

Also to your other point- just have kids. Nobody is ever "ready". Getting a house, getting financially prepared, etc.- it's all a farce. You still won't really be "ready". Kids consume whatever resources you have, but if you are tight on resources, they cost less. For example- if you have money, you buy a new crib, expensive stroller, etc, but if you don't, you get these things dirt cheap or even free from secondhand stores, family, friends, etc. The only "expensive" part of having kids are medical expenses, but as long as you have insurance you're fine. Even feeding kids in the first year or two easy- if you nurse, you just have to eat more food. Diapers, baby formula, etc- people act like it's so expensive but if you're cost conscious it's really not much- you can just eat one fewer dinner out, or cut some other discretionary expenses, and it's easily absorbed.

I have friends who are very low income and they have more kids than I have, and guess what- their kids are doing just as well as mine (if not better). Sure, they don't do the expensive dance classes, or the designer clothes, or have after-school math classes, or whatnot, but if anything their kids get better experiences because they are forced to do the unthinkable- go outside to play!
Reply With Quote Quick reply to this message
 
Old 01-30-2020, 12:34 PM
 
5,068 posts, read 1,343,772 times
Reputation: 5981
Quote:
Originally Posted by RamenAddict View Post
I have not rushed to pay my student loans off. The interest rate has never been above 4% and has been between 1.25-3.75% the entire time. Right now they are under 3%. It seems like a waste to pay them off. I put a lot into retirement. That said, the 20% requirement is no longer the the norm. The OP needs to go talk to a few lenders to see what is actually needed.
No PMI is required on a USDA loan, and they finance at 100% (technically 102% if you count the origination fee).

What type of balance are you looking at w/ these loans? Are we talking $9k or $90k?
Reply With Quote Quick reply to this message
 
Old 01-30-2020, 06:24 PM
 
2,846 posts, read 2,528,965 times
Reputation: 3468
We need a lot more information. Got good credit? What sort of interest rate are you paying on those student loans?

I wouldn't make any extra payments on student loans if the rates are 5% or less, particularly until after the 2020 election. You can probably beat that investing elsewhere... and there is a chance Bernie, Warren, or another democrat will try and eliminate all student loan debt. Would the policy be completely unfair? Of course. But if I had 6, or even 5, figures of outstanding student loan debt, it'd be silly to not at least consider it.
Reply With Quote Quick reply to this message
 
Old 01-30-2020, 07:23 PM
 
Location: Silicon Valley
4,207 posts, read 1,908,821 times
Reputation: 6999
Quote:
Originally Posted by ohio_peasant View Post
As a child-free person, it's easy for me to blather with untutored advice. That said, start that family now - as in, tonight, so to speak. Everything else - all financial considerations - can be altered and delayed.



The median new-car is on the order of $30K. The median house in my general area, not counting the "hood", is around $120K. 20 years ago it was also around $120K; maybe $100K. 30 years ago - is that a generation, or more? - it was probably around $75K. To reach down to $30K for a house, we'd have to go back a full two generations. Why? Because back then, housing prices were more or less uniform nationwide, excluding of course places like Manhattan. The Clevelands and St. Louises of America had housing prices comparable to those of Los Angeles. A $30K house would be in the "Madmen" era - at least, towards the conclusion of the Madmen era.

Ok, it's not a perfect analysis, new autos are priced with much greater proximity than new homes, but if anything it just shows the process of distinction has been speeding up since our journey with an economy of confidence has begun. So for young people in position to buy a home on leverage vs deleverage, it simply makes the case anymore. The exception being certain segments of the rust belt.



For everywhere else, here is the median nominal values.



Here’s how much the median home value in the U.S. has changed between 1940 and 2000:
  • 1940: $2,938
  • 1950: $7,354
  • 1960: $11,900
  • 1970: $17,000
  • 1980: $47,200
  • 1990: $79,100
  • 2000: $119,600

Leverage, in theory, is going to be cheaper to pay as wages improve from CPI increases. Even if I make 100 and I spend each year 70 of consumption and 30 of housing expense, the delta between buying and renting is that buying is going to lock that 30 piece of expense, whereas the renting will allow the piece to continue to float.



So when Mr. Mad Men decided in 1970 coming of age that buying a home was dumb and they'd just rent and be free, what they really decided was to buy multiple homes over the course of their life for other people. Fifty years later as they are looking forward to retirement, they may well be paying the cost of that initial house every year in rent.



So once a young couple finds where they want to live for the forseeable future, their best investment is the home...unless they live next to OHP, who apparently is doing something beyond never mowing to flatten an otherwise unstoppable rise in real estate prices witnessed globally. Of course, even with flat prices, buying a place at least limits your main payouts to the life of your loan. With rent, you are always paying new.
Reply With Quote Quick reply to this message
 
Old 01-30-2020, 09:36 PM
 
Location: Massapequa
331 posts, read 239,681 times
Reputation: 443
Buy the house now! Interest rates are crazy low right now. Put down the minimum to ensure a smooth closing plus closing costs. After that's all settled and you are comfortably moved in, pay off the student loan. Don't fear PMI. You will only be paying it for a few years and it will get you into a home sooner.
Reply With Quote Quick reply to this message
 
Old Yesterday, 09:22 AM
 
Location: VT; previously MD & NJ
2,737 posts, read 1,633,293 times
Reputation: 8040
Why does it have to be either/or? Put 10% down, for example, and accelerate your payment schedule on the student loan.
Reply With Quote Quick reply to this message
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.


Reply

Quick Reply
Message:


Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Economics
Follow City-Data.com founder on our Forum or

All times are GMT -6.

© 2005-2020, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top