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Old 03-12-2008, 06:49 PM
 
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If I want to buy a 300K house, I could potentially put down 90-100K down-payment. Should I? I know this will give me lower monthly payments, but some people have told me to make a smaller down payment (60-70K) for the future tax benefits. What do you think?
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Old 03-12-2008, 07:45 PM
 
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Ignore whatever "some people" tell you and go with what makes YOU most comfortable. People who talk about "tax benefits" from paying more interest are IDIOTS. Look at it this way; for every DOLLAR you pay the bank in INTEREST, you are not paying the government about a QUARTER in taxes!

In other words you will be buying QUARTERS, but paying a DOLLAR for each one you purchase. Not a good bargain in my book.

I would put down as much as makes you comfortable, to obtain the payment that makes you comfortable. At least 20% down, and a 15 year loan always makes me comfortable. The pay that baby off as quick as you can.

golfgod
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Old 03-12-2008, 07:49 PM
 
Location: central, between Pepe's Tacos and Roberto's
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Unless you are pretty financially savvy, I would use the money to as a down payment. If you do have some experience investing, then putting 20% down and leveraging to invest would not be a bad idea, but you would need to be able to see a consistent after-tax return greater than the note rate on your mortgage for that to make sense. I wouldn't put less down strictly for a tax break though, the benefits of the extra write off may not be substantial enough to justify the decision. You may want to consult a CPA on that though.

I think that the amount of liquid reserves after the down payment should play a factor here as well. It wouldn't be a bad idea to have 6 months or so of living expenses in the bank, so that may be a factor to consider as well.
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Old 03-12-2008, 07:51 PM
 
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Ditto to both posts above.
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Old 03-12-2008, 08:56 PM
 
Location: Columbia, SC
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I agree With Daddys. Do what makes you comfortable. Personally I would go with 20% down to avoid PMI and leverage the rest. Figure out the payments with 60k down vs. 100k down and see what makes you happy. Your lender should be able to run a good faith estimate with both scenarios for you.
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Old 03-12-2008, 09:39 PM
 
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Muchas Gracias, Merci Beaucoup, and Thank you all very much! I didn't even think about the possibility of a 'little' less down, then invest the rest
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Old 03-12-2008, 09:56 PM
 
Location: Just south of Denver since 1989
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Put enough down and have 3-6 months expenses in the bank - a CD that rolls over, maybe?
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Old 03-13-2008, 05:02 PM
 
Location: Houston, Texas
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One of the biggest benefits of home buying is your ability to leverage the investment. You should always put down as little as possible that still keeps the debt obligation affordable.

To give a quick dirty example take a 100k house putting 20% down. Lets say it appreciates 4% in a year. That gives you a paper profit of 4K and you only have 20K invested. 4/20 equals a 20% return on your money. Now if you put just 10K more down so that you have 30K in the house. You reduce your return to only (4/30) 13.3%. Paying the little bit higher payment(interest) is negligible for this example and so was not included in calculation.
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Old 03-13-2008, 06:23 PM
 
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How's the math work for a highly leveraged investment if prices drop 4% per year?

Granted, it's not a problem if you keep the rest of the money in something fairly risk free, as others have advised. Just don't fall into the trap of spending what would have been the extra down payment since you'll have guaranteed equity when you sell.
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Old 03-13-2008, 06:33 PM
 
Location: Gilbert - Val Vista Lakes
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I agree with Brandon. Pay 20% down to avoid paying PMI coverage.
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