I have plugged away the last two years and have finally got my down payment saved up. What’s the best way to save as much cash as possible on buying a home? Think I’ve found one I want, so working to get a preappoval. So I just get a generic pre approval online and then shop around for a mortgage? Or should I use a mortgage broker for all that? Looks like so many ways to get fleeced during this process.
OT: buying first house tips
- Thread starter forestdepth
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Get a local broker. Don’t do anything online because you’ll get blown up email and phone. It’s actually pretty easy. With online listing it’s pretty easy to cut out a realtor on your end, especially if you have the house you want picked out. Do everything you can to get a conventional mortgage. FHA and USDA you get robbed. Also get a lawyer you know and trust, not the one the realtor who has the listing wants to use.
ETA- personal anecdote for local broker you actually know. My guy contacted me 4 years after I bought and suggested I refy to take advantage of exploding property value in my area. I called a lawyer to make sure he wasn’t trying to just generate a new fee. My refy was a HUGE advantage to me and not only that, he caught an issurance issue where I got redfunded about $1k from my insurance agent. None of that would have happened with a generic online company. It was because I had a local guy I know and have an acquaintance with. And bigger than the money saved and gained was what I learned going through the process twice with him. Read everything, double check everything, because everyone is trying to screw you. It’s busines.
ETA- personal anecdote for local broker you actually know. My guy contacted me 4 years after I bought and suggested I refy to take advantage of exploding property value in my area. I called a lawyer to make sure he wasn’t trying to just generate a new fee. My refy was a HUGE advantage to me and not only that, he caught an issurance issue where I got redfunded about $1k from my insurance agent. None of that would have happened with a generic online company. It was because I had a local guy I know and have an acquaintance with. And bigger than the money saved and gained was what I learned going through the process twice with him. Read everything, double check everything, because everyone is trying to screw you. It’s busines.
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Best advice I ever got-
1.Just because you're approved for xxxx amount, don't do it. Spend below your means, not up to it. And-
2. Repairs and remodeling will almost always cost more than you think. Be ready.
1.Just because you're approved for xxxx amount, don't do it. Spend below your means, not up to it. And-
2. Repairs and remodeling will almost always cost more than you think. Be ready.
Do not do anything house related (buy, refy, repair) without having a group of people you can call. Me personally I call my parents and in-laws because they’ve dealt with most everything first hand. I have 2 lawyers in the family. I know a few home builders, construction guys, and a realtor. If you have an issue or concern, call all of them. Gather as much info as possible. Arm yourself with first-hand and professional advice.
I'd go with a local lender/broker; they're almost all going to sell the mortgage eventually. Also, know up front that they're going to 17 with you when it goes to underwriting. Kinda just how it is, gotta keep your cool best you can and ride the wave.
Good luck, buying a house is usually a good feeling once the process is over.
Good luck, buying a house is usually a good feeling once the process is over.
This is the most important. If you are preapproved for 300k shop for a 200k house. Pay it off early and then buy you a vacation home.
Also echo
Get a local broker - this is not an area where cheap online alternatives is better.
Buyers agents aren't necessary and most aren't looking out for your best interest, they're in it for the commission. That's not to say they can't be helpful but every house I bought I used an agent and in the end I ended up finding every house online, they just setup appointments for the houses I wanted to see. A lot of times they try to point you towards houses they or their friends have listed even if it's not exactly what you want.
Get recommendations for a good inspector. See if you can find the ones real estate agents hate the most. A good inspection will save you tons in the long run.
If you are single or have no kids, think about the future, are the school districts good? If not, your future wife is going to make you send them to private school and that's another mortgage. Might be worth a couple hundred more a month to live near a better school and avoid a 5-10k a year private school bill.
Don't ever buy the nicest house in the neighborhood. The other peasant houses will bring your values down. If you are handy and like to do your own repairs shopping foreclosures has good value, they generally need extra repairs and are sold as-is.
Do you have a realtor you trust, that knows what they are doing? That's the first step, especially if you are buying and don't have to pay them. Get them to give you 3 mortgage guys with low closing costs. Talk to them about their products and get them to give you a quote, choose one, then get pre-approved with them. Other pretty standard items:
20% avoids PMI
15 year mortgage saves you on the interest rate, if you can afford it
Factor in your insurance and taxes into the payment
Dave Ramsey says to make sure a 15 year mortgage payment is at or less than 25% of take home pay, which is just pay - taxes, not everything else. Not many can do that, but if you can, it will set you up for success.
20% avoids PMI
15 year mortgage saves you on the interest rate, if you can afford it
Factor in your insurance and taxes into the payment
Dave Ramsey says to make sure a 15 year mortgage payment is at or less than 25% of take home pay, which is just pay - taxes, not everything else. Not many can do that, but if you can, it will set you up for success.
This is particularly good advice on your first house --- and the two sort go hand in hand. Prior to owning a house, you likely have no clue what all can go wrong over the next few years - ac units, roofs, large appliances, termites, etc. You can spend a ton of money repairing / replacing stuff. Don't take on a mortgage payment so large that you can't handle unexpected expenses that will come up.
Buy something you can easily afford, then after living in it for a while you'll start to understand the expenses go along with owning and maintaining a house. If you decide to move or upgrade in a few years, you'll be a lot more knowledgeable about things to look out for when buying your next house and you'll also have a much better feel for what you can afford.
Buy something you can easily afford, then after living in it for a while you'll start to understand the expenses go along with owning and maintaining a house. If you decide to move or upgrade in a few years, you'll be a lot more knowledgeable about things to look out for when buying your next house and you'll also have a much better feel for what you can afford.
Also, unless you trust your own realtor, don't use an inspector recommended by him/her.
If you're trying to save your cash, negotiate with the buyer to cover your closing costs, in exchange for an offer closer to their asking price. For the seller, it doesn't make a bit of difference, for you, it allows you to finance a couple of thousand into the loan instead of needing that as cash on hand at the closing. That can really help because you're going to need cash for moving expenses, new furniture, setting up utilities, planting a few flowers, etc.
A more aggressive way, and something i did with my last house, was to look for properties that were on the market at one point, but had been pulled. I found one i liked, knocked on the door and worked out a deal - no realtor at all. That saved the seller a ton of money, and we essentially split the difference in the price of the house. I also had them cover my closing costs so I could maximize my cash for down payment
If you can swing it, try to get to 20% down, even if you need to borrow from the in-laws to do it. That saves you PMI, which is the biggest money-wasting boondoggle out there.
A more aggressive way, and something i did with my last house, was to look for properties that were on the market at one point, but had been pulled. I found one i liked, knocked on the door and worked out a deal - no realtor at all. That saved the seller a ton of money, and we essentially split the difference in the price of the house. I also had them cover my closing costs so I could maximize my cash for down payment
If you can swing it, try to get to 20% down, even if you need to borrow from the in-laws to do it. That saves you PMI, which is the biggest money-wasting boondoggle out there.
Just basic advice away from the mortgage side.
1) Never let a realtor try and close the deal with you by saying “well there are x number of people interested in this house”. Sometimes they are flat out lying. It is more likely they are if the house has been on the market for a few months.I told the realtor that “They are building more every day” when they tried this tactic on me.
2). If you don’t like something about the house.. and it’s not easily corrected.. pass on it. Especially if your significant other doesn’t like it. Paint is one thing. “ I don’t like the setup of the master bath” is another. It will not grow on you.
3) if you don’t like subdivision or city living with a homeowners association and ordnances, don’t convince yourself you will eventually. You won’t. Ditto for someone that’s wants to live in the city and not the country.
4) pay attention to the flooring. If there is tile, get down and peck on it lightly with the back of a knife, a key, or something. If it sounds hollow underneath anywhere, run away. Don’t look back. Look at the grout. Look at the carpet.
5) look at the downspouts of the rain gutters. Is there a large amount of stuff there that should be on your shingles? Be concerned about the roof. Stand back and look at the roof. Look for shingles that are not set down. Look at the ridges also. Just for anything out of place.
6) Look at the brick of it is brick. Look at the mortar joints. Is it all set? Look to see if any is seperating in a pattern. This is a giveaway for possible foundation problems. If you want the house, say you want it inspected by a foundation guy.
7). Look for any water standing beside the house when there shouldn’t be. Especially on a high location when it hasn’t rained in a few days. Could indicate a leak.
Lastly, don’t settle. Don’t rush. You have a realtor that is calling you twice a day? They are hustling. That’s how you make money as a realtor. Listen to them. And remember what you want. If you don’t want it or it’s in a location you don’t want? Pass. If it sounds interesting, ask them where it is and say you may get a chance tomorrow to go look at it. Go that night and look. If it’s not what you want, pass. Don’t waste your time and the realtors time going to look at a house you know is a no. If you just wanna take a break... tell them you got your dick hung in the door or something and you want to take a few weeks off from looking. And just keep looking online.
1) Never let a realtor try and close the deal with you by saying “well there are x number of people interested in this house”. Sometimes they are flat out lying. It is more likely they are if the house has been on the market for a few months.I told the realtor that “They are building more every day” when they tried this tactic on me.
2). If you don’t like something about the house.. and it’s not easily corrected.. pass on it. Especially if your significant other doesn’t like it. Paint is one thing. “ I don’t like the setup of the master bath” is another. It will not grow on you.
3) if you don’t like subdivision or city living with a homeowners association and ordnances, don’t convince yourself you will eventually. You won’t. Ditto for someone that’s wants to live in the city and not the country.
4) pay attention to the flooring. If there is tile, get down and peck on it lightly with the back of a knife, a key, or something. If it sounds hollow underneath anywhere, run away. Don’t look back. Look at the grout. Look at the carpet.
5) look at the downspouts of the rain gutters. Is there a large amount of stuff there that should be on your shingles? Be concerned about the roof. Stand back and look at the roof. Look for shingles that are not set down. Look at the ridges also. Just for anything out of place.
6) Look at the brick of it is brick. Look at the mortar joints. Is it all set? Look to see if any is seperating in a pattern. This is a giveaway for possible foundation problems. If you want the house, say you want it inspected by a foundation guy.
7). Look for any water standing beside the house when there shouldn’t be. Especially on a high location when it hasn’t rained in a few days. Could indicate a leak.
Lastly, don’t settle. Don’t rush. You have a realtor that is calling you twice a day? They are hustling. That’s how you make money as a realtor. Listen to them. And remember what you want. If you don’t want it or it’s in a location you don’t want? Pass. If it sounds interesting, ask them where it is and say you may get a chance tomorrow to go look at it. Go that night and look. If it’s not what you want, pass. Don’t waste your time and the realtors time going to look at a house you know is a no. If you just wanna take a break... tell them you got your dick hung in the door or something and you want to take a few weeks off from looking. And just keep looking online.
Buyer’s agents can be very helpful when it comes to the offering stage. Realtors network a lot, and there is a lot of “I’ll scratch your back, you scratch mine” type dealing that they do to cut one or both of their commissions when buyer and seller can’t meet in the middle. When I bought my first home, I had a hard number I wasn’t going over and seller wanted about $3k more. My realtor talked the seller’s realtor into taking it out of her commission to get the deal done. House had been on the market for about 5 months, in the height of the housing crash, and seller’s agent was just ready to turn it over. If you are a first time home buyer, you’d be foolish not to at least consult with a buyer’s agent because it doesn’t cost you anything. As to whether you need one when you are selling your house, that’s a different story.
There are other tangential benefits too, as they often have access and connections to properties that aren’t necessarily on the market but they know the residents are open to offers. I will say you need to pick someone that is very experienced and knows the area intimately, not some part time stay at home Mom or Dad who is just started doing residential real estate as a side hustle for some vacation money. Experience and connections are everything.
There are other tangential benefits too, as they often have access and connections to properties that aren’t necessarily on the market but they know the residents are open to offers. I will say you need to pick someone that is very experienced and knows the area intimately, not some part time stay at home Mom or Dad who is just started doing residential real estate as a side hustle for some vacation money. Experience and connections are everything.
Good stuff here. Re the line on lots of people looking, see the guy in the condo thread: " If you find it, jump on it IMMEDIATELY - the 20 other buyers looking for it will if you don't". Spoken like a true realtor REALTOR
ETA: Cannot wait for the next time I want to put off a salesperson by telling the "yeah got my dick hung in the door, gonna be a few days"
ETA: Cannot wait for the next time I want to put off a salesperson by telling the "yeah got my dick hung in the door, gonna be a few days"
With respect to the mortgage and closing, so you know what to expect, Download a HUD1 and review it and note where it says your GFE amounts are binding and not.
Somebody said get the inspector realtors hate the most. That's great advice.
Somebody said a buyer's agent doesn't cost you anything, which is not really true (that's less money out the door that you can negotiate for; if a listing agent is greedy and can keep you from interacting with the seller, then it might be hard to capture that), but if you have a good buyer's agent, it's definitely worth it for a first tiem buyer. A good buyer's agent will make sure you look at things like life cycle maintenance and consider things like where in the lifecycle is the HVAC, the roof, included appliances, etc. Will make sure you consider the difference between utility bills between different age houses or tax rates if you are looking in two different school districts or other taxing jurisdictions, etc. I would say most buyer's agents are not good agents and have very little value add.
Get 20% in to avoid PMI. I would say don't put anymore in, and put it on a thirty year note, and use the savings to contribute more to retirement. That will likely be better than a 15 year note over the long haul. It will prevent you from building a lot of equity that you can use to upgrade to your next house, which I would consider a feature by ensuring you end up with your money in tax deferred accounts, and not in housing, but other people would see that as a drawback.
For goodness sake don't pay attention to what the bank says it will lend you. As far as I can tell, my approval number was calculated by taking my entire monthly income and then backing out taxes, utilities, and the cost of a 30 day supply of ramen noodles.
At closing, they are going to hand you a thousand documents to sign and act like they expect you to just sign it without reading it. It will probably be ok if you do that, if you have a reputable broker and attorney. But I would go ahead and ask them to send you draft documents ahead of time so that everybody doesn't have to wait on you to read it. You'll be rushed when you're in there and the seller is just signing everything than hand to them, and your documents are just piling up while they wait for you to actually read.
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The down payment is great, make it as big as you can, but remember that closing costs and an inspection are going to eat into what you've saved. These can add up to several additional thousand dollars. As was mentioned before, prepare for repairs that will need to be done for almost any home over ten years old. Very often homes in the 10-15 year old range will still be on their first roof and HVAC. Stretch yourself a bit if it is the right property, but ideally, after taking all the above into consideration, try and put enough down to avoid PMI.
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From my singular experience.
Use a local mortgage company. Talking about that stuff over the phone is just painful. My experience with a remote mortgage company was pretty terrible.
Buy what you can afford. Being house poor is not a great way to go through life.
Maintenance is expensive. Make sure you can afford it.
Use a local mortgage company. Talking about that stuff over the phone is just painful. My experience with a remote mortgage company was pretty terrible.
Buy what you can afford. Being house poor is not a great way to go through life.
Maintenance is expensive. Make sure you can afford it.
1) Find a realtor that you trust.
2) Finance local. It’s likely they’ll sell your mortgage off to another entity anyway after the deed is done. Don’t freak out.
3) NO question is dumb. If you think it, ask it. Call up the realtor or lender anytime, that’s their job.
4) Read documents carefully.
5) Call in back up. Solicit help from close family or friends that have been through it before.
6) If possible, keep the note at or below 20% of your income net income. Breathing room is important.
7) Take into account closing fees when determining your down payment.
8) If possible, get 20% down to avoid PMI.
9) Quote your homeowners policy with more than one agent.
10) Make sure the appraisal gets done in a timely manner. Don’t get so far into it and then the appraisal doesn’t go well.
2) Finance local. It’s likely they’ll sell your mortgage off to another entity anyway after the deed is done. Don’t freak out.
3) NO question is dumb. If you think it, ask it. Call up the realtor or lender anytime, that’s their job.
4) Read documents carefully.
5) Call in back up. Solicit help from close family or friends that have been through it before.
6) If possible, keep the note at or below 20% of your income net income. Breathing room is important.
7) Take into account closing fees when determining your down payment.
8) If possible, get 20% down to avoid PMI.
9) Quote your homeowners policy with more than one agent.
10) Make sure the appraisal gets done in a timely manner. Don’t get so far into it and then the appraisal doesn’t go well.
Best advice I can give... find a neighborhood that you like and is desirable. Don’t be so concerned about cosmetic things with the house you can easily change. If you buy in a desireable neighborhood, you’re house will hold it’s value better and it will be easier to sell. You can always take an older house in a good neighborhood and renovate the inside. You can’t take a brand new shiny house and move it to an established neighborhood (no offense to people in gluckstadt... I lived there for a bit too).
Mortgage. As has been mentioned, use a broker, but as a mild request ask that he/she try to set you up with a mortgage company that has an app or modern web portal. All things being equal, I really miss my Quicken app, I could make extra payments, download any kind of document, whatever.. instantly. These new clowns built the website in the 80's and it sucks. I literally have to mail a check in...
Inspection. Get an Internachi certified inspector. They are real nerds about their business, worth the extra 1-200 bucks. I am on a structural consulting list and only Internachi inspectors ever call/refer clients to people like us. Inspections are not pass fail (outside of va and some fha), it's just for you to know what you are getting into. You want someone that takes pride in their trade, your realtor wants someone that doesn't kill deals.
Life lesson I learned after buying my first house... Homes are not an appreciating asset. The land might be, but the structure itself requires a lot of upkeep and usually won't keep up with inflation after you factor in maintenance costs. It's that patch of dirt under it that can be a gold mine.
Sock away $1500 a year extra in the home disaster account. In 5-10 years you will spend all of that savings on HVAC, water damage, leaking roof, mold, termites, foundation/basement, or plumbing... Something insurance won't cover. It's a fact of life. That account is for damages you usually can't expect/prepare for... this is not for new cabinets or a man cave upgrade... That's a separate account.
HOA's. Just know, the board is made up of a Clarence Boddicker, 2 Blacklisted Bully's, and an old lady on the landscaping/architectural committee that drives around wanting so badly to cite you for not maintaining the proper 38° pitch on the Yaupon Holly or for planting purple flowers after Labor Day.... If the disaster account is flush after 7-8 years bite the bullet and trim the Holly to look like a phallus, it's worth the first few fines to see if you can make her croak.
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Inspection. Get an Internachi certified inspector. They are real nerds about their business, worth the extra 1-200 bucks. I am on a structural consulting list and only Internachi inspectors ever call/refer clients to people like us. Inspections are not pass fail (outside of va and some fha), it's just for you to know what you are getting into. You want someone that takes pride in their trade, your realtor wants someone that doesn't kill deals.
Life lesson I learned after buying my first house... Homes are not an appreciating asset. The land might be, but the structure itself requires a lot of upkeep and usually won't keep up with inflation after you factor in maintenance costs. It's that patch of dirt under it that can be a gold mine.
Sock away $1500 a year extra in the home disaster account. In 5-10 years you will spend all of that savings on HVAC, water damage, leaking roof, mold, termites, foundation/basement, or plumbing... Something insurance won't cover. It's a fact of life. That account is for damages you usually can't expect/prepare for... this is not for new cabinets or a man cave upgrade... That's a separate account.
HOA's. Just know, the board is made up of a Clarence Boddicker, 2 Blacklisted Bully's, and an old lady on the landscaping/architectural committee that drives around wanting so badly to cite you for not maintaining the proper 38° pitch on the Yaupon Holly or for planting purple flowers after Labor Day.... If the disaster account is flush after 7-8 years bite the bullet and trim the Holly to look like a phallus, it's worth the first few fines to see if you can make her croak.
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Put down at least 20% and go with a 15-year fixed instead of a 30-year, even if it means buying less house.
Imagine a $300,000 loan. 4% for 30 years or 3.25% for 15 years. Borrowing the money for 15 years would cost $80,000, compared to $215,000 over 30 years. That's a big difference for the same house.
Imagine a $300,000 loan. 4% for 30 years or 3.25% for 15 years. Borrowing the money for 15 years would cost $80,000, compared to $215,000 over 30 years. That's a big difference for the same house.
This, this, this times a million. An excellent inspector with a hard *** reputation is worth it. So many people get screwed over by weak inspections.
How much extra do you think dude paid to bring in a landscape crew with a cherry picker to get up that high?
1) talk to lender and get pre-qualified first and foremost
2) get pre-APPROVED as soon as you find a house you think you like. this can give you the strength of an all-cash buyer.
3) Find a local lender, but don't assume your bank will give you the best rates. avoid the online ones like Rocket.
4) write down a wish list of everything you want in a home
5) shop zillow and keep a list of those addresses
6) find a realtor that you would drink a beer with. getting someone that you jive with a critical IMO.
7) give the realtor your wish list and your list of homes. they will set up the appointments.
General tips...
- buying from a FSBO will usually not save you money. They are already looking to save by not hiring a listing agent, so no savings will get passed to you as the buyer.
- lending is hardest part. finding a home is easiest. take care of the tedious, mundane stuff on the front end, and your experience will be awesome.
- ask your agent to set you up on an automated MLS search update that sends you new listings as they come to market
2) get pre-APPROVED as soon as you find a house you think you like. this can give you the strength of an all-cash buyer.
3) Find a local lender, but don't assume your bank will give you the best rates. avoid the online ones like Rocket.
4) write down a wish list of everything you want in a home
5) shop zillow and keep a list of those addresses
6) find a realtor that you would drink a beer with. getting someone that you jive with a critical IMO.
7) give the realtor your wish list and your list of homes. they will set up the appointments.
General tips...
- buying from a FSBO will usually not save you money. They are already looking to save by not hiring a listing agent, so no savings will get passed to you as the buyer.
- lending is hardest part. finding a home is easiest. take care of the tedious, mundane stuff on the front end, and your experience will be awesome.
- ask your agent to set you up on an automated MLS search update that sends you new listings as they come to market
This is not the full picture. I remember Forest making the statement you have to bury him with his Vanguard Total Market Index Fund. So let's assume he's an investor that has a brokerage account and his favorite fund underperforms over the next 15 years and only earns 8.5%.
Now there are 2 options I want to compare...
No sense in putting 20% down on a 15 year, 10% keeps the PMI away. So $300k house with $30k down equals $1900 per month for 15 years at 3.25%. Let's assume a 4% appreciation of the property and that you took the $30k you saved on a down payment and bought the TM fund the same day you bought the house. Here is your net worth after 15 years.
Vanguard Account = 30,000*1.085^15= $101,992
Home 300,000*1.04^15= $540,283-$0 mortgage
Total $642,275
Option 2
$60k down on $300k house at 4% interest for 30 years equals $1150 per month. The property still appreciates at 4% and you invest zero in the vanguard funds initially, but add $750 per month to the account. Here is the picture in 15 years.
Vanguard=$263,000
House=$540,283-$155,000 left on mortgage=$385,283 equity
Total=$648,283
So technically you are better off financially with the 30 year, if you are ironclad in your investments. If you are not, the forced savings of a mortgage is better. The 30 year also affords you more interest deductions on taxes, if that matters any more. Most importantly it gives flexibility. There may be times in the next 15 years where $750 per month would come in really handy. If you you think you might move in less than 10 years, the 15 will keep you right side up on your equity quicker.
It all works itself out in the wash, I like cheap money and live in a house we don't want to leave for a long time so I am on a 30. My last 2 were 15's though.
JoeLee, you continue to surprise...that was a very well written and thoughtful post.
Thank you.
Thank you.
This isn't accurate.
You will have paid MUCH more in interest over that first 15 years, and still have another 15 years to pay on the house, in Option 2.
Run your calculations out over the whole 30 year period, with that Option 1 payment ($1,900) that has now disappeared, going in the Vanguard. Ruh Roh. Option 1 wins by over a million.
You sound like one of the ones who say, "Well Dave Ramsey has some good points, but I don't TOTALLY agree....."
I have to disagree with your last logic too. A 30 year note is best if you aren't staying in the house very long and want some extra cash, while a 15 year note is best if you will be there for a while. Honestly if you do not buy more house than you can afford, the 15 year note works best every time.
Logic like this is why America is in debt.
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Some great points have been made but just don't forget
Location Location Location still should be at the top of the check off list.................
Location Location Location still should be at the top of the check off list.................
You are assuming a lot, and your two scenarios are within 1% of each other. I would put down at least 20% with a 15-year fixed and pay it off early.
Like my 6th grade math teacher said, show your work son, I need to see how you got it so wrong.
Disagree and ruh roh all you want, your the one that is wrong. After 30 years both houses are paid off and worth the same so let's focus on the brokerage account. All calculations are based on 8.5% return compounded annually.
15 year option.
After 15 years you have $101,992 in the account from the $30,000 saved on the down payment. Now that the house is paid off, put the $1900 a month in the same account and 15 years later (30 years after home purchase) the account is worth $1,015,150... Not bad.
View attachment 12178
30 year option.
After 15 years you have $263,842 in the account from adding $750 per month for the last 15 years. Now we will continue to add the $750 per month to the account. After 15 more years (30 years after home purchase) the account is worth $1,157,976. $142k more.
View attachment 12179
I think you were not counting on the continued $750 per month investment.. 15 year guy is paying out $1900 to brokerage after the house is paid off... 30 year guy is paying $1150 to the mortgage and $750 to the brokerage account... Both still have $1900 flowing out.
The 30 year mortgage has the most value in years 15-30, the interest is all front loaded. Once you get to the backend it's gravy...
Dave Ramsey does have good points, but he's targeting an unsophisticated average consumer.
There are many reasons America is in debt, but managing cash flow, tax liability, and investments with sound reasoning is not a big contributor.
Now I am not saying 15 or 30 is better but it's not this slam dunk 15 year wins everytime. My argument is subject to market return risk, but also offers diversification. The 15 year option really sucks if you end up with home in a location that depreciates because the school district goes to crap or they find plutonium in the area.
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Shiiiaat
No sir. If my kids want me to leave them some equity they better be chopping wood cutting grass pressure washing driveway sweeping the chimney painting trim or cooking once in a while.
If not, I'll die from sharkbite in my own island cove or in a firey crash of my own airplane. They can buy their own damn house.
No sir. If my kids want me to leave them some equity they better be chopping wood cutting grass pressure washing driveway sweeping the chimney painting trim or cooking once in a while.
If not, I'll die from sharkbite in my own island cove or in a firey crash of my own airplane. They can buy their own damn house.
Mortgage interest deduction probably doesn't matter anymore.
For this scenario, and for most first time buyers, the interest might be closing in on the $12k standard for a single filer. So if you're also really charitable or have some other things to deduct, it might help.
But if you are married filing jointly (or will be in the near future), you probably aren't hitting the new standard $24k in deductions.
For this scenario, and for most first time buyers, the interest might be closing in on the $12k standard for a single filer. So if you're also really charitable or have some other things to deduct, it might help.
But if you are married filing jointly (or will be in the near future), you probably aren't hitting the new standard $24k in deductions.
My bad . I was working up my opus in response to Carl and fat fingered the down vote. It not only cost you, but it erased my whole post and I had to start over. Your post is 100% correct. Location and lot. The house will be demolished one day, so you want a lot/location that will be attractive to someone wanting to build something big and expensive.
Pretty sure this is definitely wrong. If you assume borrowing money at 4% to put in a return that is assumed to get 8.5% annual return, you're going to come out ahead compared to putting raising the amount you put toward the 4% investment each month but reducing your interest to 3.25%. Just eyeballing it, and you do effectively juice your initial real estte return to 40% by leveraging up with a 10% downpayment (instead of the 20% assumed with a 20% down payment), but I don't think that's enough to change over time (especially since fairly early on you end up with more leverage under the 30 year note scenario).
ETA: Another huge thing to add is that for most people, if you are not maxing out your tax deferred accounts, you are not just investing in the stock market, but getting preferred tax treatment to do so. So unless you are maxing out your tax advantaged options (so basically $25k per year for a person with access to a 401k or up to $50k if its a couple with both having a 401k), then that probably pushes the dial towards the 30 year note and more towards the stock market.
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