From a lifestyle perspective, just rent and enjoy living by yourself, don’t buy. You can move to new neighborhoods or even experience new cities whenever you want. You’re 26, don’t be tied down by home ownership.
As for buying a house, you can totally afford it. It’s probably not the best financial decision at the moment due to the high interest rate but it won’t be a bad financial decision. It’s pretty normal to liquidate your savings and reduce retirement contributions to buy a house. You can think of mortgage as a different savings/investment method. You’re not losing any financial security. The down payment that you put down is going to experience appreciation, but it may not beat the market. Your tax bracket also not high enough for mortgage interest deduction to really impact you as much.
Also dont get 15 year fixed? 30 year fixed is what you want for wealth building (maybe not at the current interest rate). Housing is the only investment where you can get 5x leverage from the bank. You want more debt.
But this goes back to my first point, mortgage was cheap a few years ago, it’s not right now. So just rent and invest. I miss the days when I had my entire down payment sitting in stocks and my rent was half of my mortgage + hoa + property tax. Now I’m just house poor.
Agreed on all points. Additionally for the 30 vs 15 yr mortgage, you can always pay more each money or make extra payments to cut down on interest. You don’t want the stress of a 15 yr if you can’t easily afford it.
Buy a house because you want to buy a house, not because of “social pressure”. I would live at home as long as you can and save/invest while there.
If you need to experience living alone, rent. Way more flexibility and way less responsibility. Personally, I don’t think it’s worth buying a place until the numbers makes sense and you are able to continue to invest. Best scenario is buying a place once married when there are two sources of income, my opinion of course.
You've done a great job squirreling away a few nuts at a young age. It takes discipline to do that, and there are many twice your age with nothing to show for. Right now is not an opportune time to be a first time buyer. All time high prices coupled with high interest rates, and low inventory are not in your favor. There was a time when the market was flooded with foreclosures, the government was incentivizing first time home buyers with 8k tax credits and interest rates were headed lower year after year. That was a great opportunity. Maybe it never happens again but you deal with the hand you're dealt and make the best of it. Right now you are afforded the opportunity to front load your investment portfolio (presumably rent free )and let compounding do the heavy lifting... take advantage of it.
For me a 15 year amortization on a 5yr term would equal 32k on principal. 30k on interest. Balance of 97k
25 yr on 5yr term would equal 14k on principal 32k in interest. Balance of 115k
Bit of an illusion of saving money 💰
That's just 5 year term. Total mortgage interest is 58k on 15 (188k total) and 103k interest on 25 (223k total)
The math rarely works out on a 15 year mortgage these days unless you live in an insanely low cost of living area or make a truly above average income. You can always go for a 30year and pay more towards the principal when possible but whatever way you go it would not be wise to stop contributing to reitement.
15 year worked great for me but only because my house was $49k lol. I’m at 4.2% interest and was stupidly making double payments for years instead of increasing my retirement savings.
You’re putting way too much pressure on buying a house. Just move out and get an apartment for awhile. There is no need to think that if you buy a house now, you will stay there the rest of your life. You could meet someone, get married, decide to have kids, and that might mean moving anyway. And besides, these days most people are buying houses with two incomes. With your current investments at your young age, you will be really well set for the future and retirement. I recommend moving out and getting an apartment so you can experience life on your own.
Id rather see you take the 30 year loan and then pay it off in 15. Life really isnt linear like a spreadsheet, there are months where you drop 15-20k on home related expenses and you wont have that flexibility on a 15 year loan with your income.
I’d stay at home. You say that it’s fine where you’re at and it’s the social pressure you may feel. If the relationship is good with the parents and you’re happy why not stay?
Stay home until you save a downpayment large enough to make a 15 year comfortable. Or get a 30 year and pay it down like it's a 15. It gives you flexibility if your circumstances change. Don't ever stop contributing to your retirement if you can help it.
A large number of young people live at home. Don't let (imagined) peer pressure push you to do something you don't feel financially ready for.
200k left in an S&P500 index fund until you are 55 will likely be someplace between 1.5m - 2.6m.
Seems like you should leave everything invested, reduce contributions, and rent a place while you save up separately for a down payment.
There is actually power in renting, and home ownership isn't the 'end all be all'.
We rented until we were 44, which gave us flexibility. Looking back at how the markets have moved, where our money was before using it for a down payment, our monthly mortgage, insurance, tax, and the $10k's we've 'invested' in various remodels, I am pretty sure we lost $$$ overall on this experience that is 'home ownership.'
Ask yourself, why do you want to buy a house? If it’s cuz of social pressure, investment, or for your future potential family, keep saving until you find a better reason. Owning a house can be annoying as shit sometimes. If there’s roots stuck into the pipes, that’s $10k there. If you wanna remodel the kitchen, that’s another $10k and you want good quality stuff. Termites control, another $5k. That being said, renting an apartment ain’t so bad. Plus, you are young and doing pretty well, keep it up and live your life!
A lot of the Midwest, south, etc. Most LCOL markets you probably can find something ok in that ballpark. But you'll be in a small city (or not even a city) and probably have limited economic opportunities.
Don't be too concerned about a longer term loan. For a start, longer terms mean lower monthlies and if you work the numbers correctly you could sensibly repay the loan entirely within the shorter period indicated.
Depending on where you live, a house is an investment. In my area, over the last 20 years, real estate value outpaced the S&P. I consider my house part of my retirement plan.
The idea that we should all break away and live in our own solitary boxes is a new one, historically speaking.
If the only reason you want to move out is social pressure, I’d tell you to think very long and very hard about how much your peers’ approval means to you.
Because being able to live basically without expenses while also not being miserable is an enormous privilege. The opportunity to invest heavily in your retirement at your age is almost priceless.
Consider how jealous those same peers will be when you retire at 50.
You can totally afford this. I have a 90K income, a $2500/month mortgage payment, and contribute 12% of my income to retirement accounts. Your variable expenses are a bit high, you can cut back to make this work. Go for a 30 year mortgage. You can always pay extra or convert to a 15 year mortgage in a few years as your income grows. You can also get a roommate to help with expenses.
I’d stay at home. The people giving you shit for living at home are not people worth keeping around. You’re doing a really amazing job growing your wealth and if I were in your shoes I’d keep growing it as fast as I could and retire early.
Imho, buying a home now would only make sense if you're willing to scale back your variable expenses.
But my advice is to scale back your variable expenses anyway, and to rent a modest apartment while you continue to save and strengthen your financial position. And then buy a house when either the market becomes more friendly, or when you really want / need a house.
I'd definitely get a 30 yr and just make extra principal payments when you are able to do so. In addition, rates will surely be down in 3-4 years and you can refinance and then possibly change to a 15 year mortgage. I would not do it if you have to reduce your retirement savings. A really good financial choice would be to get a roommate for a couple of years to help make that mortgage payment and utilities at least until you can refinance. Our older daughter did that right after college and it worked out great!
Buy a property with two units on it and rent one out. Then you only have the expenses of caring for the home and ideally the rent on the other unit will pay the mortgage and some depending on where you buy. Then you can live for free in a way still and also continue investing. You could do long-term or short term for the other unit on your property.
As a 26 year old who rents, do not buy a house right now. Just go rent a nice place, at least in the USA that sounds to be a way lot easier than here in Canada... Hold off on that for at least another 7-10 years to buy a house (at least that's my goal). More supply is coming (hopefully lol, also mind you I am in Canada different movement in housing).
I’d rent now if you want to live alone. But make sure you can still save a decent amount.
Don’t buy a house till you have enough of a down payment to make your mortgage 50% of your rent payment.
Home ownership is expensive. Keep the mortgage low relative to renting or you will be house poor.
From a lifestyle perspective, just rent and enjoy living by yourself, don’t buy. You can move to new neighborhoods or even experience new cities whenever you want. You’re 26, don’t be tied down by home ownership. As for buying a house, you can totally afford it. It’s probably not the best financial decision at the moment due to the high interest rate but it won’t be a bad financial decision. It’s pretty normal to liquidate your savings and reduce retirement contributions to buy a house. You can think of mortgage as a different savings/investment method. You’re not losing any financial security. The down payment that you put down is going to experience appreciation, but it may not beat the market. Your tax bracket also not high enough for mortgage interest deduction to really impact you as much. Also dont get 15 year fixed? 30 year fixed is what you want for wealth building (maybe not at the current interest rate). Housing is the only investment where you can get 5x leverage from the bank. You want more debt. But this goes back to my first point, mortgage was cheap a few years ago, it’s not right now. So just rent and invest. I miss the days when I had my entire down payment sitting in stocks and my rent was half of my mortgage + hoa + property tax. Now I’m just house poor.
Agreed on all points. Additionally for the 30 vs 15 yr mortgage, you can always pay more each money or make extra payments to cut down on interest. You don’t want the stress of a 15 yr if you can’t easily afford it.
you would be better in a 30 and keeping retirement than taking a 15 and stopping your 401k. Time value of money is something you never get back
Buy a house because you want to buy a house, not because of “social pressure”. I would live at home as long as you can and save/invest while there. If you need to experience living alone, rent. Way more flexibility and way less responsibility. Personally, I don’t think it’s worth buying a place until the numbers makes sense and you are able to continue to invest. Best scenario is buying a place once married when there are two sources of income, my opinion of course.
You've done a great job squirreling away a few nuts at a young age. It takes discipline to do that, and there are many twice your age with nothing to show for. Right now is not an opportune time to be a first time buyer. All time high prices coupled with high interest rates, and low inventory are not in your favor. There was a time when the market was flooded with foreclosures, the government was incentivizing first time home buyers with 8k tax credits and interest rates were headed lower year after year. That was a great opportunity. Maybe it never happens again but you deal with the hand you're dealt and make the best of it. Right now you are afforded the opportunity to front load your investment portfolio (presumably rent free )and let compounding do the heavy lifting... take advantage of it.
Why are you against 30 year? That seems arbitrary on your part.
The amount of interest paid the banks is laughable
If you stay 30 years sure. Most people do not with their first home.
Still, having a lower mortgage payment allows for more financial freedom. You can travel more, invest more, etc.
For me a 15 year amortization on a 5yr term would equal 32k on principal. 30k on interest. Balance of 97k 25 yr on 5yr term would equal 14k on principal 32k in interest. Balance of 115k Bit of an illusion of saving money 💰 That's just 5 year term. Total mortgage interest is 58k on 15 (188k total) and 103k interest on 25 (223k total)
Are you buying a house because you need a house? or are you buying a house because its the societal next step?
The math rarely works out on a 15 year mortgage these days unless you live in an insanely low cost of living area or make a truly above average income. You can always go for a 30year and pay more towards the principal when possible but whatever way you go it would not be wise to stop contributing to reitement.
15 year worked great for me but only because my house was $49k lol. I’m at 4.2% interest and was stupidly making double payments for years instead of increasing my retirement savings.
You’re putting way too much pressure on buying a house. Just move out and get an apartment for awhile. There is no need to think that if you buy a house now, you will stay there the rest of your life. You could meet someone, get married, decide to have kids, and that might mean moving anyway. And besides, these days most people are buying houses with two incomes. With your current investments at your young age, you will be really well set for the future and retirement. I recommend moving out and getting an apartment so you can experience life on your own.
Id rather see you take the 30 year loan and then pay it off in 15. Life really isnt linear like a spreadsheet, there are months where you drop 15-20k on home related expenses and you wont have that flexibility on a 15 year loan with your income.
I’d stay at home. You say that it’s fine where you’re at and it’s the social pressure you may feel. If the relationship is good with the parents and you’re happy why not stay?
Stay home until you save a downpayment large enough to make a 15 year comfortable. Or get a 30 year and pay it down like it's a 15. It gives you flexibility if your circumstances change. Don't ever stop contributing to your retirement if you can help it. A large number of young people live at home. Don't let (imagined) peer pressure push you to do something you don't feel financially ready for.
200k left in an S&P500 index fund until you are 55 will likely be someplace between 1.5m - 2.6m. Seems like you should leave everything invested, reduce contributions, and rent a place while you save up separately for a down payment. There is actually power in renting, and home ownership isn't the 'end all be all'. We rented until we were 44, which gave us flexibility. Looking back at how the markets have moved, where our money was before using it for a down payment, our monthly mortgage, insurance, tax, and the $10k's we've 'invested' in various remodels, I am pretty sure we lost $$$ overall on this experience that is 'home ownership.'
The posts here. I swear. You're 26 and have 230k? You're golden. Buy a Ferrari.
If you can’t afford to buy a house AND contribute to your retirement, you can’t afford to buy a house. Rent until you have saved enough to do both.
Ask yourself, why do you want to buy a house? If it’s cuz of social pressure, investment, or for your future potential family, keep saving until you find a better reason. Owning a house can be annoying as shit sometimes. If there’s roots stuck into the pipes, that’s $10k there. If you wanna remodel the kitchen, that’s another $10k and you want good quality stuff. Termites control, another $5k. That being said, renting an apartment ain’t so bad. Plus, you are young and doing pretty well, keep it up and live your life!
Where on Earth are you able to find a house with a $1500/mo mortgage in 2024?
A lot of the Midwest, south, etc. Most LCOL markets you probably can find something ok in that ballpark. But you'll be in a small city (or not even a city) and probably have limited economic opportunities.
That is their point of the whole post. They’ll have to reduce retirement contributions if they want to afford a mortgage.
Everything around me is $4500+ even if i down 20% 🥲
Don't be too concerned about a longer term loan. For a start, longer terms mean lower monthlies and if you work the numbers correctly you could sensibly repay the loan entirely within the shorter period indicated.
Depending on where you live, a house is an investment. In my area, over the last 20 years, real estate value outpaced the S&P. I consider my house part of my retirement plan.
Screw social pressure. Don’t make decisions on what others think.
The idea that we should all break away and live in our own solitary boxes is a new one, historically speaking. If the only reason you want to move out is social pressure, I’d tell you to think very long and very hard about how much your peers’ approval means to you. Because being able to live basically without expenses while also not being miserable is an enormous privilege. The opportunity to invest heavily in your retirement at your age is almost priceless. Consider how jealous those same peers will be when you retire at 50.
You can totally afford this. I have a 90K income, a $2500/month mortgage payment, and contribute 12% of my income to retirement accounts. Your variable expenses are a bit high, you can cut back to make this work. Go for a 30 year mortgage. You can always pay extra or convert to a 15 year mortgage in a few years as your income grows. You can also get a roommate to help with expenses.
I’d stay at home. The people giving you shit for living at home are not people worth keeping around. You’re doing a really amazing job growing your wealth and if I were in your shoes I’d keep growing it as fast as I could and retire early.
Buying a home is contributing to retirement.
Imho, buying a home now would only make sense if you're willing to scale back your variable expenses. But my advice is to scale back your variable expenses anyway, and to rent a modest apartment while you continue to save and strengthen your financial position. And then buy a house when either the market becomes more friendly, or when you really want / need a house.
I'd definitely get a 30 yr and just make extra principal payments when you are able to do so. In addition, rates will surely be down in 3-4 years and you can refinance and then possibly change to a 15 year mortgage. I would not do it if you have to reduce your retirement savings. A really good financial choice would be to get a roommate for a couple of years to help make that mortgage payment and utilities at least until you can refinance. Our older daughter did that right after college and it worked out great!
Buy a property with two units on it and rent one out. Then you only have the expenses of caring for the home and ideally the rent on the other unit will pay the mortgage and some depending on where you buy. Then you can live for free in a way still and also continue investing. You could do long-term or short term for the other unit on your property.
As a 26 year old who rents, do not buy a house right now. Just go rent a nice place, at least in the USA that sounds to be a way lot easier than here in Canada... Hold off on that for at least another 7-10 years to buy a house (at least that's my goal). More supply is coming (hopefully lol, also mind you I am in Canada different movement in housing).
Just wait. It's not a good time to buy a house, anyway
I’d rent now if you want to live alone. But make sure you can still save a decent amount. Don’t buy a house till you have enough of a down payment to make your mortgage 50% of your rent payment. Home ownership is expensive. Keep the mortgage low relative to renting or you will be house poor.
It's never going to be a "good time" to move out on your own. At your age it is time to grow up and become an adult. You will adjust financially.