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gwrtheyrn posted:He's not saying put 5% down on the same house afaik, he's saying buy a 15% cheaper house. Which you could also do with a 20% down and save a ton of money, but if you want a remotely desirable house, this might not be an option. It may also not save you money in the long run if you buy a groverhaus. Oh sorry, I didn't realize that. I was still working from the post at the top of the page (e.g. why put down 20% instead of 5%). Definitely don't feel like you need to buy a more expensive house just because you can afford it, that's brain worm poo poo
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Aug 10, 2021 22:45
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Insurrectum posted:Am I taking crazy pills? Where did I say the house asset/loan was being used as leverage? I didn't say take out a reverse mortgage to invest in the stock market--your cash is your cash. Under that reasoning, any investment in the stock market before the house was paid off is using your real estate asset as "additional leverage". If you can afford the the monthly payments with a down payment of 5%, then it's purely a financial choice on what to do with the rest of the money. You live in the house regardless. You are absolutely leveraging the mortgage. Simple numbers for ease here. If you take a 80k loan, down pay 20k and invest 10k, you are not leveraging the mortgage. If you purposely take a 95k loan to invest 25k instead of your 10k, you are intentionally taking a larger loan to put more money into investments (AKA using leverage). Just because you didn’t take the loan in a margin account or whatever doesn’t mean you aren’t leveraging a loan to make investments.
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Aug 10, 2021 22:50
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QuarkJets posted:Definitely don't feel like you need to buy a more expensive house just because you can afford it, that's brain worm poo poo You gotta draw the line somewhere. Like would you be willing to live in carnation to "save money?" I'm guessing not. (substitute carnation for sultan, gold bar, or any progressively farther out from seattle town if carnation is too desirable lol)
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Aug 10, 2021 22:52
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To give an example, we were approved for a conventional mortgage of $865k, but ended up purchasing a house at $770. We had enough cash to go up to 10% down easily, but it would only save about $100-150 a month (versus a $3200 mortgage, also taking into account the slightly better interest rate our lender would offer us at 10% down). PMI is less than $100 a month. Putting down 5% gave us a big cushion for any unexpected expenses, and our mortgage payment (plus tax + insurance) is less than our rent payment was even at such a small down payment. I'd rather now max my retirement contributions than pay more toward my mortgage, since our interest rate is so low. If someone considers that "gambling," I don't know what to tell you!
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Aug 10, 2021 22:58
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spwrozek posted:I would wager that most people either are paying way more in PMI with worse credit than the posters here, they can't save 20% down anyways, and they are not getting these super low rates (still low but not what people are posting here about).
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Aug 11, 2021 01:07
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kw0134 posted:To the extent that you need to pay for the mortgage and can do some comfortably at 5 or 20% is sort of the sticking point. If you're scrimping by and can only barely afford the mortgage with 5% down, then you're gambling on whether the home is in fact affordable; the first unforeseen expense will send you into a tailspin that could well be catastrophic. If you're able to pay the mortgage if it's 5, 15, 25% down or whatever, then that becomes a "crunch the numbers for max gain" issue and I see no problem with "leveraging" your mortgage. The house I brought was on the low end of my budget so I wasn't going to be house poor irrespective of the money down, so I took a small downpayment and tossed the rest into investments. That's money I have liquid if something blows up, and the larger monthly payments still fit comfortably within my budget. But that's a case-by-case analysis with no one answer, and you have to be very honest about what is or is not affordable.
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Aug 11, 2021 02:13
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Insurrectum posted:To give an example, we were approved for a conventional mortgage of $865k, but ended up purchasing a house at $770. We had enough cash to go up to 10% down easily, but it would only save about $100-150 a month (versus a $3200 mortgage, also taking into account the slightly better interest rate our lender would offer us at 10% down). PMI is less than $100 a month. Putting down 5% gave us a big cushion for any unexpected expenses, and our mortgage payment (plus tax + insurance) is less than our rent payment was even at such a small down payment. I'd rather now max my retirement contributions than pay more toward my mortgage, since our interest rate is so low. This is not the argument you were making before. Lowering your down payment to have a cash reserve is responsible. Lowing your down payment to invest in the stock market to get a return that outpaces the loss from your mortgage interest rate was what you were arguing before.
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Aug 11, 2021 02:39
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Pilfered Pallbearers posted:This is not the argument you were making before. And now they're saying that we're calling investing "gambling. This is either a very confused poster, or someone posting in bad faith. This was enough to let me know they aren't worth the time.
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Aug 11, 2021 02:42
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The people saying to put 5% into your house and the rest into stocks look pretty clever now, and they've been right for the last 13? years. But I was there in 2008 and 1999 and the people who had SO MUCH MONEY back then suddenly had absolutely nothing a couple of weeks later. The only way they could have stayed clever was by taking all of their money out of the stock market at exactly the right time. It's cool and you can make lots of money if you go back in time to 2008 or 2009 and invest a lot in the stock market but you can't say the same right now for the next few years because you don't know and there's no way you can convince me that you know. Anyway, yeah buying a house for me is not a way to make money, it's a way to be secure with my family.
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Aug 11, 2021 02:44
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gwrtheyrn posted:You gotta draw the line somewhere. Like would you be willing to live in carnation to "save money?" I'm guessing not. I don't think that has anything to do with what I said, which is to buy the house you want, not to feel pressured to buy the most expensive house that you can afford. QuarkJets fucked around with this message at 04:00 on Aug 11, 2021 |
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Aug 11, 2021 03:54
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Insurrectum posted:To give an example, we were approved for a conventional mortgage of $865k, but ended up purchasing a house at $770. We had enough cash to go up to 10% down easily, but it would only save about $100-150 a month (versus a $3200 mortgage, also taking into account the slightly better interest rate our lender would offer us at 10% down). PMI is less than $100 a month. Putting down 5% gave us a big cushion for any unexpected expenses, and our mortgage payment (plus tax + insurance) is less than our rent payment was even at such a small down payment. I'd rather now max my retirement contributions than pay more toward my mortgage, since our interest rate is so low. No one in the thread has called that kind of behavior gambling. We were talking about throwing that difference in down payment into the stock market, which would be gambling. What you're doing is basically just budgeting (you should not consider emergency funds to be accessible for a down payment! )
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Aug 11, 2021 04:11
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Motronic posted:And now they're saying that we're calling investing "gambling. QuarkJets posted:No one in the thread has called that kind of behavior gambling. We were talking about throwing that difference in down payment into the stock market, which would be gambling. What you're doing is basically just budgeting (you should not consider emergency funds to be accessible for a down payment! ) QuarkJets posted:See this is the gambling part that everyone is talking about  Pilfered Pallbearers posted:This is not the argument you were making before. It is, though. I never said you needed to immediately invest all of the 15% in stocks. My point was if you can afford the monthly mortgage payment at 5% down, you have the flexibility to allocate your cash in a way that best suits your long-term goals. Part of that is a cash reserve, but part of that is indeed investing it in the market. And with mortgage interest rates at historically low levels (for people with good credit, which apparently I need to specify), there's a real financial tradeoff to consider for getting that lower monthly payment.
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Aug 11, 2021 04:20
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Insurrectum posted:
I like how you quoted that, and ignored the clear cut example which shows your strategy is using your mortgage as leverage to gamble against your APR. If you wanna do dumb poo poo like this go for it, but I'm pretty sure this thread has made clear most of us are just buying homes to live in and are not interested in using a mortgage as an investment.
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Aug 11, 2021 04:31
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Pilfered Pallbearers posted:I like how you quoted that, and ignored the clear cut example which shows your strategy is using your mortgage as leverage to gamble against your APR. Here, I'll quote your example! Pilfered Pallbearers posted:You are absolutely leveraging the mortgage. The problem with your example is that it presumes 20% down is the baseline, and anything less is leveraging the mortgage to make the investment. With that logic, any investment you make as long as you have a mortgage balance is "leveraging" the mortgage. If you're truly purchasing the house to live in (not as an investment) and can afford the monthly payment at 5%, you are free to allocate your cash in a way that best suits your goals.
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Aug 11, 2021 04:45
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Bribe appraiser, leverage overvalued house for maximum cash out mortgage, invest everything in bitcoin with five of your friends, buy one revolver, one bullet, everyone comes out 20% ahead, reinvest in house to retain 20% equity, this plan can't lose NEXT
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Aug 11, 2021 04:55
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One thing that makes me, IDK, question reality in a way, is when lenders or landlords or whoever ask me my credit score or tell me they'll have to do a credit check, then I tell them it's 804 (or they do a check then tell me) and their reaction is ALWAYS basically: ":O holy poo poo your credit score is REALLY GOOD" and I'm like, ... ... so who is buying houses then?
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Aug 11, 2021 05:02
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Motronic posted:And now they're saying that we're calling investing "gambling" QuarkJets posted:Borrowing more money so that you can make bigger bets at the poker table is reckless no matter how you slice it It's not gambling, it's leveraged investing. Dude doesn't understand what leverage is, it seems, but terminology aside, I have to agree with his point. Agreed as well that if you are investing at all while paying a mortgage, you are using leverage. The fact that the normal percent down is 20% doesn't mean much, and I don't get why people are piling onto the dude pointing out that that line is somewhat arbitrary. If you're so risk averse that 5% down is too risky, then don't do it. But don't act like there's some black and white line past 20% where leverage becomes gambling. There are plenty of situations where 5% down makes a ton of sense at these lending rates.
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Aug 11, 2021 05:41
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The real reason to do 20% down is to have a more attractive offer if your market is poo poo hot and that kind of thing matters maybe.
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Aug 11, 2021 05:47
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moana posted:The real reason to do 20% down is to have a more attractive offer if your market is poo poo hot and that kind of thing matters maybe. My real estate agent in denver said that often people write the max amount down that they physically have in the bank (like 30% down or whatever) and then put 5% down anyway because the terms of the loan are not up to the seller.
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Aug 11, 2021 06:06
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moana posted:The fact that the normal percent down is 20% doesn't mean much, and I don't get why people are piling onto the dude pointing out that that line is somewhat arbitrary. It's not somewhat arbitrary. It's customary to get the best rate and not pay PMI/MIP. This wasn't a randomly chosen number that happened to gain consensus among mortgage lenders. It's an amount that historically shows people are likely to be able to sell their home without putting cash on the table at any point in their ownership outside of, and potentially including, black swan events. When you are looking at your primary residence as a place you live rathe than an investment or a "free leverage" vehicle this kind of thing matters. The whole "PMI is so cheap!" thing is very recent, and only applies to people with quite good to excellent credit.
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Aug 11, 2021 06:22
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You should really just be targeting a monthly payment that is a reasonable % of your income and total monthly debt, in conjunction with “is this a nice place to live will I be happy here” It’s easy guys
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Aug 11, 2021 07:11
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I’m using 20% for alit if the reasons motronic mentioned, but frankly the % doesn’t matter here. If you have cash (+ emergency and etc + existing investments) for 10% down, and you Instead put 5% down and invest the other 5% in the stock market, you are absolutely using the mortgage as specific leverage for investments. Pre-existing and post-purchase investments are quite different than using half your down payment to invest because you think it’ll play out more.
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Aug 11, 2021 07:20
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This is a dumb argument. Any portfolio that includes both debt and investments is leveraged to some extent. Talking down to someone for leveraging their mortgage because they're putting 5% down and not 20% is a stupid take, because they're still leveraging at 20% down. There's plenty of valid (for some, not all) arguments why 5% down is a bad idea, as Motronic pointed out, but "it's leverage" isn't one of them. Motronic posted:It's not somewhat arbitrary. It's customary to get the best rate and not pay PMI/MIP. This wasn't a randomly chosen number that happened to gain consensus among mortgage lenders. It's an amount that historically shows people are likely to be able to sell their home without putting cash on the table at any point in their ownership outside of, and potentially including, black swan events.
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Aug 11, 2021 13:04
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The problem with that argument is that if you have enough for 20% down but don't do so, that money doesn't evaporate (and if it does for frivolous reasons, then you're really not part of this discussion). Like if I were forced to sell right now AND the property was underwater, I'd pull cash from investments and put it on the table. If everything is shot, including investments, then I'm probably hosed anyway! If I lose my job and have no income, and all my investments are down hugely it won't matter if I save a $200 a month on my mortgage because even the lower payment is unaffordable on zero cash flow. It's 2008 again and even a 20% downpayment is swallowed by the popping asset bubble. The dike I build is swept aside by a tsunami of bad economic news. But in the economic conditions we find ourselves right now, and for the foreseeable future, I have a hard time thinking that I'm at more risk of foreclosure when I have significant liquid assets I can draw upon. People that can only bring 5%, are stretching their DTI ratio, and have a prayer, they're historically vulnerable and still are. But those aren't the people who are getting mortgages for the minimum down and investing the rest.
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Aug 11, 2021 14:04
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20 years ago, I would have argued that putting 20% down and aggressively paying down your house was the right thing to do. It's what I'm doing now and I'm too old to change my ways. However, I think this is an outdated strategy, given what we have seen lately. 1) No matter what happens, the Federal Reserve will always bail out the system. If you put 5% down and housing prices crash, who cars? Just send a gingle mail to your mortgage lender with the keys and walk away or do a short sale. Lenders don't seem to care all that much if you had a short sale and will happily give you another loan. 2) Inflation is higher than mortgage rates. Hard to argue that you should pay down your house when you are making a passive 1% return by doing nothing at all. 3) If things do go to hell, the houses that are underwater are the last ones to get foreclosed on. Lenders have a change to make some of their money back and cover foreclosure costs when you have 25% equity in a house compare to -5%. 4) Investing in an index fund is a much better investment than your house. When rates are this low long term equity investing with borrowed money at 2.5% is no brainer if you have the stomach for it.
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Aug 11, 2021 14:28
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There is no right answer, and we'll only know the smartest strategy years into the future. This is a perennial topic on financial forums like bogleheads.org and others. It's worth noting, however, that the situation gets much more complicated if you hold assets in your portfolio other than equities (stonks!) Fixed income securities, or cash/cash-equivalents earn far less return than pre-paying your mortgage, especially on an after-tax basis. If all you have is a small emergency fund, your mortgage, and invest everything else in stocks, fine, but you need to consider just how much risk you're taking to achieve those returns. Hardly anyone, when actually tested with risk questionnaires, have the stomach for 100% stocks, or even worse, leveraging debt to buy equities. It's practically a meme at this point that when the bull market is running, posts like "why shouldn't I be 100% stocks?" are popular. Those same posts tend to die down quickly in bear markets. If you weren't old enough and rich enough yet to watch hundreds of thousands of dollars evaporate from your portfolio in '00/'08, not to hit those levels again for years, you're pretty much talking out of your rear end. You don't know if you'll panic; you don't know if you'll do something stupid like (or be forced to) sell at the bottom.
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Aug 11, 2021 15:02
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B-Nasty posted:Hardly anyone, when actually tested with risk questionnaires, have the stomach for 100% stocks, or even worse, leveraging debt to buy equities. It's practically a meme at this point that when the bull market is running, posts like "why shouldn't I be 100% stocks?" are popular. Those same posts tend to die down quickly in bear markets. If you weren't old enough and rich enough yet to watch hundreds of thousands of dollars evaporate from your portfolio in '00/'08, not to hit those levels again for years, you're pretty much talking out of your rear end. You don't know if you'll panic; you don't know if you'll do something stupid like (or be forced to) sell at the bottom. And here is the divide on opinions in this thread. Well explained and laid right out. kw0134 posted:Like if I were forced to sell right now AND the property was underwater, I'd pull cash from investments and put it on the table. If everything is shot, including investments, then I'm probably hosed anyway! If I lose my job and have no income, and all my investments are down hugely it won't matter if I save a $200 a month on my mortgage because even the lower payment is unaffordable on zero cash flow. It's 2008 again and even a 20% downpayment is swallowed by the popping asset bubble. The dike I build is swept aside by a tsunami of bad economic news. So you're planning on a black swan event and/or riding the economy to the bottom. This a setup for the people who, even while remaining employed, "lost it all" in 2008. One may ask how, and the answer always comes down to "panic selling their entire retirement account (or other assets) at the bottom". Some because they didn't keep enough cash or bonds on hand to manage things like a job loss, some simply because they didn't have the intestinal fortitude to stick it out. Being underwater on your home doesn't help, but it's manageable. If you're not underwater you have a lot more options that don't include "liquidating in a down market" or "wiping out all of my reserves to the point of not having a downpayment for an apartment." Motronic fucked around with this message at 17:02 on Aug 11, 2021 |
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Aug 11, 2021 16:58
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daslog posted:4) Investing in an index fund is a much better investment than your house. When rates are this low long term equity investing with borrowed money at 2.5% is no brainer if you have the stomach for it. As a bit of a tangent, this is the part I never liked in this argument. What percent of people are investing more money in index funds specifically because they have a few hundred dollars more per month available? I doubt many do but instead just have a bigger amount to spend/put in savings accounts. I’m already maxing my 401k and have a Roth spillover set up from before buying. I know that I could do some math and change things to invest some small percent more instead of paying the mortgage early, but instead I added $200 to my principal payment because it’s easy and still a guaranteed 2.99% return by paying extra principal. Plus if poo poo goes down and I have to sell, I should be in a better spot by having less total owed on the loan. Is it the mathematically best option? No. But I think as long as you aren’t sacrificing your emergency fund it’s a reasonably choice over having even more money going into a money market account
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Aug 11, 2021 17:02
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redreader posted:My real estate agent in denver said that often people write the max amount down that they physically have in the bank (like 30% down or whatever) and then put 5% down anyway because the terms of the loan are not up to the seller. The fact that I don't have this sort of creativity is kind of depressing to me.
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Aug 11, 2021 17:02
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Residency Evil posted:The fact that I don't have this sort of creativity is kind of depressing to me.
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Aug 11, 2021 17:53
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Hawkeye posted:As a bit of a tangent, this is the part I never liked in this argument. What percent of people are investing more money in index funds specifically because they have a few hundred dollars more per month available? I doubt many do but instead just have a bigger amount to spend/put in savings accounts. Like I said, I'm the guy who posted that and I don't do it either. Instead I plow an additional $1000 a month into my mortgage payment because having my house paid off allows me to sleep at night.
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Aug 11, 2021 18:44
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Hawkeye posted:As a bit of a tangent, this is the part I never liked in this argument. What percent of people are investing more money in index funds specifically because they have a few hundred dollars more per month available? I doubt many do but instead just have a bigger amount to spend/put in savings accounts.
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Aug 11, 2021 19:51
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Motronic posted:And here is the divide on opinions in this thread. Well explained and laid right out.
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Aug 11, 2021 19:58
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kw0134 posted:And to be honest, worse comes to worse, I'd rather take a hit on stocks (that I've probably gained a bit on) and cash out early than have to rely on squeezing equity out of an illiquid asset with high transactional costs. You mean you're rather be tied to the asset that ties you to a specific location where you've lost your income? Interesting thought process.
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Aug 11, 2021 20:00
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If it's the alternative between holding on to the home at least in the short term versus being homeless, I don't think that's even a question. If you're saying a homeowner should strategically default, then that would seem like an argument for having the least money down in the first place.
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Aug 11, 2021 20:08
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In case anyone was wondering assume that the PO never did a single amount of minimum maintenance.
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Aug 11, 2021 20:46
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spwrozek posted:In case anyone was wondering assume that the PO never did a single amount of minimum maintenance. Or if they did, they didn't document a drat thing. Question: Do city pickups for recyclables actually recycle anything? Seems like everybody on my street throws their amazon boxes and plastic soda bottles (and pretty much anything that isn't food garbage) in theirs without any consideration for how that poo poo has to be sorted once it gets to an actual recycling center. It's basically a second garbage bin.
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Aug 11, 2021 21:06
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biracial bear for uncut posted:Or if they did, they didn't document a drat thing. Most of that "mixed stream recycling" is actually just shipped overseas to be sorted somewhere else. (It used to mostly go to China, but I believe they've stopped taking our poo poo and so it might be going elsewhere in SE Asia now.)
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Aug 11, 2021 21:08
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What is the thread's opinion on HOA's? Are they ever ok? Seems like if we want a newer home in the denver area, built after like 1980/1990 it'll probably have an HOA.
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Aug 11, 2021 21:13
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CellBlock posted:Most of that "mixed stream recycling" is actually just shipped overseas to be sorted somewhere else. (It used to mostly go to China, but I believe they've stopped taking our poo poo and so it might be going elsewhere in SE Asia now.) Seattle does its sorting locally! The city's official numbers say that about a third of recycling (mostly paper, some cardboard) goes overseas. Of course, how much you can trust them on that is... dicey; there was a scandal a few years back where one of the "local recyclers" was just quietly most of their less-profitable stuff out the back door. Domestic recycling infrastructure has gotten a lot better since China started tightening up. e: whoops, lost track of which thread this was. But it's still true and I'm kind of proud of the city for doing it 'a little bit right'. Cassius Belli fucked around with this message at 21:29 on Aug 11, 2021 |
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Aug 11, 2021 21:19
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