I'm thinking about putting ~200k down on a 1.2 million dollar house, then getting a 15-year mortgage since I make more than the current lending rates investing (i.e. if my mortgage rate is 3.5% and my average year I make 7% on that money I want to keep use of that rather than just pay it off immediately even though I can pay cash).
Why would put less than 20% down, you'd have to pay PMI and get a second mortgage...
Okay, good to know. Yeah I know nothing about this. Will put more down then...
settling down is the worst feeling ever
What’s your net yearly income?
I'm tired of renting and smelling what my neighbors are having for dinner and listening to their yappy dogs.
..I should add I have about a million saved up so far. 950k, taxes paid for. So that 220k is post tax off my work salary.
And that’s on your income tax return right? Using affordability calculator, you’ll get slightly less then a mil but you’ll need a 230k down payment for a 1.2m house at 3.5%.
If you can reasonably make 7% return on your capital, it would make sense to do so instead of simply buying the house. But of course nobody can, with certainty, predict where the market is going it’s a risk none the less.
As long as your capital investment horizon is long enough to normalize returns I don’t see a problem. The problem would be mainly if you are planning to use the investment capital gains as part of your mortgage payments, that could be a bit hairy depending on the market and more risky.
Not sure if you could reasonably afford a 1m+ 15 year mortgage with that income. That would have to be close to $10k/month. Remember to factor in taxes (depending on location this could be thousands/month), insurance, repairs/maintenance, etc. I would put down at least half on the house. Yeah, you may be able to get better returns from other investments than the interest rate, but you will be highly leveraged and exposed to the housing market. Huge risk if you are relying on high yield investment returns to pay your mortgage...
You should also probably just get a 30 year and you can always pay it down like its a 15year. Higher interest rate, but you get the flexibility of reducing your payments if you need to.
Yeah, it's about 220k after I pay taxes on my salary. I have 950k saved up, taxes paid. That's money NOT in the stock market. Then I have another 400k in the stock market but I don't want to consider that since obviously that can go very south.
Hm, yeah, 7% would be tough if the market goes south. I mean, I made like 16% last year on stocks but I think that can't last.
No, it would all be off my salary income. Unless I pay some down, which would be off that 950k. So if I paid 250 down then I'd take it out of that 950k and then monthly payments would be off salary.
Thanks user. I see your point. I want to play it safe.
I'm probably going to get a raise soon but don't really want to count on that.
>Buying a house in the US before the next real estate crash and getting a huge bargain.
Kek the next crash will be way worse than 2008. Wait a couple more years before you buy anything.
>If you can reasonably make 7% return on your capital, it would make sense to do so instead of simply buying the house. dumbass here. how did you calculate that?
Where do you live? I made around that much last year (post tax) but I live in a low cost of living area where $300k gets you a 3,000 sqft house in a nice suburb. My plan is to move there and just bank the rest of my income. Houses are expensive as shit, and property taxes will cornhole you.
>Kek the next crash will be way worse than 2008. Why? Isn't lending a lot tighter now?
Miami Beach :/
Let’s assume it’s 3.5% on 1million on a 30 year mortgage. In the first year you’ll have paid around 34.4k in interest payments. If op can make 7% on his 1 million, he will yield 70k minus taxes. So his net gain would be greater then then cost of borrowing. Now you know why people were leveraging the fuck out of themselves when the interest rates were low.
I am OP. I wasn't clear though, I was asking how do I calculate my risk? Like I'm trying to wrap my head around if the housing market went south, stock market went south, and shit hit the fan...how much I can leverage and still be safe.
I'm leaning towards basically zero and maybe renting for longer until I can make more money. I'm a bit worried about what said but I don't really see why it would crash. I could see it going down a bit (it already has in my area)...
It would be difficult to calculate. You’d have to run a series of scenarios dependant on the severity of each correcting market.
I donno, maybe I should wait. I said that like three years ago though and look at the market now. I'm afraid it will outpace my earnings and I'll never get into something decent, everyone keeps moving here.
Guy has no idea what hes talking about. With the tax cuts and spending government is going into huge debt now. Inflation is going to skyrocket so even if there a housing crash you won't feel it much.
Yep, that’s the uncertainty of the market. Personally, I look at it this way. If I like a house and I want the peace of mind in owning the place and plan to stay in my current location im the foreseeable 10+ years. I don’t mind buying a place. 10 years is enough to normalize any correcting market and the better quality of life I’d enjoy with ownership is worth it to me.
You can wait and the market might price you out or it all might come tumbling down. But 10 years is enough to normalize any correction. Life’s a risk.
Don’t know what you do for a living but a lot of banks offer “doctor loans” if you’re a physician that waive PMI. When I was looking around 2015 you could get close to a million with no down payment and no PMI
Thanks user, yeah I don't plan to leave here. I'll probably live here my whole life because its where my family, friends and most importantly work is (even if I changed jobs, the industry is mostly here).
I'm an engineer.
Where can I learn more about this? I see housing has already slowed here, 2016 I think was the peak, but I feel like over time Miami Beach is going to be as expensive as San Francisco. There are so many people moving here from all over the world, it's not even an just Americans moving in thing. It's Europeans, Russians, South Americans, some Americans too of course. ...and no more good land.