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Jason73 wrote:

Instead of keep renting (as suggested by a lot of posters here), why can't  "buying a smaller, less expensive house" a reasonable alternative?

 

If you can't afford your dream house at $800K, why can't you settle for an affordable house at $400K and keep that extra cash on hand for rainy days (job loss, pay cut...etc)?

 

Why is it "waiting" so right, and "buying" so wrong?

 

You buy whatever you can afford and enjoy every bit of it.  Why wait?

Message Edited by Jason73 on 11-07-2009 03:39 PM

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Jason, this is the logical thing to do but how many people do you know who think logically when talking about their home?

That aside it's easy to say to buy down but in some areas it is not possible. Or other factors make it less desirable. Can you really buy down in Beverly Hills?

And what about schools? Does it make sense to buy in a bad district just so you can have an affordable house?

Hence my advice to rent or be prepared to lose capital and flexibility. Who knows, maybe in a few years things will revert back to buying being the better option but I am not going to hold my breath.

Buy a house "just because"?  I don't think so.  Not to be brash, but this is the thinking of a single, 20-something mind that has no responsibilities other than a college loan.  In the real world, you have a job and you want a house near your job.  In the real world, you have a spouse who needs to also live near their job.  In the real world, you have kids who need decent schools near where you live.

It's not all about "owning".  It's about living your life efficiently and practically.

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Z-W wrote:

In the real world, you have a job and you want a house near your job.  In the real world, you have a spouse who needs to also live near their job.  In the real world, you have kids who need decent schools near where you live.

 

It's not all about "owning".  It's about living your life efficiently and practically.

 

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Unless you never want to be a home owner yourself , sooner or later , the imperfections of owning a house you have mentioned above (not be able to live near you and your spouse's job, good school...) will be applying to you when you buy your first house. 

In real world, not everybody can afford a house.  In the real world, your job may not be so close to your own house. In real world, not everything is perfect as you wanted it to be.

You can keep renting and/or keep relocating to places close to work with better school.  If you decide to own a house someday, sooner or later, you will have to face these problems in REAL WORLD.

Some people are lucky enough to own a house that is very close to their work. Other people unfortunately, have to live in a cheap apartment (due to their affordabilty) that is very far away from their work.   Renting is not an automatic guarantee of quality living or efficiency.  When talking about good living quality, there are many variables you have to take into account.

Good luck.

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eHollywood wrote:

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LB1 wrote:
Yep, that's what I did. I had 300k. Instead of using it as downpayment to buy a 800k house, let's say, I bought a 300k house cash.

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That's great, I think most people would be better off with a smaller home.  They'd buy and accumulate less junk, spend less on heating/cooling/maintenance, and spend less time/money on cleaning.

 

As far as paying cash though, unless there are factors I'm not taking into account, I think you're making a mistake to pay in cash.  Take out a mortgage, put your money in a CD for as high an interest rate as you can get, and make your payments with that money, while taking an income tax deduction for your mortgage.  As long as you keep your cash in FDIC insured accounts, you are as good as having paid cash, but with two extra benefits (interest on a huge sum of money and income tax deductions on a pretty decent sized mortgage). 

 

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Uhmmmm where is this magical CD that not only pays interest rates HIGHER than mortgage rates, but also allows you to draw the principle down every month? 

Its never a good idea to make any financial investment JUST on tax benefits. If I follow your logic, you are advising borrowing at 5-6% on a mortgage while simultaneously getting 2%-3% on a cd? Thats LOSING 2% on your money for a tax deduction.

Now your strategy makes sense if your alternative to the mortgage pays MORE than the mortgage rate- and for that you need to look at securities, which of course, is a longer time line and more risk- but is the avenue of choice (I think) for most people in this situation.