I live in the US in PA and I am thinking about buying a house that costs $225,000. I can put 50% down and make a salary of 50k before taxes. I have no debt but will probably need a new car in a few years. My kids are going to college, so I'm a bit afraid of taking the plunge thinking that I might need to have money to help them with tuition costs. I have little to no retirement savings because my ex took it in the divorce. I have only what is through my job where I've been working for the past ten years. Is it better to stay living with my friend in an apartment and helping with rent or should I buy the house? I'm 45 years old and a bit anxious about making a mistake. All the websites seem unrealistic. Utilities, groceries, car insurance, and bills need to be taken into account and those run probably 1400 a month. Any good advice out there?

Thanks for your answers. I also have about 40k additional in cash, but I'm not sure whether to keep it, invest it, or what...

  • Months ago, I heard mention on the news that there was a style of mortgage loan where the bank held your money but they gave you a lower interest rate. (I assume this was so that they could claim the value of the collatoral towards their cash reserves, allowing them to sell more loans). Unfortunately, I was driving at the time, and I can't remember what they called this type of loan.
    – Joe
    Commented Mar 30, 2015 at 20:38
  • And it sounded like they could hold other things in collatoral, as well (eg, stock certificates, so you didn't have to sell the stock and take capital gains on it to get the better rate)
    – Joe
    Commented Mar 30, 2015 at 20:39
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    Buy a big block of quality land and live frugally in a tiny house in the meantime. Build that tiny house for under $30,000. See the Tiny House Movement for more information. Commented Mar 31, 2015 at 3:42
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    How much rent are you paying? Is $225k cheap historically? E.g. what would that house cost 2, 5, 10, years ago? What's the market like? Is this a good neighbourhood? Do you think it will improve or get worse? How long do you expect to live in this house? Could you rent out a suite in it? Property taxes? How important is it to you to own a house? Some of the questions I would ask to make a decision.
    – Guy Sirton
    Commented Mar 31, 2015 at 6:14

5 Answers 5


It seems very risky have all of your net worth in this one home. If I were to buy the house, I'm not sure I would put that much down, consider 20% and keep cash on hand, in retirement assets, etc. I would look at how much a mortgage, plus interest, taxes, insurance, etc. would cost with 50% down and with 20% down and see how that impacts your cash flow. Renting may make more sense, it's hard to tell without more specifics (NYTimes Rent/Buy calculator is a nice tool), but regardless, I would not want to have so much net worth tied into one asset and so would opt for less money down if I were to buy. Focus on rebuilding some retirement assets.


I'm going to take a different path than the other answers:

Given how low interest rates are (depending on your credit), buying a house may be a great strategy. However, I would not put more than 20% down. Putting more than 20% down unnecessarily ties up cash that could be used more productively elsewhere.

You need to figure out your cash flow situation both for the near term, and for the long term.

For the short term, you probably won't need to help your kids with tuition. They will likely be able to get a combination of grants, scholarships, and loans that will cover the cost. However, the loans are generally not low interest, and that is a huge amount of debt for someone so young. If you want to help pay your kids tuition, you should at least guestimate/budget that amount now.

For the long term, without any retirement savings, you may be hurting in a couple decades. Since you also don't have a home, your living situation may be a problem. Buying a home today may be the prudent move, because that will hopefully be an appreciating asset, and, with a 30 year mortgage, you'll own it outright by 75, which takes a big strain off of retirement costs.

$1400 a month in bills (apart from rent/mortgage) with no kids in the house (is this correct?) sounds high. I would also recommend looking at your basic expenses and seeing what you can do without if you are cash strapped.


Consider not buying the house? Consider a cheaper property? What are your actual goals? Owning vs renting? Perhaps an actual investment goal? What is your rent now vs the mortgage on the house? What is the time frame for the mortgage you are considering?

Those are the real questions you need to ask yourself. It does sound like you can become overleveraged with this property, although your down payment is quite substantial, but one single thing goes wrong and your cash flow is irreparably constricted. I personally wouldn't take that risk if I had the same forecast of expenditures, but this could be altered if there were particular investment goals I had in mind.


How about a slightly different approach. Invest in a duplex or trip/quadplex. Live in one unit, rent out the rest. Chances are you'll end up either paying nothing in total, or even making money as your tenants pay your bills for you. Depends a lot on your area and your willingness to deal with the crap of tenants, but have a look into it. You'll be surprised what you can buy in your area and the types of people you might end up living with you...


This probably isn't worthy of being more than a comment, is not specific to your needs (other answers cover that better), and I am a big advocate of NOT owning property but investing the money in the markets instead (potentially higher rates of return), however, if I were going to buy a property I would do so sooner rather than later as a rise in interest rates is not a matter of if but when. Borrow now when it is cheaper to do so and lock in the rate by taking out a fixed rate mortgage - the rate might be higher than variable rate mortgages but their rates will go up above your fixed rate very quickly.

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