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233

Ask your investor friends if you already owned the house, would they be advising you to take out a mortgage in order to invest elsewhere. If not, ask them to explain the difference between taking out a mortgage on the day you buy the house and taking the same mortgage out the day afterwards.


106

If you're moving up in house in the same area, it's better to wait until the alleged bubble bursts, since bubbles affect higher-prices homes more than lower-priced homes. You could also sell now and rent until the market bottoms out. There is no shame in renting, especially if you don't plan to stay in the house for more than a few years. If you're ...


80

I think you have a misunderstanding in point 2: Effectively, the cost of the mortgage in the first year would be much higher than the nominal ~3.5 percent interest rate of the loan. No, the rate of your loan is how much interest you pay relative to the outstanding balance. In the first year of a mortgage with a constant monthly payment, yes, you pay more ...


48

Rent. You have no idea whether you will still be in the same part of the country five years from now; you may not even be in the same country. A house is a boat anchor you really do not need or want at this time. It's also a set of obligations you may not want to take on yet. And buying is not automatically more financially advantageous than renting, when ...


37

There are often taxes (by whatever name) that scale with the property price. Agents’ fees are also often a percentage of the property price. These costs are usually a small but noticeable percentage of the total price. Aside from this, you’re mainly looking at the difference between what you get and what you pay. If you are buying and selling properties at ...


35

You stated several things in your question that you are afraid of - you are afraid of investing in something you can't "see", afraid that you're buying the rental too high, afraid that you'll be stuck in your apartment. It sounds like investing in real estate is not going to give you peace. I have no clue about the investment opportunities in the ...


30

If you sell and buy around the same time, the market situation (hot, cold, before, after, or no crash) is of little relevance - it just affects the size of the numbers on both contracts, and about the same, so it's mostly a wash. If you want to take advantage of your prediction, you have to split the selling and the buying in time - several months at least -...


28

I think you're right. However... unless (1) you're very rich, or (2) the house is very cheap, or (3) you're buying one house with the proceeds of another, then buying with cash is going to wipe out a significant percentage of your liquidity. That's why I'd get a mortgage, and plan on paying it off in 10 years. EDIT: Life is a balancing act, and becoming ...


25

Just ask! If the apartment isn't move-in ready and the landlord asked you to wait, send an email (put it in writing) and say something like: "Dear Ms Landlord, Thank you for painting the space and remove the dirt and cobwebs before I can move in. Please let me know when I will be able to move in. I will pro-rate the first month's rent according to the date ...


23

There is a mathematical way to determine the answer, if you know all the variables. (And that's a big if.) For example, suppose you rent for 4 years and the price of rent never increases. The total amount you will have paid is: 600*48 = 28,800. If you currently have money sitting in the bank earning only a negligible amount of interest, and you can ...


22

As I understand it, if the "borrower" puts a down payment of 20% and the bank puts down 80%, then the bank and the "borrower" own the home jointly as tenants in common with a 20%-80% split of the asset amongst them. The "borrower" moves into the home and pays the bank 80% of the fair rental value of the home each month. {Material added/changed in edit: ...


22

It makes sense to avoid share picking, if you're not really familiar with individual companies. But a reasonable alternative is to buy an Exchange-Traded Fund which tracks a whole portfolio of companies. This is basically investing in the economy as a whole. The ETF will generally buy a mix of shares. For instance, an ETF which tracks the EuroStoxx 50 will ...


22

Tricky choice, but there's a couple of things to consider. You said you plan on upgrading to a more expensive house, so you might save more on the new house post-bubble than you'd lose on your current house. Suppose you want to move from a $1M house to a $1.5M house - you'll need $0.5M. The bubble bursts, and housing prices fall 20% across the board. Now you ...


21

There are times that the simplest explanation (or analysis) is best. You show that, for a time, the PMI is $1812/yr. And it's the cost you will incur by sending $15,000 to the student loan instead of using it as a downpayment. 1812/15000 is 12%. The loan is already costing you 4% (I know, 3.899, a rounding error), so in effect, that $15,000 is costing 16%. ...


17

This tale makes me sad the more I learn of it. I am impressed with your dedication and caring for your ex-wife and particularly your kids; you seem like a good person from your questions. But you are tired and exasperated too. You have every right to be. The problem isn't how this woman can rent a new apartment (which there isn't a good way that won't ...


15

This is a pretty common situation, so not too much fuss involved. Most lenders will have have no issue with counting an equity gift as down-payment and since the difference between value and mortgage amount is more than 20% of value you likely won't need any cash for down-payment. Your grandparents will have to report the gift ($80k in equity) via Form 709 ...


13

Pay off my entire mortgage, and put the rest to stocks I like this option, rather than exposing all 600k to market risk, I'd think of paying off the mortgage as a way to diversify my portfolio. Expose 400k to market risk, and get a guaranteed 3.75% return on that 200k (in essence). Then you can invest the money you were putting towards your mortgage each ...


12

She can find a landlord that doesn't do credit checks. Maybe on Craigslist? She may end up paying more, have a bigger security deposit, etc. She can get someone else (not you) to sit her down and explain to her frankly that she's messing things up for herself and her children by being a poor manager of her finances. As her credit score improves, more ...


12

When a house is sold at a foreclosure auction, the selling bank usually does not provide the guarantees that a normal house seller provides. Furthermore, the previous owner may have neglected the property, and/or spitefully damaged the property. Bank-owned properties are often neglected and/or vandalized. Banks are usually too short-sighted to properly ...


12

Can I give the bank the $300,000 to clear the mortgage, or must I pay off the total interest that was agreed upon for the 30 year term? This depends on the loan agreement. I had one loan where I was on the hook regardless. Early payment was just that, early payment. It would have allowed me to skip months without making payments (because I had already ...


12

I think it's important to look at numbers. Let's consider a $100,000 house. Case one: Buying with cash In this case, the risk is having all your eggs in one basket. Many people use the term "investment" when mentioning houses, but that's debatable. Rental properties are an investment. Primary residences? I'd personally say no. There is nothing that ...


12

You care if you’re trading up or down, which is very common. The amount that you have to pay to trade up, or receive when trading down, shrinks and grows with the average house price. You also care about the effect on the ease of buying and selling. Generally speaking, in a booming market it is easy to sell but hard to buy, while in a declining market it’s ...


11

I am from Australia, so my answer is based on my experience over here, however it should be similar for the USA. Generally, what determines both the price of houses/apartments and the rents for them is supply and demand. When there is high demand and low supply prices (or rents) generally go up. When there is low demand and high supply prices (or rents) ...


11

Let me address each of your points: Home Prices and Interest rates are in inverse proportion to each other This is not necessarily true at all. Home prices are driven by supply and demand, not by interest rate. It might be true that when rates go up, the demand for houses goes down, as fewer people can afford a house. But in any individual ...


10

You could look into an index fund or ETF that invests primarily in Real Estate Investment Trusts (REIT's). An REIT is any corporation, trust or association that acts as an investment agent specializing in real estate and real estate mortgages Many investment firms offer an index fund or ETF like this. For example, Vanguard and Fidelity have funds that ...


10

The house that sells for $200,000 might rent for a range of monthly numbers. 3% would be $6000/yr or $500/mo. This is absurdly low, and favors renting, not buying. 9% is $1500/mo in which case buying the house to live in or rent out (as a landlord) is the better choice. At this level "paying rent" should be avoided. I'm simply explaining the author's view, ...


10

The 3% and 9% figures are based on the cost of borrowing money and all the other ownership costs associated with real estate. From the same article: http://patrick.net/housing/crash1.html Because it's usually still much cheaper to rent than to own the same size and quality house, in the same school district. In rich neighborhoods, annual rents are ...


10

VNQ only holds ~16% residential REITs. The rest are industrial, office, retail (e.g. shopping malls), specialized (hotels perhaps?) etc. Thus, VNQ isn't as correlated towards housing as you might have assumed just based on it being about "real estate." Second of all, if by "housing" you mean that actual houses have gone up appreciably, then you ought to ...


10

Housemate shares. Seriously. I can't tell you how many times I hear this scenario: Kid graduates college; kid runs out and signs lease on apartment "because that's what you do"**; kid complains that he's in financial trouble and can't make ends meet. Housemate sharing is most famously displayed in hit shows like Big Bang Theory or New Girl. They get a ...


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