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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.


109

You are conflating issues. You made a charge on a credit card. You have the money, earning near-zero interest, but are wondering whether you should use that money to pay a (presumably) high interest debt. Of course, the answer is pay now. Most of the details beyond that are not relevant.


107

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 ...


79

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 ...


69

There are a few economical reasons to rent instead of buy including if the cost are similar. The first is that you anticipate that you might be moving soon. It is typically expensive to transact real estate and this would include closing cost and loan origination fees. If you know you are going to be moving in a year or two, then it is probably better to ...


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 ...


36

Well "sane" is a pretty low bar... It's not a terrible plan, but it's not guaranteed to work in your favor. If you are correct that the market is at a peak, then yes, you'll be better off paying the mortgage. But if the market goes up, then you'd have an opportunity cost. The trade-off with paying debt versus investing is risk. You are effectively ...


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 ...


29

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 ...


28

Buying means you are taking on the risk associated with the price fluctuation of the property. If the property goes down in value, it's possible you end up underwater on your mortgage when you decide to sell - or when you have to sell. Even if you're planning on buying one property and staying for the long term, you could have a major health issue, or a ...


28

The property must be your primary residence and you must have occupied it for 2 of the last 5 years and make no more than $250,000 in gains if you're single or $500,000 if file joint tax returns with a spouse. There are exceptions, for instance for members of the armed forces. Official IRS document regarding this subject: https://www.irs.gov/taxtopics/tc701 ...


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 ...


23

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 ...


23

If you have 15,000 in your checking account, you should see these two events (paying for house and getting money for internship) completely separated. You pay your bill when it is due and no interest is charged (otherwise you'd pay more). Even if that leaves you with 10% less in your account, that's the cheapest way of doing it.


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 will depend greatly on your personal appetite for risk. From a strictly monetary point of view, you'd likely do better by investing in the market (although past performance does not guarantee future results). Paying off the mortgage gets you a guaranteed effective return of 3.675%, which is historically pretty low. Long-term investment in stocks would ...


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 ...


13

There are already great answers that cover most of it. Here are a couple of other considerations. Be sure you understand the cost of ownership. The other answers have covered this pretty well, but make sure you calculate the actual cost of ownership. This will include your mortgage, maintenance costs, insurance and taxes at a minimum. Depending on where/...


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

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 ...


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