Rent or buy in same neighborhood...

That doesn't necessarily make it better.

 

Most landlords have a rule about renters with ass mucus. So just keep that in mind.

 

Then you're talking about flexibility, which is a given. If you want the flexibility of renting, then it supercedes the financial advantages of ownership. No real need to crunch numbers, it's just personal preference.

What you spend on a house is discretionary unless you buy a house that you have to fix.

 

No, I'm talking about alot of things. Many of them are in this thread. Flexibility is one that cannot be mathematically quantified, the others can.

Flexibility is one.
Liquidity is another.
Cost of ownership is one.
Maintenance.
Taxes.
Insurance.
Tendency to decorate 'owned' homes more lavishly.
Cost of liquidation.
Closing costs.
Cost of the interest, even after deductions is large.

There's alot more to think about than most think about. Add them all up, it's alot.

Here's the catch that always comes back, and this surprised me, particularly in my neighborhood where million dollar homes are the norm:

If the monthly and annual costs of renting are much less than ownership, the homeowners will not invest the remainder. They will blow it. In other words, the only 'savings' many people have is in their home, either by appreciation or repayment of debt. This makes home ownership better than blowing all your money, but still not always better than renting and investing your savings.

But - if you really look at the costs of renting versus owning, renting is often better. Most people would be satisfied with a much less luxurious rental home, and that's less. There's a ton of factors.

It needs to be done on a spreadsheet. I own a home because I like nice things. It's a horrible 'investment'. It got less bad when rates got really low - when I bought rates were 8 5/8 - but it's still not great. After 7 years of it being WAY worse than renting, it might be turning since my interest expense is so low. And FWIW, it's increased in value by several hundred thousand dollars. Doesn't matter. Looks good to see it, but it's a small fraction of the picture.

 

I guess we're all straying from the original point here.

Gutter was debating renting v. owning a specific residence. My point was that if the neighborhood is appreciating at a decent rate and you are a little bit cash starved with good credit and have decent income buy it on an 80/20 and go I/O on the 80% loan. You avoid pmi, have an affordable payment and the appreciation on the property will far outweigh any principle you would have paid off in a conventional 30 year fixed.

In a 30 year fixed you would be mostly paying off the pmi after interest and your payment will be higher. People get to hung up on paying off principal. How many people do you know that lived in the same house for 30 years? Live there for as cheap as possible and don't let interest only loans scare you. In the right property they are a good move.

As was pointed out earlier in this thread, you need to do some homework on the neighborhood and surrounding development, you need good credit so you don't pay more than prime + .5 on the 2nd and you just pay the 2nd mortgage agggresively. If Prime goes through the roof you can always refi.

 

Point being, I can rent a townhome in the neighborhood I wanted to purchase for about 200 dollars less than buying the same exact unit factoring in taxes, HOA, and insurance for both. I don't have 20% to put down. That is a buttload of money. If i had that it would have already been spent on hookers and coke.

I'm a little concerned that the units will begin to taper off. They have appreciated 40K in 4 years. I'm not sure how much they could possibly increase with all the new construction. But, they are in a high dollar area so who knows.

 

Nice to see a man with his priorities in line.

I forgot to mention that the loan programs I was discussing involve zero PMI for excellent credit scores. It's an alternative to the 80/20 plan. Pretty much have to shop hard for it, but its out there, usually at credit unions (viva tax exempt status).

 

You can get a secondary mortgage for the 20%.

 

Welcome to the first page of this thread.

 

New construction shouldn't deter you. Many times it will benefit you.

Find a mortgage broker you can trust and run the numbers on an 80/20 going interest only on the first 5-10 years of the 1st morgage.

You can get in there no money down for a low payment, if your credit is decent, pay no pmi and it will most likely keep appreciating. You will be paying principal on the 2nd loan and I/O on the first so you should do fine.