I agree--though I do think that if one can save up the 20%, even if it means living on rice and beans, then the monthly payments are not as much of a vice. Meaning that if you can save $100K on a $500K house, then the $2,000 - $2,500 a month for the mortgage is probably very comfortable since you were likely saving quite a bit more than that per month to reach the downpayment.
I somewhat agree. Of course it's always going to be easier to pay a lower mortgage amount, but that doesn't mean it's always the smarter choice to defer buying until you can amass a 20% downpayment.
i so agree with this!Date: 1/6/2010 8:23:52 PM
Author: Dancing Fire
we bought our house in 1987 when i was 28 yrs old and we paid off our mortgage in 18 yrs by paying an extra $250 per month. believe me.... it feels so good w/o worrying about a mortgage payment every month even though we probably lost about $200K in equity after the bubble had bursted. right now i could care less if my house is worth $100K or 500K i can sleep well at night.my wish now is to recover the money that i lost in the stock market.
I definitely agree that 20% is not the end-all, be-all. Heck, I feel like luck plays a role in itself. I remember having a conversation with a friend several years about about how much to put down. She and her husband bought in 1999 with something like 5% down. She wanted to wait until they had 20% down and her husband wasn''t having it. Well lo and behold, the market took off and their house doubled in value in just 2 years. She said that if they''d waited and done it her way, they''d never be able to afford their own house. They ended up getting divorced in 2005 and sold the house for nearly 4x what they paid. She still jokes about the timing of it. She says it was just pure luck that she got married when the housing market was taking off, let her husband talk her into making what she felt was bad financial decision, then divorced at the peak. She couldn''t have planned it better if she tried, hahaDate: 1/7/2010 5:53:24 PM
Author: Allison D.
I somewhat agree. Of course it''s always going to be easier to pay a lower mortgage amount, but that doesn''t mean it''s always the smarter choice to defer buying until you can amass a 20% downpayment.
In my case, the monthly payment difference between putting down 20% vs. 10% is only $216 (on a mortgage of nearly $2K). The house wouldn''t have been magically ''more affordable'' had I waited to save 20% down; it would have just left me in the rental market longer with less to show for the money I spent.
What made it affordable was these things: a) we didn''t carry any other debt (cars paid off, no significant c/c debt), b) we bought a house well within our means, and c) we chose a newer house that would be far less likely to need significant repair funds in the first few years of ownership.
Not only could we comfortably hit our monthly mortgage, but we were able to pay off a $37,500 second mortgage in under 3 years AND save money, too. The house was affordable because of our debt-to-income ratio, not because of the percentage of our downpayment.
I guess my point is this: we still spent the 2.5 years ''saving'' the other 10%, but instead of depositing it into a savings account, we ''deposited'' it to the 2nd lender to pay off the HELOC. While doing so, we profoundly improved our quality of life since we were ''saving'' while living in our home instead of living in less than optimal apartment conditions. We also improved our financial position by using those 2.5 years to pay into our asset instead of rent.
20% is a great guideline, but I agree with Meresal that it''s not the be-all, end-all.
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