My wife wants to buy a house now that my income is at 50k a year. I lost my job four years ago and am now doing something totally different but making OK money. Very secure job, but honestly strapping myself into a house at this point scares the living daylights out of me. My councelor says it is a wise investment and even if you find yourself wanted to move in a few years your house has still appreciated and you walk away on top. Me I like the freedom of mobility. The ability to pick up and move at anytime. We have already found the house to buy, suppose to put an offer tomorrow. Any of you have any sage advice?
Not sage advice....but maybe a wise move anyway Hello Xarick, If I were you I might wait and see what the housing market will do in the coming year or two. I have a friend that is a very successful mortgage broker and she is seeing a lot of her middle income loans dry up do to housing prices and interest rates. Her business is still good in the high income areas of the city (she sells a lot of mortgages on Brownstones in Boston) but she is starting to see a lot of suburban houses sit on the market for sometimes >1year. Good luck! Justin
Definitely compare the cost of buying (including taxes, insurance, mortgage) a house with the cost of renting the equivalent house. In some areas of the country, renting costs half of purchase carrying costs. Do factor in any tax break you'll get. Do not factor in appreciation as you can't predict that (despite what some real estate professionals would like you to believe - housing can and does go down in local markets).
Buying a house is the most expensive investment most people will ever make in their lives. The decision is a very personal one, and should be based on your family/financial situation, as well as the real estate market. In this part of the country, having a mortgage is comparable to the rents being charged, so it was a no-brainer for me. I bought in 1999, just before the market exploded, so I got in at just the right time. A piece of advice my father gave me.....if you make an extra payment every year on a 30-year mortgage, you can pay it off in less than 20 years, because the extra payments go on the principal, not the interest.
I've been told that an extra payment per year on a 30-year mortgage will allow you to pay it off 7 years earlier. Either way, it will save you a lot of money in interest. Anyway, if you do decide to make an extra mortgage payment per year, be sure to annotate on the check and payment slip somewhere that the extra payment is "for principle only." Otherwise the bank may apply the extra payment towards interest. http://www.ehow.com/how_110943_save-big-bucks.html
I bought my first house last year. I was hesitant for a while, but it was one of the best things I've done. Sure there is more responsibility with maintenance, insurance, and so forth, but I like having my own place, my own yard, the mortgage interest rate deduction, and my own garage Yes, houses may depreciate, but with a fixed rate mortgage, your payments will stay the same. A landlord could raise your rent every year, or worse, decide to kick you out. If you not planning to move in the next 5 years, I would say it go for it. Just don't try to buy more house than you can afford.
Let's see... I bought a house in 2001 and sold it and moved in 2003 (Profit of over $10k) ; I bought to the place I moved to (and am living in now) and it looks as though I will be moving again this fall. The way the real estate market looks here (rural Nova Scotia), I should be looking at making a profit of 10 - 12k (that's after I the $ I spent on the house ). So, living here for 3 years, I'll have made ~3k a year. (+ I'll get my downpayment back and all the mortage payments I made since I own the place...) If I were renting locally, I'd have paid just as much in rent and I'd walk away with $0. I'd say research the market, but if you live in a good place the average increase of your home-value is 5%/year ( though some places it's 5% a month!)... you'll never make money if you rent, though your landlord will always make his/her $! Depending on the market, real estate is generally a wise investment, as long as it's well thought through - don't buy a $250k house if the avg home is $150k, you're limiting yourself to a chosen few who can afford it... Good Luck
I live in portland oregon. The average house appreciation has been 12-17% over the last five years. This year it was 15%. You can't buy a house for 150k here. Minimum is 190k for an older 3 bedroom with 1100 sqft on a 6k lot. New houses sell for 300-500k Crazy.
It is a personal choice and only you can decide from a finaincial prospective what is best for you. My wife andI have alwas rented until late last year. the price of homes were going up at an unbelievable rate. All the apartments were being converted to condos. We felt that is we did not buynow, we could not afford it in a few years. Now, or monthly payment will not goup (except for monthly fees) where rent as going up every year. For us, it was a good mve.
Planning ahead I can't say buying my house was that great of an investment, nor can I even say it wasn't a bad idea. I bought an older house (built 1917) in a nice residential area. The problem I've had is the municipality I live in. They continue to find ways to raise taxes and cut services...kind of a "Doing less with more" attitude. The housing assessments keep going up, but the sale prices are dropping. Only after fighting the board through numerous meetings can people get the assesments, and therefore their taxes, dropped. Of course when you buy the house you have to pay the first years taxes right off the bat, an no... you don't get a rebate if you get your assessment lowered. You can apply for the Star Exemption, but if you miss the March 1st deadline your application doesn't go in until the following March, which means the tax break goes into effect the year after that. Either way you're paying full taxes the first year. I've been lucky enough to not have to replace the furnace, hot water tank, or roof so far, 4 years in. If you're not as lucky then you'll find yourself recalculating your "investment" numbers. A $165,000 house at 7%apr will run you about $1097.75 per month. An extra payment of $1097.75 will drop 6 years off the payment schedule *IF* you keep paying the same amount, even when they mail you your new booklet with a lower payment amount in it. They want you to take 30 years, they want the interest to accrue. The years off is pretty static due to the whole percentage issue. To take off 10 years, make 2 double payments each year. Interestingly (ha ha pun intended) if you make 3 double payments throughout the year, you will only knock off 12 years. More fun with interest can be had at Mortgage Calculator You can also do the generic rent vs buy thing HERE The natural gas prices went up so much I was forced to replace my nice old windows in the house. Wasn't a factor at first because the prices were doable. They've increased at least 100% since I bought the house. Might as well pay the money to the window guy and at least have new ones to look out. My quarterly water bill just went up again about $100 per quarter. There are now general fees attached with the actual usage fee. I got an FHA loan for the place, which means if I sell within 7 years or so I have to pay the difference in points between the regular loan and the FHA loan. I wanted to replace the fuse box with breakers. The local electricians all quoted me a price of around $2100 for that. It seems our city reads the state law in a way which requires any citizen who contracts out for work to the house must update their fire alarm system to include hard wired smoke detectors. It doesn't matter if you already have a smoke detector on all floors, they must be hard wired detectors because people are apparently too stupid to change their batteries and we have to be protected from ourselves. Well, I stand corrected on that. They also told me that I'm in luck becuase they recently changed the laws stating now only 1 has to be wired, the rest can be wireless but have to have some sort of network or something. Either way, there has to be one in each bedroom, one on each floor, and it costs about $2100. No thanks, I'll take my chances with my fuses. So anyway, I chose a bad city to buy in. I failed to research the little things and now I'm paying for it.
Buy a house if you plan to be in the area for a minimum of 7 to 6 years. Even if you are in a city where it costs less to rent, buying the house will afford you a tax break and, most importantly, future equity in the home. With rising interest rates, try to finance the house with a mortgage that is assumable. If rates continue to go up, your house will be extremely attractive to a potential buyer because of it's low, assumable rate. Even if you move locally, you can keep the house as a rental while you rent elsewhere. Don't view a house as an anchor. Though it's your home, it's also an investment. Buy a house with 3 or more bedrooms and a bare minimum of 1 1/2 bathrooms, even if the home itself is small, that's ok. These features make your home attractive to both small and larger families when you go to sell or rent it down the road. I've done this exact same thing numerous times. I currently own the home I live in, plus 2 that I rent out, as well as a small interest in an apartment community. I've done it NOT with high income, but with the equity I've built through the last 8 years. Real estate is the most reliable, easiest way to invest. Pug
The OP lives in Portland, a city with a housing market not unlike Seattle. I say if you can afford it, buy now. I don't see the housing market in either city cooling off appreciably in the near future, barring some sort of economic catastrophe. I currently reside in a house that I bought new in a newly constructed neighborhood eight years ago this month. I bought it for a smidgen under $ 200K. The other houses in my neighborhood are currently selling for $ 315-330K, and I would be on the high end since I have a larger house. I refinanced to a 15 year mortgage four years ago and pay an extra $ 50/month towards reduction of the principle. I currently owe $ 125K. With a fifteen year mortgage, making substantial prepayments does not have as a much of a 'bang for the buck' impact as it does for a 30 year mortgage. I am actually not in a hurry to pay off the mortgage due to the tax advantages. What part of Portland are you looking to buy in?
