Buying a house

[MgoSam]

I am talking to a local realter and am starting to look for a house. Ideally I would love to close and be able to move in by May, as that will give me time to move in during good weather and start any renovations or projects.

I have seen several listings that I will visit that are lower than I was expecting to find, and all are in good areas. One of the things that I am looking for is a house that is less than 5 miles from my office as this will make it easier to bike to work. I found two great houses that I can afford by myself and both are 3 bedrooms so I am looking to possibly get two roommates, which will help me pay down the mortgage faster. A question popped up with my parents, they are willing to pay for the house and send me the mortgage payments, do you think this is a good idea. I have enough money in Vanguard to pay for the house outright, but don't want to pull that much money out as it will accumulate. Both of my parents have their cash in the bank, they had terrible experiences in the stock market and I haven't convinced them to put their money in Vanguard. Do you think this is a good idea?

I should add that I work for my dad's company, it is a small company and he is grooming me to take over. Right now I run our company's sales while he does the accounting, purchasing, and day-to-day management. I am learning more about these three functions and am gradually taking more control over these. I don't see them paying for the house and me paying them back as a problem. Right now I send nearly 75% of my pay to Vanguard in weekly investments and I can change this to instead move the mortgage payments to them automatically. With online mortgage amortization calculators it can be done to calculate how much I currently owe.

I know that money can ruin relationships, but since we have been working very closely for the past 3 years, I don't see this as a problem. What do you think?

[MgoSam]

I should add that they have the cash on hand. I haven't had a serious discussion with them about it, but they have hinted about this last year when I didn't think I was ready to own. My mom has about a third of the amount needed sitting in a personal bank account collecting nothing in interest.

If I were to do this I would put this down in writing and make a formal legal agreement. I am shopping around to see what interest rate pre-approved loans are available to me and will use this rate when making an agreement with my parents. Then based on this I will contribute in either weekly or biweekly payments (or monthly if they prefer).

It should be noted that I do have the money to pay the house in full, but it would require selling most of my money in Vanguard.

If this isn't the ideal situation I can also go to a bank for a mortgage, but if I can get my parents the interest payments this would also help me by eliminating closing costs and other bank fees.

[nereo]

MgoSam

Congrats on having enough cash on hand to buy your house outright, and for having parents that care enough to want to do the same for you.

I'm guessing that you have already done the "rent vs. buy" calculations and purchasing a house comes out in your favor.

Have you looked at what kind of rate you could get from the bank for a mortgage? If it's <4% than I would consider putting 20% down and keeping your Vanguard 'stach.  In the long term (+10 years) you will almost certainly earn more in your Vanguard than 4%/year.  Also, you get the tax break of deducting the interest on your mortgage, which can save you thousands.  Even with this strategy I'd still pay down the house at an accelerated rate, particularly in the first few years.

Borrowing from parents is different for every family.  I'd have a written agreement if you go that route but for some families it brings lots of stress, and for others it's never an issue.

N

[MgoSam]

Thank you, I love seeing my stash grow. It is my "One day I may say screw it and retire" fund. Right now I love my job, I love it I love it I love it, but this love may not last. So if in 10 years the situation changes I would love to have a paid off home and enough money to retire on.

If this first house works out well I hope to buy a rental property, but that is really too far down the line.

[SunshineGirl]

It sounds like you would actually be doing your parents a favor in this case, as you can provide them a good return on their investment.

Having said that, it would be AWESOME to be able to buy the house outright.