How to know when a 30 vs. a 15 year mortgage is best?

[EconDiva]

I know this is such a general question.

I am asking because I've been renting since age 21 (I'm 37 now) and my rent has officially gone over the threshold I'm willing to continue paying as a renter.  I think it's time to buy.

I'm in a fairly HCOL area and I will not be living here in another 10 years.  However, 5 years is very likely.  I'm considering a condo (can't afford an actual 'house' in the area I'd like to live).  To give an idea of the costs, the condos facing my apartment have a convertible that's 800 sq feet currently going for $230k.  They also have a 3 br/3 ba in the same unit going for $780K. 

I gross about $90K (including a 7% annual bonus) so I need to go as low as possible in price.  What I'm trying to figure out right now is how do I decide if I need to do a 30 versus a 15 year mortgage?  I want a paid off home (or property that could be rented out) by, I'd say, age 55 seems reasonable.  So that means a 15 year would be needed, right?  However, it's unlikely I could afford the payment on a 15 year considering the prices of condos in the areas I want to live...I'd only be able to afford the payment on a 30 year note.  :(

I'm trying to figure out what is my best plan of action--do I get a 30 year note and 'hope' that when I move out in, say, 5 years, I can rent the place out at a high enough amount to pay it off in say, 20 years?

[EconDiva]

I know this is such a general question.

I am asking because I've been renting since age 21 (I'm 37 now) and my rent has officially gone over the threshold I'm willing to continue paying as a renter.  I think it's time to buy.

I'm in a fairly HCOL area and I will not be living here in another 10 years.  However, 5 years is very likely.  I'm considering a condo (can't afford an actual 'house' in the area I'd like to live).  To give an idea of the costs, the condos facing my apartment have a convertible that's 800 sq feet currently going for $230k.  They also have a 3 br/3 ba in the same unit going for $780K. 

I gross about $90K (including a 7% annual bonus) so I need to go as low as possible in price.  What I'm trying to figure out right now is how do I decide if I need to do a 30 versus a 15 year mortgage?  I want a paid off home (or property that could be rented out) by, I'd say, age 55 seems reasonable.  So that means a 15 year would be needed, right?  However, it's unlikely I could afford the payment on a 15 year considering the prices of condos in the areas I want to live...I'd only be able to afford the payment on a 30 year note.  :(

I'm trying to figure out what is my best plan of action--do I get a 30 year note and 'hope' that when I move out in, say, 5 years, I can rent the place out at a high enough amount to pay it off in say, 20 years?

ETA:  Alternatively, I could look at buying a studio.  Just doesn't seem like the best idea if I want to sell the unit in the future as I'd think selling a 1 bedroom would be way easier.  I have seen some studios in the city going for $150K.  But 1 bedrooms I like are running starting in the low to mid 200s.  I'm thinking that's way too high for my salary.

[bacchi]

Have you run the NYT Rent/Buy calculator? If you don't plan to be there in 7 years, renting may be cheaper.

That said, I'd consider a 5/1 ARM where you leave some interest on the table in return for some closing cost credits. The closing costs are going to be the painful part of this endeavor if you plan to move in less than 10 years.

Don't plan on renting it. You never know how plans change and it may fit your lifestyle to sell it and move on.

[sis]

Did you do the rent vs buy calculator?  http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html  Right now it seems that your decision to buy is more emotional than anything else, you really need to see if the math makes sense.  Sometimes buying doesn't make sense, especially if you are planning on moving in a short time.

Do you have enough money to put at least 20% down and still have a bunch of wiggle room left over (say at least another 10% of the home price) for closing costs and unexpected emergencies?  If you put less than 20% down you are going to have to pay PMI.

If you are planning on moving in strictly 5 years or less (and selling at that time), the note that makes the most sense to you is probably a 5/1 ARM.  You'll get the lowest rate that way.  You need to look at the condo association rules - some places don't allow renting, or they allow renting like 2 out of every 5 years, etc.  This is specific to each individual condo.

You really need to make a budget that includes your savings goals and then figure out the most you can pay on a monthly basis.

[dougules]

+1 on the rent vs. buy calculator. 

If the numbers work out to buying or you decide it's worth the extra money,  I would look at the interest rate. 

If you have debt, get the 30 year if the mortgage interest rate is lower than the debt interest rate.  (Although, if you have debt, you really really should rent unless the calculator says it's significantly better to buy). 

Otherwise, if the mortgage interest rate is low (like below 3%), it might make sense to get the 30 year.  Then you can string it out and invest the money to leverage a better return in the market.  That strategy depends on your risk tolerance, though.

Otherwise, 15 year mortgages usually have a lower interest rate than the 30.  If so, get the 15. 

If none of the above is true, get the 30 year and then pay on it like it's an 8 year. 

[EconDiva]

I toyed around with the calculator just now.

Using a mortgage of $180K which is 2 times my gross income, 30 year note, staying in my current city for 5 years, it states it's better to rent if I can rent a similar home for less than $1,333/month. 

I could definitely find and rent a place for $1,333/month here.  Plenty of apartments in that price range on the other side of town.

However, it would be in a totally different area from where I'm looking to buy.  I'm looking to buy within a half mile or so of where I currently live.  I cannot find a one bedroom for $1,333/month or less within that distance.  The 1 bedroom I currently have I'm renting for ~$1,550 a month and new ones being listed are starting at $1,600 a month now (studios are starting at ~$1,450 a month). 

[woopwoop]

Not going to comment on whether or not buying is advisable in your case, but as far as a 15 vs 30 mortgage goes... I had a 15 year mortgage for a while, then sold that house and bought again. I decided to get a 30 year mortgage for the following reasons:
- More flexibility with payments. I can overpay if I ever want to (not sure why with such low interest rates), but I'm not forced into paying the loan off earlier.
- If I want to buy an investment property, my debt payments are lower on paper than they would be with a 15-year.
- In this lending environment, I want to stretch my 3.5% mortgage out as long as possible and invest the money instead.

- While rates are lower with a 15-year, they're not significantly lower (maybe 1% or so)  and on the balance I felt this one positive wasn't worth the downsides of a shorter loan.

[sis]

I toyed around with the calculator just now.

Using a mortgage of $180K which is 2 times my gross income, 30 year note, staying in my current city for 5 years, it states it's better to rent if I can rent a similar home for less than $1,333/month. 

I could definitely find and rent a place for $1,333/month here.  Plenty of apartments in that price range on the other side of town.

However, it would be in a totally different area from where I'm looking to buy.  I'm looking to buy within a half mile or so of where I currently live.  I cannot find a one bedroom for $1,333/month or less within that distance.  The 1 bedroom I currently have I'm renting for ~$1,550 a month and new ones being listed are starting at $1,600 a month now (studios are starting at ~$1,450 a month).

Is the other side of town inherently dangerous or truly undesirable?  It might be worth it to live in a not so wonderful place for 5 years if it gets you to the savings goals that you need.

[EconDiva]

I toyed around with the calculator just now.

Using a mortgage of $180K which is 2 times my gross income, 30 year note, staying in my current city for 5 years, it states it's better to rent if I can rent a similar home for less than $1,333/month. 

I could definitely find and rent a place for $1,333/month here.  Plenty of apartments in that price range on the other side of town.

However, it would be in a totally different area from where I'm looking to buy.  I'm looking to buy within a half mile or so of where I currently live.  I cannot find a one bedroom for $1,333/month or less within that distance.  The 1 bedroom I currently have I'm renting for ~$1,550 a month and new ones being listed are starting at $1,600 a month now (studios are starting at ~$1,450 a month).

Is the other side of town inherently dangerous or truly undesirable?  It might be worth it to live in a not so wonderful place for 5 years if it gets you to the savings goals that you need.

Nope.  I was just depressed living there and am like 10 times happier where I'm at now.

But since what is affordable is most important, I can definitely move back there.  I could rent a one bedroom for $900-1000 instead of buying a condo in a location I like that would cost me maybe $1350 on a 30 year note.

[dougules]

I toyed around with the calculator just now.

Using a mortgage of $180K which is 2 times my gross income, 30 year note, staying in my current city for 5 years, it states it's better to rent if I can rent a similar home for less than $1,333/month. 

I could definitely find and rent a place for $1,333/month here.  Plenty of apartments in that price range on the other side of town.

However, it would be in a totally different area from where I'm looking to buy.  I'm looking to buy within a half mile or so of where I currently live.  I cannot find a one bedroom for $1,333/month or less within that distance.  The 1 bedroom I currently have I'm renting for ~$1,550 a month and new ones being listed are starting at $1,600 a month now (studios are starting at ~$1,450 a month).

Is the other side of town inherently dangerous or truly undesirable?  It might be worth it to live in a not so wonderful place for 5 years if it gets you to the savings goals that you need.

Nope.  I was just depressed living there and am like 10 times happier where I'm at now.

But since what is affordable is most important, I can definitely move back there.  I could rent a one bedroom for $900-1000 instead of buying a condo in a location I like that would cost me maybe $1350 on a 30 year note.

Which one is closer to work?  Don't forget the commute. 

[EconDiva]

In the old neighborhood I commuted 3 hours roundtrip to work daily.  Now its more like 3 hours and 45 minutes.

I know, I know.  Honestly, once you get past like 2.5 hours in commute time, its bad either way.  Although I'm commuting more living in the heart of the city, I'm happier because I like where I live so much more.  So the extra 45 minutes didn't make a difference because it's long either way (plus I work on the train I take to/from work).

I have no desire to live by my job FYI.  I'm single and the job is located in the middle of nowhere.

[mozar]

How about getting a studio for 1450? You'll save an extra 100 bucks, and you don't have to worry about maintenance, upgrades, renting it out or selling it.

[dougules]

In the old neighborhood I commuted 3 hours roundtrip to work daily.  Now its more like 3 hours and 45 minutes.

I know, I know.  Honestly, once you get past like 2.5 hours in commute time, its bad either way.  Although I'm commuting more living in the heart of the city, I'm happier because I like where I live so much more.  So the extra 45 minutes didn't make a difference because it's long either way (plus I work on the train I take to/from work).

I have no desire to live by my job FYI.  I'm single and the job is located in the middle of nowhere.

Wow.  That sounds rough.  I don't think I could handle that long-term personally.  Any halfway decent jobs closer to home? 

Anyway, I don't know what the difference in train ticket prices is, but it should go into the math. 

[boarder42]

holy cow a 4 hour commute daily thats just insane in my mind

i personally wouldnt buy a house that setup a commute that far you're tying yourself to something that is reducing your pay by 50% per hour due to time on the train.

i'd be
1. considering moving to a LCOL
2. considering getting a new job in the area i like to live
3. continue renting b/c thats just nuts IMO

but as to your original question it takes 7 years for the 30 year to be come the better option in most instances there is an online calculator here to enter your exact data if you sold on buying but to me its uttter nonsense considering the commute time

http://michaelbluejay.com/house/15vs30.html

[EconDiva]

How about getting a studio for 1450? You'll save an extra 100 bucks, and you don't have to worry about maintenance, upgrades, renting it out or selling it.

It's an option.

However, I lived here in this same exact building in 2013 and the studios in this building were $1250 then.

So I'm sure within 2 years they'll be up to about $1550.  The location I'm in is crazy price-wise.  That's why all of a sudden I'm feeling antsy to buy for the first time in my life.  I feel like I'd rather lock myself into a mortgage than keep paying these rising rents. 

Even on the cheaper side of town, with my first rent renewal they tried to go up on my 12%.  That's not even downtown where I'm located now. 

[EconDiva]

holy cow a 4 hour commute daily thats just insane in my mind

i personally wouldnt buy a house that setup a commute that far you're tying yourself to something that is reducing your pay by 50% per hour due to time on the train.

i'd be
1. considering moving to a LCOL
2. considering getting a new job in the area i like to live
3. continue renting b/c thats just nuts IMO

but as to your original question it takes 7 years for the 30 year to be come the better option in most instances there is an online calculator here to enter your exact data if you sold on buying but to me its uttter nonsense considering the commute time

http://michaelbluejay.com/house/15vs30.html

My current job is the first place I've considered staying in long term.  To give more background, I'm hoping within the next few years that I can go remote with them and move back home to the south.  I hope...who knows what will really happen. It's too early right now.  They have a pension here, so I figure the adult thing to do would be to stick with this company long term.  I really don't want to live by my job though.  There is nothing out that way.  I already moved away from all my friends and family so moving by my job near nothing would not be good.

I think everyone should consider this as well: 

SHOULD something happen to my job, all of the jobs are in the CITY, where I currently live.  Not where I'd be moving to if I moved closer to my current place of employment. I used to actually work a mile from where I currently live but took a job offer where I'm at now making approximately 50% more in pay. 

[EconDiva]

In the old neighborhood I commuted 3 hours roundtrip to work daily.  Now its more like 3 hours and 45 minutes.

I know, I know.  Honestly, once you get past like 2.5 hours in commute time, its bad either way.  Although I'm commuting more living in the heart of the city, I'm happier because I like where I live so much more.  So the extra 45 minutes didn't make a difference because it's long either way (plus I work on the train I take to/from work).

I have no desire to live by my job FYI.  I'm single and the job is located in the middle of nowhere.

Wow.  That sounds rough.  I don't think I could handle that long-term personally.  Any halfway decent jobs closer to home? 

Anyway, I don't know what the difference in train ticket prices is, but it should go into the math.

The difference in train tickets between where I live now (3:45 commute) and where I just moved from (3 hour commute) is ~$20/month.  I don't have a car or drive by the way. 

I could start looking for other jobs...yes.  But I like my job :(  I feel like I've been trying to get in with a company like this for the past decade.  Half my colleagues are doing a similar commute (although many of them have 2 work from home days...I only have 1 right now). 

I have adjusted to the commute.  I don't love it.  But I feel like it's part of having the job.  Don't forget as I mentioned earlier...I work during my commute.  My commute time is part of my work time basically because I work on the train.

[Axecleaver]

It doesn't sound like you really have a question about mortgages, it's more about rent vs. buy, and that NYT calculator will show you some data based on your expected timeline of 10 years (usually 7 is the minimum for "buy" to have a chance of being worth it). But in regards to the original question (15 vs 30 year), a 30 year gives you more flexibility, and the 15 year saves you a little bit over time due to a lower rate.

The spread between 15 and 30 year is around 5%-.75%. On a $200,000 house with 20% down, the difference due to the interest rate is about $59 a month. That is to say, you'd pay $59 more a month if you took the 30 year, but made payments on a 15 year schedule.  So increased flexibility costs you ~$700 a year.

[boarder42]

i would examine my lifestyle choice then.

5am get up get ready
6am on train
8am at work
5pm leave work
7pm get home eat dinner etc.
9pm you need to be in bed for 8 hours of sleep

so what exactly are you getting out of this area you live in ... couldnt you just make the 2 hour one way commute to hang out with friends on the weekend.

[Cassie]

She said the train ride is part of her work day so I am assuming she only spends 6 hours at the office. If this is not true you are right about her having no time to enjoy the location.

[EconDiva]

i would examine my lifestyle choice then.

5am get up get ready
6am on train
8am at work
5pm leave work
7pm get home eat dinner etc.
9pm you need to be in bed for 8 hours of sleep

so what exactly are you getting out of this area you live in ... couldnt you just make the 2 hour one way commute to hang out with friends on the weekend.

Close...it's more like:

6 am get up get ready
7 am work on train
9 am work in the office
4 pm back on train
7:30 pm arrive home (usually stop at gym and an errand and/or pick up dinner)
11:00 pm in bed

[dougules]

i would examine my lifestyle choice then.

5am get up get ready
6am on train
8am at work
5pm leave work
7pm get home eat dinner etc.
9pm you need to be in bed for 8 hours of sleep

so what exactly are you getting out of this area you live in ... couldnt you just make the 2 hour one way commute to hang out with friends on the weekend.

Close...it's more like:

6 am get up get ready
7 am work on train
9 am work in the office
4 pm back on train
7:30 pm arrive home (usually stop at gym and an errand and/or pick up dinner)
11:00 pm in bed

You must really love your current job out in the sticks as well as your neighborhood.  You're essentially working about 11 hours a day.  Were you working those kind of hours at the one closer to home?  Did your effective hourly rate even go up that much?  I know I've gone off on a tangent to the interest rates, but I think most people on here reading this can't quite wrap their heads around that lifestyle. 

[boarder42]

I think this mortgage is a bad idea. Your future self will thank you for renting when you realize you're wasting lots of life to spend ~2-3 hours per night in this place you "love".

[EconDiva]

i would examine my lifestyle choice then.

5am get up get ready
6am on train
8am at work
5pm leave work
7pm get home eat dinner etc.
9pm you need to be in bed for 8 hours of sleep

so what exactly are you getting out of this area you live in ... couldnt you just make the 2 hour one way commute to hang out with friends on the weekend.

Close...it's more like:

6 am get up get ready
7 am work on train
9 am work in the office
4 pm back on train
7:30 pm arrive home (usually stop at gym and an errand and/or pick up dinner)
11:00 pm in bed

You must really love your current job out in the sticks as well as your neighborhood.  You're essentially working about 11 hours a day.  Were you working those kind of hours at the one closer to home?  Did your effective hourly rate even go up that much?  I know I've gone off on a tangent to the interest rates, but I think most people on here reading this can't quite wrap their heads around that lifestyle.

No, I don't love it. I like it. And it pays 50% more than I was making at the place I worked downtown. I don't mind the questioning of why I do it.  I want people to understand. I wasn't working those kind of hours at my last job; no. But I got paid about 50% less. Which means I couldn't travel. Or contribute to a 401K. 

[EconDiva]

I think this mortgage is a bad idea. Your future self will thank you for renting when you realize you're wasting lots of life to spend ~2-3 hours per night in this place you "love".

Either that or I could regret I'm 60 and still renting because I never bought and paid off a home...right?

[mozar]

So I'm sure within 2 years they'll be up to about $1550.  The location I'm in is crazy price-wise.  That's why all of a sudden I'm feeling antsy to buy for the first time in my life.  I feel like I'd rather lock myself into a mortgage than keep paying these rising rents. 

It seems counter intuitive but when prices are going up like crazy, that's the time to take a deep breath and not buy. I don't have a crystal ball but remember how prices were going crazy in 2006? It would be different if you planned to stay more than 5 years. I would hunker down and find the smallest studio possible.

Either that or I could regret I'm 60 and still renting because I never bought and paid off a home...right?

Nope, theres nothing wrong with renting.

[Axecleaver]

why your house is a terrible investment.

[EconDiva]

I'm getting the feeling no one understands what it's like to have to work a job with aspects you don't like (i.e. Commute) in order to gain experience and make more money...even if it's a temporary thing you don't plan on doing forever.

May I just pose the question: What would you do then? Walk away from the job with a pension and 50% more than you made before?  Essentially the only enjoyment I get out of having moved to this state is living on the side of town I'm in now.

[EconDiva]

So I'm sure within 2 years they'll be up to about $1550.  The location I'm in is crazy price-wise.  That's why all of a sudden I'm feeling antsy to buy for the first time in my life.  I feel like I'd rather lock myself into a mortgage than keep paying these rising rents. 

It seems counter intuitive but when prices are going up like crazy, that's the time to take a deep breath and not buy. I don't have a crystal ball but remember how prices were going crazy in 2006? It would be different if you planned to stay more than 5 years. I would hunker down and find the smallest studio possible.

Either that or I could regret I'm 60 and still renting because I never bought and paid off a home...right?

Nope, theres nothing wrong with renting.

I understand there's nothing wrong with renting but my point is moreso that I'd feel more secure with a paid off place in retirement since housing is usually a decent percentage of one's income when it comes to expenses is all.

[onlykelsey]

FWIW (I know, market timing, all that jazz), it looks like you're coming in to a very seller-friendly and you-hostile environment in the Chicago real estate market: http://www.trulia.com/real_estate/Chicago-Illinois/market-trends/  . It might make sense to start saving your money and looking around (in a non-emotionally invested way) while you evaluate your options, but the cycle is pretty predictable looking to me. 

I'd also not underestimate how long it takes to buy, even once you have enough cash in the bank and know what neighborhood you're interested in.  My cashhad to be there for 2 or 3 monhts before I applied for a pre-approval, I had to get letters from my bank and my employer, prove my income, find a real estate agent, figure out fees, find a lawyer, etc.  Even once you make an offer that's accepted, you may have to deal with condo and co-op boards who need to approve you, etc.

[boarder42]

So I'm sure within 2 years they'll be up to about $1550.  The location I'm in is crazy price-wise.  That's why all of a sudden I'm feeling antsy to buy for the first time in my life.  I feel like I'd rather lock myself into a mortgage than keep paying these rising rents. 

It seems counter intuitive but when prices are going up like crazy, that's the time to take a deep breath and not buy. I don't have a crystal ball but remember how prices were going crazy in 2006? It would be different if you planned to stay more than 5 years. I would hunker down and find the smallest studio possible.

Either that or I could regret I'm 60 and still renting because I never bought and paid off a home...right?

Nope, theres nothing wrong with renting.

I understand there's nothing wrong with renting but my point is moreso that I'd feel more secure with a paid off place in retirement since housing is usually a decent percentage of one's income when it comes to expenses is all.

This statement tells me you really don't understand the math behind any of this. Feeling more secure and being more secure are 2 different things.  Youre also buying in a booming market. Just like everyone thought it wouldn't bust in 2008. 

As I stated many times so far this thread.  You shouldn't buy a house.  It's an emotional decision proven by this post. I even posted a calculator you could use above to answer your initial question if you bothered to look at it. DONT BUY A PLACE !!!!

[EconDiva]

So I'm sure within 2 years they'll be up to about $1550.  The location I'm in is crazy price-wise.  That's why all of a sudden I'm feeling antsy to buy for the first time in my life.  I feel like I'd rather lock myself into a mortgage than keep paying these rising rents. 

It seems counter intuitive but when prices are going up like crazy, that's the time to take a deep breath and not buy. I don't have a crystal ball but remember how prices were going crazy in 2006? It would be different if you planned to stay more than 5 years. I would hunker down and find the smallest studio possible.

Either that or I could regret I'm 60 and still renting because I never bought and paid off a home...right?

Nope, theres nothing wrong with renting.

I understand there's nothing wrong with renting but my point is moreso that I'd feel more secure with a paid off place in retirement since housing is usually a decent percentage of one's income when it comes to expenses is all.

This statement tells me you really don't understand the math behind any of this. Feeling more secure and being more secure are 2 different things.  Youre also buying in a booming market. Just like everyone thought it wouldn't bust in 2008. 

As I stated many times so far this thread.  You shouldn't buy a house.  It's an emotional decision proven by this post. I even posted a calculator you could use above to answer your initial question if you bothered to look at it. DONT BUY A PLACE !!!!

I used the rent vs buy calculator. I simply did not get to the calculator you posted yet. I'm just getting home.

I am taking into serious consideration everything everyone is posting in this thread. It is seriously NOT necessary to yell to get your point across. Understand the thought of purchasing is a consideration at this point. I haven't made up my mind I would do it. I'm just starting to research if it would make sense. If I was overly emotional about all of this I would have bought a long time ago but I realize renting has been the best decision for me all of this time because I have come out ahead cost wise.  But now I'm not so sure, hence the thread and the questions and the research and all of these thoughts.

Maybe I 'don't' fully understand all of the math behind everything....yet....because I haven't done all of it...hence the reason for this thread. I am considering it. Like literally just started having these thoughts yesterday. I won't do it if it doesn't make sense. Just understand I am simply explaining what my situation is and what I've been thinking up until this point is all. 

[mozar]

Plenty of us understand what it's like to take a longer commute to move up in your career. Up until literally a week ago I had a 3 hour a day commute. I did it for a 20% raise and a step up in career. I was able to finagle a move to an office closer to my house last week by being clever. You can see my post crowing about in the general discussion forum. You said in previous posts that your boss is against telework.  My boss is against it to. You will be surprised what you can get away with at work.
 Instead of making a costly mistake buying a condo in a sellers market. Figure out how to ask for more telework, and start looking for jobs in the city. I used to think I couldn't make more money too. It's about changing your mindset, which is harder than buying a condo but will have a much higher payoff.

[tobitonic]

I was all set to answer 15 years because I'd recommend paying off as quickly as possible, but if a shorter term leads to you spending a hefty chunk of your salary on the property per month, I wouldn't recommend it. More generally, I wouldn't buy any property that cost more than 2x my household income. If I couldn't find any, I wouldn't buy in the area, because that would be a sign to me that the area was unaffordable relative to my income.

[EconDiva]

Plenty of us understand what it's like to take a longer commute to move up in your career. Up until literally a week ago I had a 3 hour a day commute. I did it for a 20% raise and a step up in career. I was able to finagle a move to an office closer to my house last week by being clever. You can see my post crowing about in the general discussion forum. You said in previous posts that your boss is against telework.  My boss is against it to. You will be surprised what you can get away with at work.
 Instead of making a costly mistake buying a condo in a sellers market. Figure out how to ask for more telework, and start looking for jobs in the city. I used to think I couldn't make more money too. It's about changing your mindset, which is harder than buying a condo but will have a much higher payoff.

My boss isn't crazy about the idea of direct reports doing it but she telecommutes 2 days a week.  However, the company is currently really pushing their whole "work life balance" initiative and trying to put action behind those words.  Just last week we started working half days on Friday's as an example, which is a huge deal (they already had 'no meetings on Fridays' in place).  Partly this is because of the huge volume of people doing a similar commute to mine and often still having to work in the evenings as well.  We don't have the types of jobs we can just shut off from at 5 pm every day, so they are trying to help us out in that regard.

Changing my mindset will DEFINITELY be the hardest thing about me; after getting this job I just can't imagine I'd have a better one...maybe that's not the right way to look at things.  I've just always been in positions where I was looking to leave and do better...this is the first time I haven't felt that way.  But the pension is also one of the biggest reasons I was thinking I should not just jump ship right now not knowing if I may be able to get a better commuting situation down the line or now.  I have been thinking a lot about that and wondering if I should truly at least 'lay low' until I'm fully vested in that.

I also understand it doesn't hurt to look so I could always just put some feelers out there because you never know.  It's time I update my CV just in case anyway.

Congrats on the move closer to home!

[EconDiva]

I was all set to answer 15 years because I'd recommend paying off as quickly as possible, but if a shorter term leads to you spending a hefty chunk of your salary on the property per month, I wouldn't recommend it. More generally, I wouldn't buy any property that cost more than 2x my household income. If I couldn't find any, I wouldn't buy in the area, because that would be a sign to me that the area was unaffordable relative to my income.

I understand.  2x my income is my definite absolute max and not even ideal to go up to that.

My close friend, who's a real estate investor of 15 years in Atlanta started contacting me recently about buying there...it's a good chance I'll move back and he claims I need to snatch up something there right NOW NOW NOW.  Anyways, that's also unlikely as I haven't had in depth conversations with him about that and no clue how I'd manage a property from here with me never having bought before.  But first and foremost I've been gone from there a long time and have no real clue what the market is doing there.

[boarder42]

sounds to me like you're just looking to buy a place b/c you're supposed to own a place.  but its not for everyone esp. now that you're talking about atlanta.  it seems you're all over the place. 

[EconDiva]

sounds to me like you're just looking to buy a place b/c you're supposed to own a place.  but its not for everyone esp. now that you're talking about atlanta.  it seems you're all over the place.

No. I have clearly stated in my original post that my first thought about buying was related to reaching a threshold rent wise that is over what I'm willing to pay in rent. My questions about buying versus renting are obviously because I want to make the best financial decision. Again, if I was the type of woman that wanted a brand new shiny home like virtually all of my other friends have, I'd already have one. I don't even have a car or get my hair or nails done. Anyways, I digress....

All over the place? I said very early in this thread that I may not be here for more than about 5 years. Did you catch that part? The REASON I may not be here more than 5 years is because Atl might be the place I move back to. Might. Maybe you have the rest of your entire life all mapped and planned out but I'm not in that position right now and I'm okay with that. I'm just trying to determine what moves I should make considering what may be more likely to happen.

[dougules]

So I'm sure within 2 years they'll be up to about $1550.  The location I'm in is crazy price-wise.  That's why all of a sudden I'm feeling antsy to buy for the first time in my life.  I feel like I'd rather lock myself into a mortgage than keep paying these rising rents. 

It seems counter intuitive but when prices are going up like crazy, that's the time to take a deep breath and not buy. I don't have a crystal ball but remember how prices were going crazy in 2006? It would be different if you planned to stay more than 5 years. I would hunker down and find the smallest studio possible.

Either that or I could regret I'm 60 and still renting because I never bought and paid off a home...right?

Nope, theres nothing wrong with renting.

I understand there's nothing wrong with renting but my point is moreso that I'd feel more secure with a paid off place in retirement since housing is usually a decent percentage of one's income when it comes to expenses is all.

This statement tells me you really don't understand the math behind any of this. Feeling more secure and being more secure are 2 different things.  Youre also buying in a booming market. Just like everyone thought it wouldn't bust in 2008. 

As I stated many times so far this thread.  You shouldn't buy a house.  It's an emotional decision proven by this post. I even posted a calculator you could use above to answer your initial question if you bothered to look at it. DONT BUY A PLACE !!!!

I used the rent vs buy calculator. I simply did not get to the calculator you posted yet. I'm just getting home.

I am taking into serious consideration everything everyone is posting in this thread. It is seriously NOT necessary to yell to get your point across. Understand the thought of purchasing is a consideration at this point. I haven't made up my mind I would do it. I'm just starting to research if it would make sense. If I was overly emotional about all of this I would have bought a long time ago but I realize renting has been the best decision for me all of this time because I have come out ahead cost wise.  But now I'm not so sure, hence the thread and the questions and the research and all of these thoughts.

Maybe I 'don't' fully understand all of the math behind everything....yet....because I haven't done all of it...hence the reason for this thread. I am considering it. Like literally just started having these thoughts yesterday. I won't do it if it doesn't make sense. Just understand I am simply explaining what my situation is and what I've been thinking up until this point is all.

The thought behind the calculator is that there are a lot of costs people don't really consider with owning.  The cost of renting is the rent.  It's up front and you see it.  You feel it.

The costs of owning are less obvious so the emotional side of you tends to see them as not as big.  The money you put towards mortgage interest is purely just rent on money.  It's every bit the same as paying rent on a place you don't own.  The bank still holds your title.  And then the money you put in equity has opportunity costs.  If you were renting you could throw all that equity money into the market and make a return.  Despite all the hooplah about real estate values going up, the only real return owning a place is making for you is saving on rent.  The companies in your mutual funds have a better chance of appreciating than the price of the condo. 

Anyway, the calculator does the math for you so you really see the cold hard numbers on renting vs buying.  The calculator even allows you to put in how fast you think real estate values will go up, so you can play around with scenarios on condos appreciating at 30% a year if you want.  It also takes into account how long you plan to stay.  It may not be worth it if your long term future is in Georgia. 

If the calculator says to rent, renting for now will put you in a better position to buy the place you want a few years down the road.  Don't get caught up in thinking you need to rush to buy now because you think you won't be able to afford it down the road.  That's bubble mentality like in 2006.  We're only human, so it's really easy for even the strongest willed to get caught up in it.  Try to breathe, take a step back, and take your time to decide calmly. 

I admit that it feels better to own your place, but if the calculator shows renting to be better, you're paying a price for that feeling.  I paid off my mortgage early even though the math said it didn't make sense.  I'm paying for the feeling of being more secure, and I'm ok with that.  Only you can say if it's worth it, but you should know what the price is first. 

Cross your fingers, and maybe buying will be cheaper.

[EconDiva]

So I'm sure within 2 years they'll be up to about $1550.  The location I'm in is crazy price-wise.  That's why all of a sudden I'm feeling antsy to buy for the first time in my life.  I feel like I'd rather lock myself into a mortgage than keep paying these rising rents. 

It seems counter intuitive but when prices are going up like crazy, that's the time to take a deep breath and not buy. I don't have a crystal ball but remember how prices were going crazy in 2006? It would be different if you planned to stay more than 5 years. I would hunker down and find the smallest studio possible.

Either that or I could regret I'm 60 and still renting because I never bought and paid off a home...right?

Nope, theres nothing wrong with renting.

I understand there's nothing wrong with renting but my point is moreso that I'd feel more secure with a paid off place in retirement since housing is usually a decent percentage of one's income when it comes to expenses is all.

This statement tells me you really don't understand the math behind any of this. Feeling more secure and being more secure are 2 different things.  Youre also buying in a booming market. Just like everyone thought it wouldn't bust in 2008. 

As I stated many times so far this thread.  You shouldn't buy a house.  It's an emotional decision proven by this post. I even posted a calculator you could use above to answer your initial question if you bothered to look at it. DONT BUY A PLACE !!!!

I used the rent vs buy calculator. I simply did not get to the calculator you posted yet. I'm just getting home.

I am taking into serious consideration everything everyone is posting in this thread. It is seriously NOT necessary to yell to get your point across. Understand the thought of purchasing is a consideration at this point. I haven't made up my mind I would do it. I'm just starting to research if it would make sense. If I was overly emotional about all of this I would have bought a long time ago but I realize renting has been the best decision for me all of this time because I have come out ahead cost wise.  But now I'm not so sure, hence the thread and the questions and the research and all of these thoughts.

Maybe I 'don't' fully understand all of the math behind everything....yet....because I haven't done all of it...hence the reason for this thread. I am considering it. Like literally just started having these thoughts yesterday. I won't do it if it doesn't make sense. Just understand I am simply explaining what my situation is and what I've been thinking up until this point is all.

The thought behind the calculator is that there are a lot of costs people don't really consider with owning.  The cost of renting is the rent.  It's up front and you see it.  You feel it.

The costs of owning are less obvious so the emotional side of you tends to see them as not as big.  The money you put towards mortgage interest is purely just rent on money.  It's every bit the same as paying rent on a place you don't own.  The bank still holds your title.  And then the money you put in equity has opportunity costs.  If you were renting you could throw all that equity money into the market and make a return.  Despite all the hooplah about real estate values going up, the only real return owning a place is making for you is saving on rent.  The companies in your mutual funds have a better chance of appreciating than the price of the condo. 

Anyway, the calculator does the math for you so you really see the cold hard numbers on renting vs buying.  The calculator even allows you to put in how fast you think real estate values will go up, so you can play around with scenarios on condos appreciating at 30% a year if you want.  It also takes into account how long you plan to stay.  It may not be worth it if your long term future is in Georgia. 

If the calculator says to rent, renting for now will put you in a better position to buy the place you want a few years down the road.  Don't get caught up in thinking you need to rush to buy now because you think you won't be able to afford it down the road.  That's bubble mentality like in 2006.  We're only human, so it's really easy for even the strongest willed to get caught up in it.  Try to breathe, take a step back, and take your time to decide calmly. 

I admit that it feels better to own your place, but if the calculator shows renting to be better, you're paying a price for that feeling.  I paid off my mortgage early even though the math said it didn't make sense.  I'm paying for the feeling of being more secure, and I'm ok with that.  Only you can say if it's worth it, but you should know what the price is first. 

Cross your fingers, and maybe buying will be cheaper.

Oh I totally get all of this. I will definitely play around with the calculator even more. But I do value what's been posted in this thread so far and am leaning towards not doing it. My personal life is such that I could end up being here long term but I don't want to be so its a little more likely I will move away in less than 10 years from now.

Like I said in the beginning I'm terrified of owning actually due to lack of mobility. It's the recent move into a new place I love with rent that I would say is equivalent to a mortgage that has had me considering all of this. After reading everything I am unlikely to buy.

Now the question moreso surrounds where I will continue to live next since the rent 'is' so high. Likely I will just move back to the old area to save the money on rent at the end of the day. What others don't know is that without a car, I am very limited to where I live because it must be near a few specific train stops on the "suburban train line" that goes to my job. There are like 3 of those stops I'm willing to live at.

Anyways, I digress...

[tweezers]

I didn't read all the responses, but I asked a questions about the 15 vs. 30 year mortgage a while back.  I don't know if the link to the spreadsheet still works, but the 30 year mortgage worked out better for us from a cash flow, investment opportunity standpoint.

http://forum.mrmoneymustache.com/ask-a-mustachian/math-help-refi-to-15-yr-mortgage-vs-investing/msg423573/#msg423573

[sis]

So I'm sure within 2 years they'll be up to about $1550.  The location I'm in is crazy price-wise.  That's why all of a sudden I'm feeling antsy to buy for the first time in my life.  I feel like I'd rather lock myself into a mortgage than keep paying these rising rents. 

It seems counter intuitive but when prices are going up like crazy, that's the time to take a deep breath and not buy. I don't have a crystal ball but remember how prices were going crazy in 2006? It would be different if you planned to stay more than 5 years. I would hunker down and find the smallest studio possible.

Either that or I could regret I'm 60 and still renting because I never bought and paid off a home...right?

Nope, theres nothing wrong with renting.

I understand there's nothing wrong with renting but my point is moreso that I'd feel more secure with a paid off place in retirement since housing is usually a decent percentage of one's income when it comes to expenses is all.

This statement tells me you really don't understand the math behind any of this. Feeling more secure and being more secure are 2 different things.  Youre also buying in a booming market. Just like everyone thought it wouldn't bust in 2008. 

As I stated many times so far this thread.  You shouldn't buy a house.  It's an emotional decision proven by this post. I even posted a calculator you could use above to answer your initial question if you bothered to look at it. DONT BUY A PLACE !!!!

I used the rent vs buy calculator. I simply did not get to the calculator you posted yet. I'm just getting home.

I am taking into serious consideration everything everyone is posting in this thread. It is seriously NOT necessary to yell to get your point across. Understand the thought of purchasing is a consideration at this point. I haven't made up my mind I would do it. I'm just starting to research if it would make sense. If I was overly emotional about all of this I would have bought a long time ago but I realize renting has been the best decision for me all of this time because I have come out ahead cost wise.  But now I'm not so sure, hence the thread and the questions and the research and all of these thoughts.

Maybe I 'don't' fully understand all of the math behind everything....yet....because I haven't done all of it...hence the reason for this thread. I am considering it. Like literally just started having these thoughts yesterday. I won't do it if it doesn't make sense. Just understand I am simply explaining what my situation is and what I've been thinking up until this point is all.

The thought behind the calculator is that there are a lot of costs people don't really consider with owning.  The cost of renting is the rent.  It's up front and you see it.  You feel it.

The costs of owning are less obvious so the emotional side of you tends to see them as not as big.  The money you put towards mortgage interest is purely just rent on money.  It's every bit the same as paying rent on a place you don't own.  The bank still holds your title.  And then the money you put in equity has opportunity costs.  If you were renting you could throw all that equity money into the market and make a return.  Despite all the hooplah about real estate values going up, the only real return owning a place is making for you is saving on rent.  The companies in your mutual funds have a better chance of appreciating than the price of the condo. 

Anyway, the calculator does the math for you so you really see the cold hard numbers on renting vs buying.  The calculator even allows you to put in how fast you think real estate values will go up, so you can play around with scenarios on condos appreciating at 30% a year if you want.  It also takes into account how long you plan to stay.  It may not be worth it if your long term future is in Georgia. 

If the calculator says to rent, renting for now will put you in a better position to buy the place you want a few years down the road.  Don't get caught up in thinking you need to rush to buy now because you think you won't be able to afford it down the road.  That's bubble mentality like in 2006.  We're only human, so it's really easy for even the strongest willed to get caught up in it.  Try to breathe, take a step back, and take your time to decide calmly. 

I admit that it feels better to own your place, but if the calculator shows renting to be better, you're paying a price for that feeling.  I paid off my mortgage early even though the math said it didn't make sense.  I'm paying for the feeling of being more secure, and I'm ok with that.  Only you can say if it's worth it, but you should know what the price is first. 

Cross your fingers, and maybe buying will be cheaper.

Oh I totally get all of this. I will definitely play around with the calculator even more. But I do value what's been posted in this thread so far and am leaning towards not doing it. My personal life is such that I could end up being here long term but I don't want to be so its a little more likely I will move away in less than 10 years from now.

Like I said in the beginning I'm terrified of owning actually due to lack of mobility. It's the recent move into a new place I love with rent that I would say is equivalent to a mortgage that has had me considering all of this. After reading everything I am unlikely to buy.

Now the question moreso surrounds where I will continue to live next since the rent 'is' so high. Likely I will just move back to the old area to save the money on rent at the end of the day. What others don't know is that without a car, I am very limited to where I live because it must be near a few specific train stops on the "suburban train line" that goes to my job. There are like 3 of those stops I'm willing to live at.

Anyways, I digress...

Is there the ability to park near your job?   It might be worth it to just live super close to your job and get a car if that's possible.  I think that the shorter commute will probably help your quality of life a lot.

[Slee_stack]

Lose the 'must own house' caveman mindset.  The sooner the better.

The correct answer is that you need to choose whatever living situation maximizes both your happiness and wealth accumulation.

The devil is in the details of course.  You'll have to figure all that out and factor in all the risks and opportunity costs associated. 

All else equal (happiness wise), a house is just one type of many different assets you choose to accumulate.  You could choose a personal house to invest in and/or you can choose alternative investments (including other properties you might rent out to others!)

What?!  Rent to someone else AND rent my own place?!?!  Yeah, maybe....if the numbers tell you to.  Point is, don't be a caveman.

Regarding 15 vs 30 yr, its the same story.  What allows you to maximize happiness and wealth accumulation?  Pick that option.

[dougules]

Oh I totally get all of this. I will definitely play around with the calculator even more. But I do value what's been posted in this thread so far and am leaning towards not doing it. My personal life is such that I could end up being here long term but I don't want to be so its a little more likely I will move away in less than 10 years from now.

Like I said in the beginning I'm terrified of owning actually due to lack of mobility. It's the recent move into a new place I love with rent that I would say is equivalent to a mortgage that has had me considering all of this. After reading everything I am unlikely to buy.

Now the question moreso surrounds where I will continue to live next since the rent 'is' so high. Likely I will just move back to the old area to save the money on rent at the end of the day. What others don't know is that without a car, I am very limited to where I live because it must be near a few specific train stops on the "suburban train line" that goes to my job. There are like 3 of those stops I'm willing to live at.

Anyways, I digress...

Sorry if I came off as trying to insult your intelligence.  I just don't know where you're at in terms of learning about this kind of thing.  It took me a long time to wrap my head around it myself. 

It's hard to sacrifice for the future.  I'm in my hometown, and I really don't care for it at all.  My career and DH's career are here, though, so it's all about getting to FIRE.  Then we can leave and live the high life in somewhere better.  I just wish I could just pack my stuff and leave today. 

It sounds like you're a city person like me?  Is it just me or are those rare?  I live around so many people here that want to retire to a place they have so much land they can piss off the back porch without the neighbors seeing.   I feel like I'm living Green Acres.  I mean I love to get lost in the woods, but if I struck it rich it I would be coming home afterward to somewhere with a good skyline view. 

[dougules]

Oh I totally get all of this. I will definitely play around with the calculator even more. But I do value what's been posted in this thread so far and am leaning towards not doing it. My personal life is such that I could end up being here long term but I don't want to be so its a little more likely I will move away in less than 10 years from now.

Like I said in the beginning I'm terrified of owning actually due to lack of mobility. It's the recent move into a new place I love with rent that I would say is equivalent to a mortgage that has had me considering all of this. After reading everything I am unlikely to buy.

Now the question moreso surrounds where I will continue to live next since the rent 'is' so high. Likely I will just move back to the old area to save the money on rent at the end of the day. What others don't know is that without a car, I am very limited to where I live because it must be near a few specific train stops on the "suburban train line" that goes to my job. There are like 3 of those stops I'm willing to live at.

Anyways, I digress...

Sorry if I came off as trying to insult your intelligence.  I just don't know where you're at in terms of learning about this kind of thing.  It took me a long time to wrap my head around it myself. 

It's hard to sacrifice for the future.  I'm in my hometown, and I really don't care for it at all.  My career and DH's career are here, though, so it's all about getting to FIRE.  Then we can leave and live the high life wherever we want to go without being bound by our careers.  I just wish I could pack my stuff and leave today. 

It sounds like you're a city person like me?  Is it just me or are those rare?  I live around so many people here that want to retire to a place they have so much land they can piss off the back porch without the neighbors seeing.   I feel like I'm living Green Acres.  I mean I love to get lost in the woods, but I want to come home afterward to something with a good skyline view.