Author Topic: Buying a house - now, or wait a bit?  (Read 913 times)

Samwise

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Buying a house - now, or wait a bit?
« on: January 10, 2019, 12:52:49 PM »
Hello fellow Mustachians,
Iím hoping for some advice on timing of buying a house.  My wife and I currently live in a 1br apartment, itís small but itís nice for us, and we love the location. Itís also a pretty great deal, which is helping us to save money and save up for a down payment.  We are considering buying a house in the next few years and staying in it for a while, with a 30 yr fixed mortgage.  Considering that interest rates are likely to go up, Iím wondering if we should be buying a house pretty much as soon as we can, or is there value in waiting and enjoying the low cost of living in our current place? In particular, I wonder if an interest rate increase of .25% or something would totally offset any savings from staying in our cheap apartment another year.  Any advice, or thoughts on how to think of this, would be much appreciated!

Jon Bon

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Re: Buying a house - now, or wait a bit?
« Reply #1 on: January 10, 2019, 01:33:38 PM »
Hello fellow Mustachians,
Iím hoping for some advice on timing of buying a house.  My wife and I currently live in a 1br apartment, itís small but itís nice for us, and we love the location. Itís also a pretty great deal, which is helping us to save money and save up for a down payment.  We are considering buying a house in the next few years and staying in it for a while, with a 30 yr fixed mortgage.  Considering that interest rates are likely to go up, Iím wondering if we should be buying a house pretty much as soon as we can, or is there value in waiting and enjoying the low cost of living in our current place? In particular, I wonder if an interest rate increase of .25% or something would totally offset any savings from staying in our cheap apartment another year.  Any advice, or thoughts on how to think of this, would be much appreciated!

Wait.

The fear of inflation is largely overblown. Rates might go from 4.5 to 5% which would be about what 100 bucks a month on a 300k loan? Not to mention housing prices tend to move inversely to rates, so if rates DO creep up, housing prices should start to come down. Saving money in your cheapo apartment is always a better play then buying a house.

A bit more information would help here. In terms of timing, I think you will be better off the longer you wait. Market is gonna correct at some point, sitting on the sidelines with no house and a bunch of cash is about the best thing you could hope for.


waltworks

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Re: Buying a house - now, or wait a bit?
« Reply #2 on: January 10, 2019, 01:35:27 PM »
Prices will be flat or decline nationally as interest rates rise, you're fine (of course, all RE is local, your particular spot might go up, down, or do nothing). Stay put and save money.

-W


Dee18

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Re: Buying a house - now, or wait a bit?
« Reply #3 on: January 10, 2019, 04:51:33 PM »
If youíre happy and you know it...stay there!  A house will take a lot more time, as well as money.

2Cent

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Re: Buying a house - now, or wait a bit?
« Reply #4 on: January 11, 2019, 07:37:57 AM »
If you would use your savings to pay off the principal a .25% increase from the current 4.43 would equal paying off of about 3%. The rate matters a lot. But why fix for 30 years? If you get a lower rate for say 15 years and use that money to pay off the principal you will come out ahead. Especially if you save enough to pay the entire thing in 15 years should the rate go up too much.

Jon Bon

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Re: Buying a house - now, or wait a bit?
« Reply #5 on: January 11, 2019, 07:43:57 AM »
If you would use your savings to pay off the principal a .25% increase from the current 4.43 would equal paying off of about 3%. The rate matters a lot. But why fix for 30 years? If you get a lower rate for say 15 years and use that money to pay off the principal you will come out ahead. Especially if you save enough to pay the entire thing in 15 years should the rate go up too much.

Please show your work :)

I respectfully disagree on the 15 year mortgage, you are literally just burying money into your house. Makes it hard to get out, and really ties down your cash flow for the long term. 30 years is much more appropriate for a first time buyer IMO.

2Cent

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Re: Buying a house - now, or wait a bit?
« Reply #6 on: January 11, 2019, 09:20:10 AM »
If you would use your savings to pay off the principal a .25% increase from the current 4.43 would equal paying off of about 3%. The rate matters a lot. But why fix for 30 years? If you get a lower rate for say 15 years and use that money to pay off the principal you will come out ahead. Especially if you save enough to pay the entire thing in 15 years should the rate go up too much.

Please show your work :)

I respectfully disagree on the 15 year mortgage, you are literally just burying money into your house. Makes it hard to get out, and really ties down your cash flow for the long term. 30 years is much more appropriate for a first time buyer IMO.
My work is just a column in excel and some experimentation with the input values and then adding up the total payments. :)

A 15 year mortgage would come at about 725 per month per 100k, a 30 year mortgage would come at about 500 per month per 100k. So for a 30% reduction in monthly payments you have to pay twice as long, which sounds kind of bad. Putting that 225 in stocks with 7% returns would become a little over 70k in 15 years, so this would be more profitable. Hmm. I guess it's better to go with stocks...
You could also go with an adjustable rate mortgage to get the lower rate. The risk is probably not fatal for you, and if rates go down you even benefit.