Author Topic: house buying; substantial deposit  (Read 4297 times)

kt

  • Guest
house buying; substantial deposit
« on: January 16, 2014, 01:04:27 AM »
Hello, I've done some internet searching and not managed to turn up much on my own so thought I'd come pick some mustachian brains, please!

My fiancÚ and I are considering buying a house. The houses we are looking at, we could put down roughly a 50% deposit whilst leaving us a good emergency fund (I'm self-employed). This would make a mortgage paid off at the normal rate (15-25 years) 20-40% cheaper than renting.

Are there any disadvantages to putting down a large deposit? Or does this make us likely to be in a better position if we need to sell or move on in 3 years?

I still feel renting would not be terrible (who knows when we'll want to move) but he has very much been brought up that you should buy as soon as you have the down payment and can afford a mortgage (i.e. apparently things like how soon you might be moving on and the cost of of surveys/mortgage fees don't come into play).

I'm just trying to get as much info as possible so we make a properly informed decision.

dragoncar

  • Walrus Stache
  • *******
  • Posts: 8829
  • Registered member
Re: house buying; substantial deposit
« Reply #1 on: January 16, 2014, 05:21:20 AM »
How much down is a personal choice much debated.  But in the rent vs buy decision, you should consider the opportunity cost of your down payment.  The NYT rent v buy calculator will do this (make sure you use the advanced settings).  Sounds close

money_bunny

  • Stubble
  • **
  • Posts: 114
Re: house buying; substantial deposit
« Reply #2 on: January 16, 2014, 05:23:31 AM »
If you need to sell in three years you then you are going to be losing a lot of money for the transaction fees of buying in and getting out.

A big DP will cause a smaller mortgage and less interest paid to the bank. More money to invest elsewhere per month.

_JT

  • Stubble
  • **
  • Posts: 229
Re: house buying; substantial deposit
« Reply #3 on: January 16, 2014, 08:24:53 AM »
There are too many factors to make this a black and white issue. Chances are good that you'd earn more money long term by investing anything about the minimum downpayment needed to avoid PMI, but there's also a lot to be said for owning a home outright, especially if you're staying there a really long time. It depends a lot on your personal risk tolerance, too.

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28103
  • Age: -999
  • Location: Seattle, WA
Re: house buying; substantial deposit
« Reply #4 on: January 16, 2014, 08:40:35 AM »
My fiancÚ and I are considering buying a house. The houses we are looking at, we could put down roughly a 50% deposit whilst leaving us a good emergency fund (I'm self-employed). This would make a mortgage paid off at the normal rate (15-25 years) 20-40% cheaper than renting.

If it's only a large down payment that's making buying cheaper than renting, it probably isn't, and is best to rent.  (In other words, that 50% down payment could instead be invested and the proceeds of that used to pay your rent.)

Ditto the NYT Buy vs. Rent Calculator suggestion, due to there being a lot of variables involved: http://www.nytimes.com/interactive/business/buy-rent-calculator.html
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

kt

  • Guest
Re: house buying; substantial deposit
« Reply #5 on: January 16, 2014, 08:49:28 AM »
great, thanks all. as i thought really.

i guess the real question is, i have done all my homework, know buying is not for us but his family utterly disapprove of this and he cannot got on board with renting even though i've shown him the maths.
a joys! :)

Shor

  • Bristles
  • ***
  • Posts: 480
  • Location: Orange County, CA, USA
Re: house buying; substantial deposit
« Reply #6 on: January 16, 2014, 08:51:49 AM »
Personal risk tolerance could also be that the house is a 3+ year investment and hopefully it will appreciate while at teh same time provide you a stable shelter.

Remember, there is no absolute guarantee that the market will produce gains the next 3 years,
but weigh that against the possibility of you put the huge down payment in to the house, and house loses a bit of value over the next 3 years.

Would you be stuck at the location? Would this house now become a crutch on your freedom locking you down in one place, or would it become an additional liability that needs to be paid down for the next 20+ years while you're no longer there. Some people are unable to cut their losses, others can't stand such a chain on their freedom to up and change locations.

Take some time and consider what can happen, and what you would do in each situation (it's easier to do it now while you're free of the emotions). If you can plan for it, then stick to that plan, there will be fewer surprises.

kt

  • Guest
Re: house buying; substantial deposit
« Reply #7 on: January 16, 2014, 09:02:30 AM »
Take some time and consider what can happen, and what you would do in each situation (it's easier to do it now while you're free of the emotions). If you can plan for it, then stick to that plan, there will be fewer surprises.

thank you, I think this planning out all eventualities is a really good idea and def before we decide on something. I will definitely suggest we do that soon.
The trouble is, his parents are just saying, o if you want to move, rent or sell it. I know it's not that simple but they will not listen and my fiance is still at home so finding it hard to stand against them.
on the other hand, if we paid it off at the rate we'd be paying for rent, then we could be mortgage free in around 7 years. Which does make it seem a little less scary and we would still be saving more than enough for rent (if we ended up having to pay rent and mortgage).
Rent is just so much simpler for the moment!

SwordGuy

  • Walrus Stache
  • *******
  • Posts: 6004
  • Location: Fayetteville, NC
Re: house buying; substantial deposit
« Reply #8 on: January 16, 2014, 09:35:53 AM »
great, thanks all. as i thought really.

i guess the real question is, i have done all my homework, know buying is not for us but his family utterly disapprove of this and he cannot got on board with renting even though i've shown him the maths.
a joys! :)

It's not too late to remember that it's better not to marry overaged children.

Do you really want this to be the pattern of your interactions for the next 40 years?

kt

  • Guest
Re: house buying; substantial deposit
« Reply #9 on: January 16, 2014, 09:54:04 AM »
great, thanks all. as i thought really.

i guess the real question is, i have done all my homework, know buying is not for us but his family utterly disapprove of this and he cannot got on board with renting even though i've shown him the maths.
a joys! :)

It's not too late to remember that it's better not to marry overaged children.

Do you really want this to be the pattern of your interactions for the next 40 years?

:) thank you!
I know he is not an overaged child really, he lived away from home for the first 3 years of our relationship and was a perfectly normal adult. I know that he can function on his own and have no qualms about marrying him.
I wish he stood up to his mother more but she is extremely overbearing and uses emotional blackmail. I can understood how it's easier to keep quiet for an easy life. However, I am also aware that we need to set boundaries and am already in the process of doing so. There will always be issues in any relationship, but I'm fairly sure we're aware of ours and tackling them.

ChiStache

  • 5 O'Clock Shadow
  • *
  • Posts: 79
Re: house buying; substantial deposit
« Reply #10 on: January 16, 2014, 09:55:28 AM »
Quote
It's not too late to remember that it's better not to marry overaged children.

Agreed. It's surprising that your in-laws feel like they get to make such important decisions about your finances. It's even more surprising that you appear ready to go along with it. As a married couple, you and your husband should be a financial team. He seems to be teamed up with his parents, leaving you in the dust.