The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: Lagom on October 15, 2016, 07:15:42 PM
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Hi All,
So DW and I were tentatively looking at a ~6-7 year timeframe to buy a house in the SF Bay Area. Regardless of the mathematical sense of the decision, we are committed to this path. That said, my wife is a teacher and recently her district has partnered with community members to pilot a home-buying assistance program that could cut our savings time frame in half. Here is the proposal:
- The community fund will cover half of your down payment in exchange for 25% of the appreciation (or loss, if any) in your home when you sell. There are no monthly payments on the support.
- You can use this support to buy any property in the Bay Area up to $1.2M
- To use this benefit, you will need to have been a full-time employee for the last 2 years, and must commit to staying for another 2 years.
- This is for primary residences only. No second homes.
At first glance, this seems like a pretty sweet deal. Given that any house we buy would have to appreciate by 40%+ before we're losing money, this is pretty tempting, since no extra payments need be made, and in the short term it equates to up to $120k of "free" money. If we do end up with over 40% appreciation, I'm not sure I'll care about losing 25% off the top from there (especially since the plan at the moment is to live there until we die), and much of that may be made up anyway by the accelerated retirement savings we would be able to accomplish. That said, am I missing any reasons we should not take advantage of this program if it's still around in a few years?
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Nope. I'd do it. That money will help you get into the market sooner, if that is what you are bound and determined to do. You just have to remind yourselves that when it comes time to sell. Rather than looking on it as a 25% burden, see it as a 75% of the appreciation bonus, that would have been zero had you continued renting.
Don't forget that appreciation is not guaranteed, but everyone in the Bay Area who hung on after earthquakes or market plunges, or whatever has always seen appreciation over the long term. The losers are the ones who panic or are forced to move during a down market for other reasons. Another reason why a big, fat EF can be a very good thing.