Should I buy a house?

[smaze]

I'm a medial professional who has been in an epic battle to pay down my loans for the past 3 years. Starting principle balance: $92,000 @ approx 6% interest. Current principle balance: $19,000 @ approx 3% interest.

My minimum payment on these loans is currently $100 per month. Currently they are costing me about $50 bucks per month in interest. I have no other debt. Income is 60K+ per year. My partner has a slightly lower salary, but would realistically be able to contribute $650 to the mortgage payment in addition to sharing bills.

I have been hell bent on just paying these things off. However, I am also 33 and life is happening around me. I see myself in staying in one place for a long time. Happy in my location, happy in my job, happy in my relationship. Looking at the numbers I'm starting to think that just killing the loans may not be the wisest decision, as our split rent is $1250 per month.

I'm starting to consider letting these loans ride a little more now that the interest is low in order to buy a house. Current mortgage rates are good, and I'm thinking I should start shoveling all that cash into a savings for a downpayment instead. I might have enough for a 3-5% downpayment in addition to my already ~8k in emergency savings (which I plan on keeping) in a few months.

Just looking for a sounding board on this - has anyone been in a similar situation and made the call to get a house? All feedback is welcome :)

PS I know private mortgage insurance sucks, but it seems it would still be cheaper than renting if I'm staying in once place for a while!

[coldestcat]

I dont have advice at the moment because I am going through pretty much the same thing, early 30s, figuring out if it is better to spend money toward a house and stop paying rent, or to try to just pay off loans. Getting a house seems more exciting, so we are probably looking for that answer, but I cant say for sure. Ill definitely be in this thread trying to get advice as well.

[therethere]

The remaining loans are no big deal at 3%. I would pay the minimums and redirect what was previously extra payments to savings. What type of savings is TBD. It is tough to say on the rent v buy because there are no details. Cost, rent, location, etc are all very important factors.

Do the rent v. buy New York Times calculator for your scenario. Be honest with yourself and don't try to get it to force the answer you want. Either way, if it says buy is way more advantageous (and not just a tossup) I would work on collecting a larger downpayment. Even if you don't put it all as a downpayment you will want some savings to fall back on when inevitably something breaks within the first 6 months of move in. Barely having 3% would make me very nervous. Considering you paid down almost 80k in 3 years, you will be able to save up this downpayment quickly if desired.

My disclaimer on this is the following: If you are an emotional person, and just having the student loans drags you down. Just spend a year and pay the damn things off and be done with them. Sometimes emotional outweighs the mathematically correct answer.

[TreesBikesLove]

Plug your numbers into the NYTimes Rent vs. Buy calculator and see what you get. There are a lot of variables and it depends heavily on your current market. Nobody knows the future but you do know how you feel about home ownership.

If buying a house is an emotional decision (and that is fine!) then you might be better off going with what makes you happy. Renting isn't so bad if you are the personality that likes stability and not having surprise expenses. Additionally, renting is usually only a 1 year commitment at the most which could be very nice for two people who are early in their careers and willing to uproot for more opportunity. Don't let life happen around you while you repent to the debt Gods. There is room for happiness and growth without large financial outlays. Dumping money toward a mortgage instead of loans might not feel any more rewarding. Try team sports or community engagement.

It is unfortunate that $92,000 in debt got you only $60k in salary but that seems realistic for some medical professions (my partner is in Chiropractic school and will probably make about that much with similar loan burden).

Good luck, smaze.

[tralfamadorian]

I agree with the others that more information is necessary but I'm not inclined to automatically concur that purchasing with PMI is the way to go.  Your current rent is $1250.  How much would you PITIA be?  Add up all the expenses- principal, interest, PMI, taxes, insurance, HOA, maintenance and capex.

To me the questions of rent vs buy and 3% loans vs investing are two separate ones. 

[JLR]

Renting isn't so bad if you are the personality that likes stability and not having surprise expenses.

I have to disagree with you on this point. We are in our third rental in 3.5 years and have just received notice that we need to move again. We are good tenants, but two of the rentals have been sold and for the third rental the owners decided they wanted to move in. I've hated having so much instability in our lives, not knowing where we will be from one year to the next. Not knowing if the owner will decide it is worth doing a particular repair. Not knowing if mentioning something has worn out will mean they throw their hands up, decide they hate being a landlord, and sell the place. Not knowing what will be available for us to move to if we get notice and have to move within 30 days.

I'm looking forward to moving into our own place next month. Sure, unexpected expenses can pop up. But you should factor this into your budget. And there are a lot of things you can do yourself (that a landlord probably wouldn't let you do). Also, you get to decide what is important and really needs fixing.

[tralfamadorian]

...in our third rental in 3.5 years...

I've heard some anecdata that this is common complaint for Australian renters.  The rentals don't cash flow- they are appreciation plays so the owners want to get in and out relatively quickly.

[TreesBikesLove]

We are in our third rental in 3.5 years and have just received notice that we need to move again.

Good point. My perspective comes from renting apartments but renting a home from a small-time landlord can have different risks.

[JLR]

...in our third rental in 3.5 years...

I've heard some anecdata that this is common complaint for Australian renters.  The rentals don't cash flow- they are appreciation plays so the owners want to get in and out relatively quickly.

I think another issue is that there has been so much promotion in Australia around negative gearing in the last 20 years, and how it is the investment vehicle to have, that many people have bought a property and not understood that it won't make you money that you see each year - you have to wait for appreciation. And in some areas that appreciation has happened year on year, hence rapid turn over. In other areas, it only takes one or two tax returns for the landlord to feel that it isn't worth their while. Our very first landlord (back in 2000) got out after the first year when he found he didn't get a large tax return. A difficulty for him was that out rent covered the mortgage, and any work that was done in the house that year he did himself. If he had held onto it he would have made a reasonable return from appreciation. But I have the benefit of hindsight.