Listen dude… You have a choice in life. You can choose to be financially responsible or choose not to….It’s a matter of personal preference…If you choose to live like a miser and try to be smart with your money, don’t complain if later on, people want to redistribute your earnings/savings or people who choose to buy things that are nicer. There are a lot of people that was hell bent on “moral hazard” in thinking those folks who are not as financially responsible will eventually “get what’s coming to them”…Sadly, these where the same folks that ended up sleeping though the biggest real estate firesale in history and they were really disappointed.
If you really think some of your peers have it so much better, than the choice is obvious…Be more like them. Frankly, if you can get away with a 3.5% down loan that is also a fixed rate, why wouldn’t you do it? Sure beats paying rent, and with only 3.5% down, you have very little skin in the game to lose. Heck, I would do it if I could. It’s not about total outstanding debt, it’s about your monthly debt load relative to your income and about your monthly expenditures as an owner versus a renter.
Savers always lose… That 1%CD sure sucks…The good news is since your in your late twenties, you are learning this lesson fairly young so you can still recover from it. And you’re not alone, maybe people learned that lesson much older than you. In fact, there’s probably a few really old people on this blog that still haven’t learned this lesson…
And being that you are young, why would you want to buy a condo with all cash? Lpok around. Microsoft is buying LinkedIn for $26 billion. Microsoft probably has over $100billion in cash… And yet they are financing the purchase… Have you considered why???? It’s because money so cheap to borrow right now….Why would you use your own money to buy at this point, especially if you are young and trying to build your nest egg. I congratulate you on your $250k savings at such a younger age, your’e doing much better than most americans…But giving you a little tough love, if you don’t learn how to invest that money, that isn’t going to be a heck of a lot, especially in CA. Personally, if I were your age, I would NOT pay all cash for a house. I’d put as little down as you can get away with, and use as much of the bank’s money as possible such that your payments are roughly in line with how much your rent would be..Then, as an added bonus, you get a nice mortgage interest rate deduction and property tax deduction (assuming you aren’t hitting AMT on the later), that will make your payments lower than your rent.
Then I would take whatever is left of your $250,000 and learn how to invest that money very well… Paying cash for a townhome and leaving you with very little cash, imho would be a bad idea, since IF home prices did correct, you just lost your own money. Versus, if you took out a loan, while you lose out on the value of your house, your payments are the same, and the banks end up eatting it when interest rates eventually rise.
This is the opposite of what I would do if you’re instead 40++ and just want to live worry free, with a paid off home. You’re young, you can afford to take some risk. And quite frankly, there is no reward without some risk taking….
There is no politician, government, political party that is ever going to “fix” this american problem. This is how a good portion of the people in our country behave. You are in the minority. So, rather than get all mad about it, figure out how you can profit off of this.
