[quote=SellingMyHome]Why put 20% down? When I run the rent vs buy calculator at NYTimes, the higher deposit makes it better to rent, assuming a 6% or higher ROI, which long-term is doable.
Why not put the 3.5% down? The next house I buy will be my last, if nothing changes with jobs, health, etc. Aren’t interest rates so low now that it makes sense?
I know a lot of people here wish that folks never could have bought with zero or little down, as it allowed many people to walk away with no loss.
I’m really still a little (a lot in some of your eyes) clueless as to why a higher down payment is a better thing for me.[/quote]
SMH, first, the Piggs would like to know which of your “investments” have been giving you a 6% annual return and for how long …
Submitted by SellingMyHome on November 20, 2009 – 12:17pm
. . .
My story [as it relates to my property sold short in 2010]:
. . .
Current mortgage and Property tax add up to $3,300/month. Total household income is about $120K, and I estimate we save about $900 month with the interest deductions, so would need to rent for less than $2,300 to make it work. We could easily find a place for less than that that suites our needs. . . .
Can we afford what we have? Yes, but with two kids under four, we have saved absolutley nothing in the last four years, and have actually been dipping further into our credit cards. I have a great pension at work, and wife contributes to her 401K. Sadly though, we have no savings in case of emergency…
(explanation added)
Reasons to put at least 20% down? We will use a $500K purchase in Alpine, CA, for our example here (1st pymt due 1/1/12):
FHA 96.5% mtg of $482,500 borrowed at 4% fixed for 30 yrs with 0 pts:
Monthly payment (P&I amts are for 1st pymt only and taxes are for 1st full tax bill):
P = $695.20
I = $1608.33
T = $487.50
I = $229.17
MMI = $221.14
Total mo pymt = $3241.34
In addition, your “required up front MMI” of $8750 is thrown to the wind and you don’t have it available after closing for a bag of fertiilizer, etc.
[snip amort table]
payoff amount after ten years is $380,132.60
(for the sake of brevity here, you’ll have to take my word for it, lol)
Conv 80% mtg of $400,000 borrowed at 4% fixed for 30 yrs with 0 pts:
Monthly payment (P&I amts are for 1st pymt only and taxes for for 1st full tax bill):
P = $576.33
I = $1333.33
T = $487.50
I = $229.17
Total mo pymt = $2626.33
A savings of $615.01 mo over FHA!
payoff amount after ten years is $315,135.84
By 1/1/22, you will owe $64,996.76 less with the conventional loan and will have saved $7380.12 in monthly housing costs.
Would the geek Piggs like to figure out the 10-yr return on SMH’s excess (downpayment) of $82,500 if he obtains a conventional loan v an FHA loan?
And, what’s an approx mtg payment savings of $615.01 worth to you, SMH? You stated in your post two years ago that your $3300 payment was too high for you without “dipping into cc’s” every month. Is that still the case?
edit: Of course, the payments above presuppose no MR or HOA dues.
