Yes, $60K is a tiny amount if you plan to spend $600K. You are just starting your career, chrisp. I assume you are young, maybe 25. If so, then it makes a lot of sense to borrow more now than at any other time in your life. If you fully expect (not just hope) to earn $300K or so a year within the next few years, then paying $60K for a $600K home now, and arranging to have others pay $560K until you pay them back, makes some sense.
Well, it would make sense, except that home prices are at historic highs, even after some small recent declines. So paying a lot for a home now is taking on great risk of future losses. And the other part that doesn’t make sense is that those future losses, after your 10% downpayment is gone, have to be covered by taxpayers. In the old days, any risk that you didn’t take on, and the bank took on instead, was between you and the bank. But now almost all the risk, after a downpayment has been exhausted, is take on by taxpayers, so it’s all of our business.
Oh, and I know what I am saying isn’t relevant to the real world we live in. The govt allows almost anybody to borrow 97% of the purchase price, less $8K tax credit, using a subsidized low-cost non-recourse loan. So the reality is that you are officially OK’ed to blow as much taxpayer money as you want. I am speaking only from the perspective of what I think should happen.
