Honest Opinion Required!

[creechrr]

AK,

I can’t speak for the others but, my thought is to have as small a mortgage as possible and actually own the place free and clear as soon as possible.

I really hate having interest work against me. That’s throwing money away in my eyes.

I’m not advocating draining your reserves of every last penny to up the down payment. Each situation is different and each person should adjust accordingly.

Given the chance to buy a place that I want, free and clear, without a mortgage I’d stretch to make it work if I could.

:shaking fist: Get off MY lawn! :/shaking fist:

[AK]

I’m already practicing the “get off my lawn” speech. Along with “I would’ve gotten away with it if it weren’t for these meddling kids!”

I agree on the part about paying off your house as soon as practical. If prices were a little bit lower (say, in the absence of government intervention) I’d consider a 20-year conventional loan … the payments aren’t really that much different.

But I’d still want to keep a fair chunk of change in the bank … enough to cover unanticipated major repairs or to get through a period of unemployment or underemployment.

[AK]

I’m already practicing the “get off my lawn” speech. Along with “I would’ve gotten away with it if it weren’t for these meddling kids!”

I agree on the part about paying off your house as soon as practical. If prices were a little bit lower (say, in the absence of government intervention) I’d consider a 20-year conventional loan … the payments aren’t really that much different.

But I’d still want to keep a fair chunk of change in the bank … enough to cover unanticipated major repairs or to get through a period of unemployment or underemployment.

[AK]

I’m already practicing the “get off my lawn” speech. Along with “I would’ve gotten away with it if it weren’t for these meddling kids!”

I agree on the part about paying off your house as soon as practical. If prices were a little bit lower (say, in the absence of government intervention) I’d consider a 20-year conventional loan … the payments aren’t really that much different.

But I’d still want to keep a fair chunk of change in the bank … enough to cover unanticipated major repairs or to get through a period of unemployment or underemployment.

[AK]

I’m already practicing the “get off my lawn” speech. Along with “I would’ve gotten away with it if it weren’t for these meddling kids!”

I agree on the part about paying off your house as soon as practical. If prices were a little bit lower (say, in the absence of government intervention) I’d consider a 20-year conventional loan … the payments aren’t really that much different.

But I’d still want to keep a fair chunk of change in the bank … enough to cover unanticipated major repairs or to get through a period of unemployment or underemployment.

[AK]

I’m already practicing the “get off my lawn” speech. Along with “I would’ve gotten away with it if it weren’t for these meddling kids!”

I agree on the part about paying off your house as soon as practical. If prices were a little bit lower (say, in the absence of government intervention) I’d consider a 20-year conventional loan … the payments aren’t really that much different.

But I’d still want to keep a fair chunk of change in the bank … enough to cover unanticipated major repairs or to get through a period of unemployment or underemployment.

[patientrenter]

[quote=FormerSanDiegan]….
The factor 2.5x income was a rule-of-thumb based on higher interest rates (e.g. 10%+). The 3x income factor is based on 7-8% range of rates and 28%- 36% DTIs…..[/quote]

Look at all the measures of affordability, and decide for yourself what you can really afford.

But if you had to go with only one measure of affordability, the price to income ratio is better than the monthly payment versus income measure. Why? Interest rates determine the monthly payment for a given price. But inflation correlates with interest rates. Low rates on 30-year fixed-rate home loans indicates that the market expects low rates of inflation over the next 30 years. If that unfolds, it will lower the future appreciation of your home, offsetting the savings from the lower rate.

People who bought homes at low prices and high interest rates in the 1970’s and early 1980’s did very well. Buying for $100,000 in 1980 felt bad when rates were over 10%, but that worked out well when the home appreciated to $1.5 million 30 years later and the owner had long since refinanced into a much lower rate.

If home prices appreciate at much lower rates in the future, as is likely following their appreciation since the 1970’s at rates well above average, then loans today are going to hurt when they have to be repaid. You might buy for $1 million today, and sell for $1.2 million in 10 years time.

No one knows the future, so it’s all a gamble. But be wary of the lower rate = free lunch mantra that people who make money from selling real estate tend to use.

My personal rule of thumb? Home price = 10% of net worth. Everyone is different.

[patientrenter]

[quote=FormerSanDiegan]….
The factor 2.5x income was a rule-of-thumb based on higher interest rates (e.g. 10%+). The 3x income factor is based on 7-8% range of rates and 28%- 36% DTIs…..[/quote]

Look at all the measures of affordability, and decide for yourself what you can really afford.

But if you had to go with only one measure of affordability, the price to income ratio is better than the monthly payment versus income measure. Why? Interest rates determine the monthly payment for a given price. But inflation correlates with interest rates. Low rates on 30-year fixed-rate home loans indicates that the market expects low rates of inflation over the next 30 years. If that unfolds, it will lower the future appreciation of your home, offsetting the savings from the lower rate.

People who bought homes at low prices and high interest rates in the 1970’s and early 1980’s did very well. Buying for $100,000 in 1980 felt bad when rates were over 10%, but that worked out well when the home appreciated to $1.5 million 30 years later and the owner had long since refinanced into a much lower rate.

If home prices appreciate at much lower rates in the future, as is likely following their appreciation since the 1970’s at rates well above average, then loans today are going to hurt when they have to be repaid. You might buy for $1 million today, and sell for $1.2 million in 10 years time.

No one knows the future, so it’s all a gamble. But be wary of the lower rate = free lunch mantra that people who make money from selling real estate tend to use.

My personal rule of thumb? Home price = 10% of net worth. Everyone is different.

[patientrenter]

[quote=FormerSanDiegan]….
The factor 2.5x income was a rule-of-thumb based on higher interest rates (e.g. 10%+). The 3x income factor is based on 7-8% range of rates and 28%- 36% DTIs…..[/quote]

Look at all the measures of affordability, and decide for yourself what you can really afford.

But if you had to go with only one measure of affordability, the price to income ratio is better than the monthly payment versus income measure. Why? Interest rates determine the monthly payment for a given price. But inflation correlates with interest rates. Low rates on 30-year fixed-rate home loans indicates that the market expects low rates of inflation over the next 30 years. If that unfolds, it will lower the future appreciation of your home, offsetting the savings from the lower rate.

People who bought homes at low prices and high interest rates in the 1970’s and early 1980’s did very well. Buying for $100,000 in 1980 felt bad when rates were over 10%, but that worked out well when the home appreciated to $1.5 million 30 years later and the owner had long since refinanced into a much lower rate.

If home prices appreciate at much lower rates in the future, as is likely following their appreciation since the 1970’s at rates well above average, then loans today are going to hurt when they have to be repaid. You might buy for $1 million today, and sell for $1.2 million in 10 years time.

No one knows the future, so it’s all a gamble. But be wary of the lower rate = free lunch mantra that people who make money from selling real estate tend to use.

My personal rule of thumb? Home price = 10% of net worth. Everyone is different.

[patientrenter]

[quote=FormerSanDiegan]….
The factor 2.5x income was a rule-of-thumb based on higher interest rates (e.g. 10%+). The 3x income factor is based on 7-8% range of rates and 28%- 36% DTIs…..[/quote]

Look at all the measures of affordability, and decide for yourself what you can really afford.

But if you had to go with only one measure of affordability, the price to income ratio is better than the monthly payment versus income measure. Why? Interest rates determine the monthly payment for a given price. But inflation correlates with interest rates. Low rates on 30-year fixed-rate home loans indicates that the market expects low rates of inflation over the next 30 years. If that unfolds, it will lower the future appreciation of your home, offsetting the savings from the lower rate.

People who bought homes at low prices and high interest rates in the 1970’s and early 1980’s did very well. Buying for $100,000 in 1980 felt bad when rates were over 10%, but that worked out well when the home appreciated to $1.5 million 30 years later and the owner had long since refinanced into a much lower rate.

If home prices appreciate at much lower rates in the future, as is likely following their appreciation since the 1970’s at rates well above average, then loans today are going to hurt when they have to be repaid. You might buy for $1 million today, and sell for $1.2 million in 10 years time.

No one knows the future, so it’s all a gamble. But be wary of the lower rate = free lunch mantra that people who make money from selling real estate tend to use.

My personal rule of thumb? Home price = 10% of net worth. Everyone is different.

[patientrenter]

[quote=FormerSanDiegan]….
The factor 2.5x income was a rule-of-thumb based on higher interest rates (e.g. 10%+). The 3x income factor is based on 7-8% range of rates and 28%- 36% DTIs…..[/quote]

Look at all the measures of affordability, and decide for yourself what you can really afford.

But if you had to go with only one measure of affordability, the price to income ratio is better than the monthly payment versus income measure. Why? Interest rates determine the monthly payment for a given price. But inflation correlates with interest rates. Low rates on 30-year fixed-rate home loans indicates that the market expects low rates of inflation over the next 30 years. If that unfolds, it will lower the future appreciation of your home, offsetting the savings from the lower rate.

People who bought homes at low prices and high interest rates in the 1970’s and early 1980’s did very well. Buying for $100,000 in 1980 felt bad when rates were over 10%, but that worked out well when the home appreciated to $1.5 million 30 years later and the owner had long since refinanced into a much lower rate.

If home prices appreciate at much lower rates in the future, as is likely following their appreciation since the 1970’s at rates well above average, then loans today are going to hurt when they have to be repaid. You might buy for $1 million today, and sell for $1.2 million in 10 years time.

No one knows the future, so it’s all a gamble. But be wary of the lower rate = free lunch mantra that people who make money from selling real estate tend to use.

My personal rule of thumb? Home price = 10% of net worth. Everyone is different.

[Anonymous]

<>>

I have yet to meet an agent who didn’t think that now (whenever that was) was an excellent time to buy.

As a back story, when interest rates rise, which they inevitably will, housing prices will fall.

[Anonymous]

<>>

I have yet to meet an agent who didn’t think that now (whenever that was) was an excellent time to buy.

As a back story, when interest rates rise, which they inevitably will, housing prices will fall.

[Anonymous]

<>>

I have yet to meet an agent who didn’t think that now (whenever that was) was an excellent time to buy.

As a back story, when interest rates rise, which they inevitably will, housing prices will fall.

[Anonymous]

<>>

I have yet to meet an agent who didn’t think that now (whenever that was) was an excellent time to buy.

As a back story, when interest rates rise, which they inevitably will, housing prices will fall.

[Author]

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