The purchase dilemma

[Trojan4Life]

I am in a quandry right now, not as to when is the right time to buy, but whether to buy at all.

I estimate the tax savings from having a mortgage interest deduction on a $750K loan at 6% is about $4,000 per year, which will obviously decline over time. I cannot justify in my mind increasing my expense for housing by 50% ($32K increase) just to save $4K in taxes. I know that a home is a long-term investment, blah, blah, blah…but this makes absolutely no sense to me. It makes more sense to max out my company 401(k) to $15K per year, take the matching contribution, and to invest the remaining money I would have spent on a mortgage in the stock market…and pay my taxes like a good boy.

Am I missing something here, something big picture?

Trojan4life

[Raybyrnes]

I think there is a lot that is missing. You have not factored that rents can go up whereas a fixed rate mortgage stays the same over time. At some point there is an inflection point.

Secondly you have not accounted for leverage. A home is one of the only assets that allow you to borrow 5 x (assume 20% down) the amount that you are putting down.

Tax shelter. Not ony do you get the tax deduction but you also get to keep up to 500K in gains without paying taxes.

Estate planning. You can take your home as an asset and pass it down to your family members and they get the benefit of the new cost basis.

If you have children and plan on sending them to college. You can qualify for far more financial aid in the form of grants and subsidies by being house rich and savings poor.
(Federal Financial Aid does not count your home into the calculation for aid)

Long term diversification. If you plan wisely an home represents just one asset class of a long term financial plan. You can still use the 401K/403B, the Roth IRA, and Brokerage accounts to accumulate wealth in a number of different asset classes (large cap/small cap/gold/REITS/ commodities etc) along with you ownership in a home.

This is just some quick bullet points on the matter.

[Raybyrnes]

I think there is a lot that is missing. You have not factored that rents can go up whereas a fixed rate mortgage stays the same over time. At some point there is an inflection point.

Secondly you have not accounted for leverage. A home is one of the only assets that allow you to borrow 5 x (assume 20% down) the amount that you are putting down.

Tax shelter. Not ony do you get the tax deduction but you also get to keep up to 500K in gains without paying taxes.

Estate planning. You can take your home as an asset and pass it down to your family members and they get the benefit of the new cost basis.

If you have children and plan on sending them to college. You can qualify for far more financial aid in the form of grants and subsidies by being house rich and savings poor.
(Federal Financial Aid does not count your home into the calculation for aid)

Long term diversification. If you plan wisely an home represents just one asset class of a long term financial plan. You can still use the 401K/403B, the Roth IRA, and Brokerage accounts to accumulate wealth in a number of different asset classes (large cap/small cap/gold/REITS/ commodities etc) along with you ownership in a home.

This is just some quick bullet points on the matter.

[Raybyrnes]

I think there is a lot that is missing. You have not factored that rents can go up whereas a fixed rate mortgage stays the same over time. At some point there is an inflection point.

Secondly you have not accounted for leverage. A home is one of the only assets that allow you to borrow 5 x (assume 20% down) the amount that you are putting down.

Tax shelter. Not ony do you get the tax deduction but you also get to keep up to 500K in gains without paying taxes.

Estate planning. You can take your home as an asset and pass it down to your family members and they get the benefit of the new cost basis.

If you have children and plan on sending them to college. You can qualify for far more financial aid in the form of grants and subsidies by being house rich and savings poor.
(Federal Financial Aid does not count your home into the calculation for aid)

Long term diversification. If you plan wisely an home represents just one asset class of a long term financial plan. You can still use the 401K/403B, the Roth IRA, and Brokerage accounts to accumulate wealth in a number of different asset classes (large cap/small cap/gold/REITS/ commodities etc) along with you ownership in a home.

This is just some quick bullet points on the matter.

[Raybyrnes]

I think there is a lot that is missing. You have not factored that rents can go up whereas a fixed rate mortgage stays the same over time. At some point there is an inflection point.

Secondly you have not accounted for leverage. A home is one of the only assets that allow you to borrow 5 x (assume 20% down) the amount that you are putting down.

Tax shelter. Not ony do you get the tax deduction but you also get to keep up to 500K in gains without paying taxes.

Estate planning. You can take your home as an asset and pass it down to your family members and they get the benefit of the new cost basis.

If you have children and plan on sending them to college. You can qualify for far more financial aid in the form of grants and subsidies by being house rich and savings poor.
(Federal Financial Aid does not count your home into the calculation for aid)

Long term diversification. If you plan wisely an home represents just one asset class of a long term financial plan. You can still use the 401K/403B, the Roth IRA, and Brokerage accounts to accumulate wealth in a number of different asset classes (large cap/small cap/gold/REITS/ commodities etc) along with you ownership in a home.

This is just some quick bullet points on the matter.

[Raybyrnes]

I think there is a lot that is missing. You have not factored that rents can go up whereas a fixed rate mortgage stays the same over time. At some point there is an inflection point.

Secondly you have not accounted for leverage. A home is one of the only assets that allow you to borrow 5 x (assume 20% down) the amount that you are putting down.

Tax shelter. Not ony do you get the tax deduction but you also get to keep up to 500K in gains without paying taxes.

Estate planning. You can take your home as an asset and pass it down to your family members and they get the benefit of the new cost basis.

If you have children and plan on sending them to college. You can qualify for far more financial aid in the form of grants and subsidies by being house rich and savings poor.
(Federal Financial Aid does not count your home into the calculation for aid)

Long term diversification. If you plan wisely an home represents just one asset class of a long term financial plan. You can still use the 401K/403B, the Roth IRA, and Brokerage accounts to accumulate wealth in a number of different asset classes (large cap/small cap/gold/REITS/ commodities etc) along with you ownership in a home.

This is just some quick bullet points on the matter.

[PadreBrian]

lol, I wouldn’t buy now though. The market has a bit more to go through reach the true bottom.

[PadreBrian]

lol, I wouldn’t buy now though. The market has a bit more to go through reach the true bottom.

[PadreBrian]

lol, I wouldn’t buy now though. The market has a bit more to go through reach the true bottom.

[PadreBrian]

lol, I wouldn’t buy now though. The market has a bit more to go through reach the true bottom.

[PadreBrian]

lol, I wouldn’t buy now though. The market has a bit more to go through reach the true bottom.

[Coronita]

1) You can't live in your stocks

2) Depending on your investment abilities (which almost everyone thinks they are experts at and few people are readily willing to admit that they aren't), you can loose a lot more money a lot quicker in stock market speculation.

3) For some people, have more readily available cash on hand means that they end up spending more rather than really saving for investment. If you have a bunch of bills piled high, it sometimes can sort of force you to have more discipline (though some folks have proved to max out other debts and exercise no discipline). For example, I see so many times among peers that are supposedly "saving" for a home, only to blow a few thousand here and there over time on new toys because they have more money at disposal. Net end result: still no money for a downpayment.

 

Max out your pre tax savings accounts, perhaps open a few roth/iras, and then after that it's really a personal decision imho

 

[img_assist|nid=5962|title=selfportrait|desc=|link=node|align=left|width=100|height=80]

—– Sour grapes for everyone!

[Coronita]

1) You can't live in your stocks

2) Depending on your investment abilities (which almost everyone thinks they are experts at and few people are readily willing to admit that they aren't), you can loose a lot more money a lot quicker in stock market speculation.

3) For some people, have more readily available cash on hand means that they end up spending more rather than really saving for investment. If you have a bunch of bills piled high, it sometimes can sort of force you to have more discipline (though some folks have proved to max out other debts and exercise no discipline). For example, I see so many times among peers that are supposedly "saving" for a home, only to blow a few thousand here and there over time on new toys because they have more money at disposal. Net end result: still no money for a downpayment.

 

Max out your pre tax savings accounts, perhaps open a few roth/iras, and then after that it's really a personal decision imho

 

[img_assist|nid=5962|title=selfportrait|desc=|link=node|align=left|width=100|height=80]

—– Sour grapes for everyone!

[Coronita]

1) You can't live in your stocks

2) Depending on your investment abilities (which almost everyone thinks they are experts at and few people are readily willing to admit that they aren't), you can loose a lot more money a lot quicker in stock market speculation.

3) For some people, have more readily available cash on hand means that they end up spending more rather than really saving for investment. If you have a bunch of bills piled high, it sometimes can sort of force you to have more discipline (though some folks have proved to max out other debts and exercise no discipline). For example, I see so many times among peers that are supposedly "saving" for a home, only to blow a few thousand here and there over time on new toys because they have more money at disposal. Net end result: still no money for a downpayment.

 

Max out your pre tax savings accounts, perhaps open a few roth/iras, and then after that it's really a personal decision imho

 

[img_assist|nid=5962|title=selfportrait|desc=|link=node|align=left|width=100|height=80]

—– Sour grapes for everyone!

[Coronita]

1) You can't live in your stocks

2) Depending on your investment abilities (which almost everyone thinks they are experts at and few people are readily willing to admit that they aren't), you can loose a lot more money a lot quicker in stock market speculation.

3) For some people, have more readily available cash on hand means that they end up spending more rather than really saving for investment. If you have a bunch of bills piled high, it sometimes can sort of force you to have more discipline (though some folks have proved to max out other debts and exercise no discipline). For example, I see so many times among peers that are supposedly "saving" for a home, only to blow a few thousand here and there over time on new toys because they have more money at disposal. Net end result: still no money for a downpayment.

 

Max out your pre tax savings accounts, perhaps open a few roth/iras, and then after that it's really a personal decision imho

 

[img_assist|nid=5962|title=selfportrait|desc=|link=node|align=left|width=100|height=80]

—– Sour grapes for everyone!

[Author]

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