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Poll

What would you do?

Buy the city condo
Wait and buy in the 'burbs
Keep renting like an idiot
  

Author Topic: Major home-buying headache.  (Read 7337 times)

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DrewKaree

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Re: Major home-buying headache.
« Reply #40 on: January 28, 2005, 07:37:36 pm »
Chad, I just meant that's where his "free health care" comes from....pointing out the benefits he sees and wishes for, but can't see where he's paying for it.

There IS no such thing as "free" from the government, but he's under that assumption because he doesn't know of mythical things such as "lower taxes".

That's all.


Oh, and to tell JoyMonkey to go to www.clarkhoward.com
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Re: Major home-buying headache.
« Reply #41 on: January 28, 2005, 08:52:06 pm »
After some discussion we've agreed not to go for the condo and buy a cheap place in Salem later this year. We'll more than likely get a 15 or 20 year mortgage on something priced about the same as the condo in Boston, pay as much as possible and then buy a decent house after about 5 years. Hopefully I won't be kicking myself about rejecting the condo (this is the third time we've been offered one of these- we should have taken one years ago  :'()

Thanks for all the opinions, it's givin my brain a little more to stew.

danny_galaga

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Re: Major home-buying headache.
« Reply #42 on: January 28, 2005, 09:22:45 pm »
If you sell it in 2 years:
+ 10% appreciation
- the association fees
- up keep
- real estate fees
- moving
- inflation

Also your first few years the mortgage you're paying is mostly interest, so when you sell you wont own as much of the condo as you paid.

You are going to buy a house, so all the fees and headaches you get from a move/sell are doubled if you buy the condo first.

A house gets you land you own everything above and bellow it. You can also work on your car without any hassles from the association.

360,000+ is a lot of money, with the economy and interest rates going back up, do you really think someone is going to pay 380,000+ for it in two years?

I bought a town home two years ago, I like the not shoveling snow or cutting grass, but I would have bought a house if I had to do it over again.


ROUGHING UP THE SUSPECT SINCE 1981

danny_galaga

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Re: Major home-buying headache.
« Reply #43 on: January 29, 2005, 01:39:42 am »
just as an aside- mr c, is that avatar of you 'back in the day'?

Yeah..I was in Blue Oyster Cult.


pure gold!! that was funny. is that will ferrell? hard to tell behind the beard...


ROUGHING UP THE SUSPECT SINCE 1981

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Re: Major home-buying headache.
« Reply #44 on: January 29, 2005, 02:37:29 am »
Damn how much do houses cost in new england? and other parts of the U.S.

I live in Texas and even homes in Dallas aren't that expensive.  My house cost $58,000 and its 1100sq. ft about an 1 1/2 hours outside of the metroplex.   My brother had a house in Hollywood that was smaller than mine and was on a smaller lot of land, like about 10ft. parimeter around the house was his land.  Bought it about 250,000 and sold last year for 500,000.  My sister in law bought a brand new home built inside the d/fw metroplex for $150,000.  The house is cheaper than a new home where I live.  Just wondering what others had to pay for their area.

I say go with house you can claim property taxes on your income taxes also.

ChadTower

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Re: Major home-buying headache.
« Reply #45 on: January 29, 2005, 09:04:28 am »
In Salem, if he gets a house under $300k that's not a falling down POS or in a lousy block, he's very very lucky.

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Re: Major home-buying headache.
« Reply #46 on: January 29, 2005, 09:12:32 am »
Damn how much do houses cost in new england? and other parts of the U.S.

I live in Texas and even homes in Dallas aren't that expensive.
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ChadTower

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Re: Major home-buying headache.
« Reply #47 on: January 29, 2005, 11:41:56 am »
And your kids would grow up in Louisiana.

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Re: Major home-buying headache.
« Reply #48 on: January 29, 2005, 11:57:20 pm »
After some discussion we've agreed not to go for the condo and buy a cheap place in Salem later this year. We'll more than likely get a 15 or 20 year mortgage on something priced about the same as the condo in Boston, pay as much as possible and then buy a decent house after about 5 years. Hopefully I won't be kicking myself about rejecting the condo (this is the third time we've been offered one of these- we should have taken one years ago

GGKoul

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Re: Major home-buying headache.
« Reply #49 on: January 30, 2005, 12:14:59 am »


Just a tip, mortgage payments are tax-deductible


I wish they had this in Canada...


They do have this in Canada, only instead of giving you the money, they keep it in their coffers and offer you free health insurance instead.

It's a wonder, with all the tax deduction items we have in the U.S. tax code, that you haven't stumbled across this sooner, GG.


I knew the US had mortgage interest tax deductiion for a while now.  As I was going to move to the US for work during the Y2K days.

There was talk about during this system to Ontario during the election.  But the newly elected Ontario Government backed out of that program.

Paul Olson

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Re: Major home-buying headache.
« Reply #50 on: January 30, 2005, 12:35:56 am »
I think you made a good choice passing on the condo.  With the cap on appreciation, it would not have been worth it.  My condo has nearly doubled in 4 years, so if it wasn't for the cap, I would say it would be a good investment. 

Paul

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Re: Major home-buying headache.
« Reply #51 on: January 30, 2005, 04:49:18 pm »
Really depends on the area, I bought my house 2.5 years ago, paid $300K.
A house is a solid investment.





No...  a house is a liability.  Buying a property to rent it out is an investment.

Robert Kiyosaki oversimplifies a great many things, like trying to get a mortgage for a pure rental property when you haven't had a mortgage at all.  Rental properties can be big liabilities, particularly over the last three years when interest rates have hit major lows.  People are buying right now, and fewer people are renting, which means you have a harder time finding renters for your properties.  Try eating a few month's mortgage on a rental property, while you yourself are paying rent, or even your own mortgage.  Or tell me what happens to your property insurance when the insurance company finds out there isn't anyone residing at the property. 

Don't get me wrong, R.K. can be a great introduction to the big picture concepts of money management, but as they say, the devil is in the details.
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Re: Major home-buying headache.
« Reply #52 on: January 30, 2005, 08:46:36 pm »
A house is a solid investment.
No...  a house is a liability.  Buying a property to rent it out is an investment.

That's a pretty bold thing to say, since you're essentially saying that everyone else is stupider than you are (ie. willing to pay you more rent then you pay someone else). Of course, statistically they are, but you're not being a "shrewd investor" rather than just taking advantage of them. Why not just rent a bunch of houses from other people, then sublet them at a higher rate to your chumps. That's pure profit since you don't have to fix anything when it breaks.

My partner and I have talked about buying a house, especially since several of our friends are now doing it. We live in a 1.5B house (the other one is really a sunroom), about 20mins (max) from the heart of the city on a single bus trip (one every 15mins). If we were to buy a house better than that we would need to be spending $300K+ given the current market (and paper work). We pay $160 rent per week.

Let's do some math:
$160/week = $8,320 "wasted" per year
5% loan = $15,000 "wasted" in first year
6% loan = $18,000 "wasted" in first year
7% loan = $21,000 "wasted" in first year
etc...
+ $15,000 per year of "non-wasted" money.

Lets say we rent for three years and use 6% ($33,000 p.a.) as a comparison:
rental - $24,960 "wasted", $74,040 principle
property - $51,246 "wasted", $47,754 principle

1) Obviously those numbers will be affected by how much money we can borrow "interest free" from parents, or the first home-owners grant for example. This may be offset by the land-lord paying council rates, upkeep costs, etc...

2) Buying in the 'city' is a completely different ball game, since you are paying for convienience, not value. This makes the city market more volatile over the short term as people continue to breed. If you have to live in the fast lane, then get a better job.

3) And of course, if anything goes tragically wrong, having your assests in a non-liquid form can be problematic.

Basically we worked out that while the rental market is good then we will get a better "return" just saving all our excess money for reducing the principle on our future home purchase. In fact, low interest rates are a *BAD* thing for people with low wages, as when people start rushing into the market they push the price up so high that not only will they "waste" the same amount overall, they will probably "waste" *MORE* in the long run since their deposit is a lower percentage of their principle and eventually interest rates *will* cycle again.

The best way to play this "game" is to try to aim for the route which reduces the amount of money you borrow from the bank. Buying rental property is *NOT* a short term investment, as you will never recoup the loan cost from rent. Rather, provided you cover as much as possible of the interest than you are getting the capital appreciation of the house "for free" when you eventually sell the property off. In response to the poster about "liabilities", the difference between a home and a rental property is that the rental property attempts to nuetralise the yearly cost through tenants, while a home provides a *HOME* in return for the yearly costs. In both cases you will still pay the exact same amount of gratitude to your chosen money lender based on how much of that property you could afford to buy yourself.

Of course, we know we *can* save that money instead of spending it. This is incrediably important, since you need to be investing that $74K to make sure it stays ahead of the rate property prices rise. Lots of people don't have that kind of budgeting discipline, in which case the numbers I presented start to swing the other way. If you need a debt to be able to budget then buy the house now. If you can budget without needing "motivation", then every year you wait can knock 2 years off your final loan. Well, until you start having kids... :D
Done. SLATFATF.

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Re: Major home-buying headache.
« Reply #53 on: January 30, 2005, 08:55:45 pm »
In case that post was a little long and boring for some people, here is the executive summary:

- remember that most house loans go for about 15 - 20 years (at least)
- go to a few auctions and get a *real* price on the property you want
- add all the government, agent and bank fees
- go to a few banks and get a *real* interest rate for that amount
- now compare the first 5 years interest to the amount you currently pay on rent

If the difference is several multiples of your current inflation rate, stay where you are and save like Scrooge McDuck. You will either:
a) buy that house and pay it off faster
b) buy a better house in the same amount of time

If the difference is only a little bit (below double is time to start thinking hard) then start shopping for curtains. :)
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Re: Major home-buying headache.
« Reply #54 on: January 31, 2005, 12:37:39 pm »
Some of these prices I'm seeing make me feel lucky.  My wife and I just bought a 2600 sqf home (4 bedrooms and 2 baths) for $205,000.  That's with 1.17 acres and a 700 sqf shop (heated and A/C) .  Since we live outside the city limits we only pay parish taxes and that runs about $2050 a year.  Without the $75,000 homestead exemption are taxes would be about $2800.  Good luck with whatever you decide on your home purchase.
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Re: Major home-buying headache.
« Reply #55 on: January 31, 2005, 03:20:15 pm »
i read somewhere that if you get a 30 year loan and make one extra payment a year towards the principal you will wind up paying your loan off in 13 years.............

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Re: Major home-buying headache.
« Reply #56 on: January 31, 2005, 03:33:49 pm »
You can split your payment and pay twice a month and cut some time off your loan as well.  For example, if your mortgage is $800 a month, you pay $400 twice a month.  Not quite sure how that works, but it does.

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Re: Major home-buying headache.
« Reply #57 on: January 31, 2005, 04:28:10 pm »
i read somewhere that if you get a 30 year loan and make one extra payment a year towards the principal you will wind up paying your loan off in 13 years.............

I believe it's actually 23 years, 13 seems too short for what additional principal you're reducing.


You can split your payment and pay twice a month and cut some time off your loan as well. For example, if your mortgage is $800 a month, you pay $400 twice a month. Not quite sure how that works, but it does.

In theory, on a twice a month plan, you're saving two weeks of interest payments on the principal that you pay off in the first half of the month. 

Now, you combine the two plans like so, take your monthly payment and multiply it by 13 (adding an extra month), then divide by 24 (two payments a month for 24 months) and pay that twice a month.
So for a $1000/month mortgage you'd pay ~$541 every two weeks


Most importantly, learn how to do compound interest calculations, even if you have to brute-force it with an excel spreadsheet, and always check the math before you take any step, particularly with ARM re-financing.

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