I am getting ready to buy a house. Am I better off using the money I have for a down payment, or should I pay off some debt?
Answers | 5
On Debt- We generally want to be able (cash flow + equity) to pay off all of our debt in 3 yrs or less.
On the down payment- where else can you put the $$ for a greater return on investment?
Let's say you have no debt and put 20% or $100k down on a $500k home.
1) What will that home be worth in 30 yrs?
2) What are the sum total of all my payments over those 30 yrs?
3) What if I pay off the house in 10 yrs by only putting 10% down and investing the other 10%?
4) What are my living expenses?
1) Using the last 15 yrs as a guide and current ZIRP or similar, the home has a very wide range. A double would be $1M- ask again in 30 yrs
2) Around $800K in payments
3) Put $50K in an investment and in ~10 yrs you could have enough to pay off the mortgage. Do that and you pay yourself the mortgage for the next 20 yrs.
4) Together we can help you determine how long your income will exceed your expenses.
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It's not what you make, it's what you keep that determines your lifestyle.