Tacoma from a teenager's POV

so does that mean the loan at the bank is in your dad's name....you pay your day....your dad pays the bank, right? if thats the case, how do you build credit with that?......so the payment will never be late because your dad is on the hook to the bak.....now i see what going on....your dad bought the truck for your and financed it thru the bank.....and you pay so he can pay bank...

 

Congrats on your new truck OP. Enjoy it!

 

20% is a good rule of thumb and a good indicator of someones financial stability. Most people right now don't even have 20% of their home value in savings, in fact many people are dependent on the equity in their homes. A young couple who has the savings to drop $60,000 on a $300,000 home likely have the savvy to save and prepare finances well. Additionally, there overall interest payments to the bank are significantly reduced thus keeping more money in their pocket.

Lets explore this. Assuming all things are equal with costs such as Insurance, taxes, loan rate, assumed inflation etc, we can see that the couple that put 20% took a half of the NET loss that the ouple who didnt put 20% down.

No downpayment
300,000 House/Loan
2.9%
30 years
0.5% PMI
2400 Taxes
1000 Insurance

This equals a $1650 payment, over the course of 10 years, they will pay 83500 in Interest and 81500 in Principal and owe 218500. Assuming their house value increases to 350 and sells, we subtract the remaining balance of 218,500 from 350k which is 131,500 but WAIT we must subtract that from total investment (not including PMI and taxes etc) which equals a total NET LOSS of $33,300. If we want to look at it more simply, just take the monthly payment x 12 for the year x 10 years = 1650x12x10= 198000 350k-218.5k = 131.5k- 198k investment costs = -66.5k loss

Down Payment
300,000 House
20% down
2.9%
30 years
2400 Taxes
1000 Insurance

I won't go into as much details on this next calculation but if we run the same numbers as above but with 20% down (60k) we have a loan amount of 240k and are not required to have PMI due to the down payment. Which comes to about a $1280 payment, including taxes, insurance etc. OK so 1280 x 12 months x 10 years = 153600 + 60000 down = 213600 total investment. the remaining balance of this loan after 10 years is about 175k. 350k - 175k balance = 175k - 213.6k total investment = 38,600 loss.

Putting 20% down on a home in this scenario saved the home owners about $27.k

People always forget that you actually LOSE money with long term loans.

 

First off your misinformed regarding USDA loans requiring you to payback - it depends on a number of different factors.

How is it a scam? Aren't you the one taking money that's not yours? Where would it make sense for you to borrow $300,000.00 (you don't have) and payback only $300,000? It's not a scam it's a business plan. As I'm sure you've found out in life, nothing is free. So why would borrowing money be an exception? Sometimes 10% isn't in the plans for certain people. Some people need that money for other things for the time being? In your world only the rich would own houses? Which guess what - only makes them richer, because they get equity on those homes. Then the people stuck renting - STAY RENTING. Buying homes stimulates the economy in ways 90% of the population doesn't understand.

 

If you stay in that loan for 30 years - sure. Average 1st time home buyer stays in their home for 13 years.
After that it's 17 years on average.

 

…that’s how a loan works. You pay back the money borrowed plus interest. Most people don’t have 100,000 on up to pay cash for a house.

You can either pay rent, pay interest on a loan or live under a bridge or in your car. Interest isn’t screwing you, it’s allowing you to pay over time instead of up front.

You can either rent for $1200/month and never see that money again or pay $1200/month in principal and interest and own something at the end.

Arguments can be made either way on which one is better depending on the situation.

I sure wish I had $500,000 when I turned 18 so I could pay cash for everything and never need a loan like most people here.

 

Incorrect, look at the numbers. 300k loan with no down after 10 years resulted in a net loss and assumed a $50k increase in home value on sale. What if your home didn't increase value, you LOST like 80k. If you include taxes PMI insurance and such it's even more. Your only chance to a profit is to pay cash, short term loan, rent the property, pray for a crazy spike in home values

 

Buy low.....sell high





















Any questions?

 

If you rented for 10 years you also lost money…

Take the guy who mentioned $1700 rent earlier - over 10 years that’s $204,000

 

Ya renting is a complete loss. At least with buying your losses are mostly mitigated.

Personally, the best bet is to put a huge chuck down and go with a 15 year loan but we know that is super difficult for most people but a lot of people also overbuy

 

Funds are safu!

https://www.youtube.com/watch?v=DMonlRsJ5hY

https://www.youtube.com/watch?v=DelF6zEHXpE

 

I mean...lol you can google it if you don't believe me. (Here's an article from Sept. 2018).


I don't think anyone has argued that cash will result (TYPICALLY) in a larger profit, because you don't have to pay anything back you borrowed..?? I feel like that's very self explanatory.

What happens when you turn that home you bought into a rental..? I'm sure at a point you'd be paying your mortgage and then some. Bottom line is loans are there for a reason. Whether it's for school, a vehicle, a home. And you are required to pay back more then you borrowed - because you borrowed them. I'm sure you could imagine how many people don't have $300,000 for a home - let alone $500,000+ for people who live in larger cities.

 

Ok you are COMPLETELY missing the point. We are talking loan duration not how long you lived in the house. Just because you live in a house say 13 years does not mean your loan is 13 years.

At the end of the day 20% is better than none down. My example used 10 years because it's easier but you can see if a couple bought a house and lived in it for 10 years, the couple who put money down took less of a loss.

You said " people that say "20% down or you're not ready" are typically either highly misinformed or have not purchased a home in 30 years."

They aren't misinformed and they probably have purchased a home recently, if anything they are more informed and making a better financial decision.

 

You don’t need $500,000 at 18 to pay cash for everything.

You can pay cash for a car it just doesn’t need to be a $40k Tacoma.
And you can pay cash for a house if you want, you just need to avoid debt to keep as much of your income free as possible to save and buy a home within your means (most people buy too much house).

I just get mad looking at how much of my money flies out the window for someone else when I work so hard.
But thats motivation to pay off the house and pay cash for the next one.

Rent isn’t all wasted money. Its nice when its not your problem when the water heater goes out. Especially when you are in that early and broker part of life. Its not lost money.

Most people have a mortgage their whole life that amounts to hundreds of thousands of dollars lost in interest payments.

I plan on staying in my home 5 years. Itll be paid off by then.
I’m not sure what staying in it 30 years has to do with it. The longer you keep the loan the more money you waste.

 

Lol I think you might be missing the point. No one was trying to say that 20% was worse or better. It was more about the availability of having the funds for 20% down. I'd say the greater majority of the US doesn't have $60,000. That's why they make more then one loan type? That's why they have loans for people with shit credit. Or who need Down Payment Assistance..? I'm confused on why that doesn't resonate in your head - not everyone has a disposable income. 20% is not the "end all be all, top-tier, CAN'T GET BETTER"

3.5% down is better then none too. No one's arguing that. But if you are a borrower, who takes out 100% financing, you are obviously going to have more interest because you are borrowing more. But at least you're given an opportunity to own a home, make equity, and do (not literally) anything you want. Because you OWN it. Not to mention the positive impact it could have on your credit to own a home.

 

I'm sure everyone here would love to have your income then? Or maybe your a mountain man who lives in a 600 sq ft home 1b/1b and your mortgage was $60,000? (I kid, I kid)

Regardless I wish you the best of luck - being a homeowner is a great opportunity for anyone. And I will always encourage people to buy homes (if they're ready).

It's something to take pride in.

 

You said " people that say "20% down or you're not ready" are typically either highly misinformed or have not purchased a home in 30 years." MY counter argument is that they aren't highly misinformed. It's the exact opposite. My point is that the people who say that, know what the fuck they are talking about and I used math to prove it.

I agree that most people don't have the funds to put that much money down. I'd argue it's because they aren't ready or are overbuying.

Also you don't own anything that has a bank note. It might be deeded to you but it's the banks

 

Let me get this straight - I don't want to misspeak for you -

You are claiming that you are only ready to buy a home if you have at least 20% to put towards a down payment? I'm getting this from "I'd argue it's because they aren't ready or are overbuying" for your reference.

Is that correct?

 

Nope, I agree with what "they" say that you should put 20% down but if you can't you are probably not ready.

I can't tell someone when they are ready or not, I can only advise that they wait until they have 20%