It all comes down to whether you can enjoy a dinner out without worrying about the bill. Sometimes, the present discomfort can lead to future gains. It might be tough now, but you have options to improve your situation later.
Be wary of advice here; a lot of it might steer you away from building wealth. It’s important to assess information critically.
It’s a close call between renting and buying right now. Condos don’t typically appreciate as much as single-family homes, and your total monthly housing cost might exceed comparable rent by about $2k. However, if you can afford it comfortably, that’s what matters most. If it were a single-family home, buying would generally be the better choice. For now, just enjoy your home and try not to overthink it.
Interest rates are actually slightly below their 40-year average. Many people with 3% mortgages are now effectively locked in, unable to sell due to higher rates, which keeps inventory low and exacerbates the housing crisis. Who advised you to choose this mortgage structure? It might be worth revisiting your options.
A strategy to consider is accumulating cash to buy an assumable FHA loan from someone, using the cash to cover the equity they’ve accrued.
We’re closing on our first home in Parker next Tuesday. We locked in at 7.375% on an $820k loan, using seller concessions to cover the buydown and closing costs. Our plan is to refinance if rates drop into the 5s next year. A neat aspect of your 2-1 buydown is that the funds are yours to use towards refinance costs, points, or principal if the chance to refinance arises next year. We’re settling in for the long haul with a move-in ready home, avoiding projects we might not complete. Owning your home is a big step—congratulations on both your new home and your marriage!
It seems like this may not be your forever home, or even a long-term home. If that’s the case, avoid refinancing or making extra payments towards the principal. Instead, consider saving that money, perhaps in mutual funds, and then selling the condo later.
@Avery
That’s the direction we’re leaning. But why not make extra payments towards the principal? Wouldn’t we technically get it back when we sell since it increases our equity?
Ori said:
@Avery
That’s the direction we’re leaning. But why not make extra payments towards the principal? Wouldn’t we technically get it back when we sell since it increases our equity?
Extra payments towards the principal don’t increase the condo’s appreciation, which is likely to be modest at best. However, a financial advisor might help you achieve a better return on those funds.
@Avery
It’s not about the appreciation rate. You benefit from reduced interest payments as more of your money goes towards the principal, thus reducing the loan balance at the time of sale, regardless of appreciation.
@Harlow
While true, if you invest the same amount in the stock market, you might see comparable gains, even considering the tax implications, over a short period. It’s about balancing risk and return, and the stock market can often offer more lucrative opportunities.
@Avery
Stock returns are not guaranteed, especially over a short term. A guaranteed 7% return by reducing mortgage interest might be safer and more predictable than potential stock gains, which are subject to market fluctuations and taxes.
Ori said:
@Avery
That’s the direction we’re leaning. But why not make extra payments towards the principal? Wouldn’t we technically get it back when we sell since it increases our equity?
Extra payments only really benefit you if you’re going to stay in the home long enough to pay off the mortgage. It doesn’t reduce your monthly payments immediately but reduces the total interest and shortens the loan term. If you plan to sell soon, those extra payments won’t have much impact on your financial flexibility.
@Kelly
They’ll benefit from a 7% return on extra principal payments as long as they have the mortgage by paying less interest. This is effectively a return on investment, as it increases the principal paid and reduces the balance when they sell.
@Avery
This comment has been removed by the forum administration.
Drew said:
@Avery
This comment has been removed by the forum administration.
Please refer to my response to the initial post for context.
@Avery
Refinancing might be a viable option. Why not consider it?
Marlow said:
@Avery
Refinancing might be a viable option. Why not consider it?
The costs associated with refinancing, such as title fees and other closing costs, may not be quickly recuperated if they plan to sell in the short term.
What’s your monthly payment? It must be at least $3,500 with your income of $160k. I’m curious about how you’re managing it.
Bayley said:
What’s your monthly payment? It must be at least $3,500 with your income of $160k. I’m curious about how you’re managing it.
Our current payment is $2,800, but it will rise to about $3,500 once the buydown expires in 2026. It’s astounding to think we’re paying so much for a condo in Denver.