Quote:
Originally Posted by rubecube
I also think the idea that "Well we'll only match what they've already saved up, so then there's no risk" is completely ridiculous. The interest free period is 5 years, so if it took you 10 years to save your first $20k, I'm supposed to be confident you can pay off the next $20k in five? Plus, any idiot can inherit or come into $20k by accident. It doesn't prove they have the capabilities to save that money.
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I'm not sure you are looking at the math correctly. Let's suppose you saved up $20,000 in 10 years, as per your example. This amount is in addition to the rent and housing costs you are already paying before becoming a homeowner. If you can do this, it would give me confidence you know how to save some money, and could likely pay me back in the future. Your monthly housing costs once being a homeowner could be very close to what you were paying as a renter. In some cases, it will be less. You will still have the ability to save another $10,000 in the first five years, assuming the same amount is put aside to savings each month, as per your original example.
The $20,000 loan from the government doesn't have to be paid off in the first five years. It can be paid off at any time, but the balance gets paid off in years 6-25, as a 20 year loan. I don't know what the interest rate will be, but let's assume 5%. That $20,000 loan will add $131 per month to your payments, starting in year 6. If it took you 10 years to save $20,000, that's an average of $167 per month. In this case, you are still ahead by $36 per month. If in the first five years you took your $167, saved it, and put that whole amount towards the loan, you would only have $10,000 to pay down. Now the loan only has $67 per month, assuming mortgage financing rules. More frequent compounding would increase this amount.
ese payments could be less than your