Quote:
Originally Posted by burn_this_city
If you're putting down 20% at current interest rates more than half your payment goes to paying down the principal. There isn't enough of a divergence between rent and mortgage payments to be further ahead renting and saving the difference.
|
I'm not saying you're ahead. I'm saying you're pretty much indifferent between the two.
And you're pretty close to the 50/50 point but just to clarify, down payment has nothing to do with how much of mortgage payment goes towards principal. That is entirely dependent on interest rate and amortization period.
25 years, 3%: 52% interest, 48% principal in first year
25 years, 4%: 62% interest, 38% principal in first year
25 years, 5%: 70% interest, 30% principal in first year
30 years, 3%: 59% interest, 41% principal in first year
30 years, 4%: 69% interest, 31% principal in first year
30 years, 5%: 77% interest, 23% principal in first year
Moral of the story, my point is that if you can rent for about 60%-70% of an affordable mortgage payment then you should absolutely considering kicking the buy decision down the road another year if you don't think the market's going up much. I like that range even though its higher than the 50%-60% interest component at current mortgage rates because 1) property taxes with owning are money out the door, and 2) low/zero risk of major maintenance costs with renting.