Quote:
Originally Posted by polak
I get that.
But in my mind the risk/benefit in having 12,500 versus having 50,000 down on a 250K property is not worth the 31,200 I throw away in two years of rent for living in a comparable (or most likely worse for that price in the current market) property. Add to the fact that renting cuts extremely deep into the amount I can save (which in turn increases what I spend on rent) and that 37,500 of extra down payment doesn't seem like much of safety net.
ESPECIALLY if this prediction is wrong and the market keeps increasing in price mid to long term and I get priced out of the market by waiting.
Oh and that 31,200 is based on 1300 a month. Basically the price of getting out of a basement suite if you don't want to live on the wrong side of 8 mile.
Well to start, it's only a "HUGE" risk if you plan on either living in it short term or you take on more than you can comfortably afford.
Now, have you looked at rents in this city? Most rents are higher than the comparable mortgages and those that aren't, you'd only save maybe 100 or 200 bucks a month on rent. That $1200-$3000 (if we're being REALLY generous) a year is nothing.
|
I see that. It makes sense. However, that is not why there is a problem with low down payment loans. It's not about your situation, its about the rest of the people involved.
If you do not have much of a down payment, it often says that you can't save much. Not always specifically, but often. This hypothetical purchaser will often have issues with saving, and paying off the debt they just acquired. These are people who are living on the edge of financial stability. One on one, this is not that big a problem. When there are a lot of high risk home purchasers, a change in the economy can mean that there are a lot of people who cannot or will not pay their mortgage. That's when the problems begin.
Because, now, not only are there more homeowners foreclosing on their mortgage, dropping the price of buying a new home, but there are a lot of people with new mortgages that cost more to upkeep than it is worth. Imagine you have a big mortgage, and the price of what you bought has dropped to a lot less than what you owe. In other words, you are paying more than what you own. If you do not have a large down payment, you have an option to drop your mortgage, because you don't have much invested in it.
And that is the big issue - you need to be invested in this investment. The bank needs to know that you aren't going to run away from the mortgage if prices drop. The bank needs to know before hand that you are a good saver to avoid getting in this position to begin with. And every other home buyer needs to feel confident in the market in general, because if there are people that will cause the housing market to drop, that is where the issues come up.
In short, it's not about you. You have listed really good reasons why you want to buy a house, and this isn't the problem. Just because the situation isn't completely fair to you, doesn't mean that there aren't good reasons for it. I was in the same situation you described 7 or 8 years ago. It was tough. Your task however is to find a way to get what you need, regardless of the hurdles put in front of you, and the banks need to make sure that the situation as a whole doesn't screw everyone else over.
Good luck with that. And I mean that.
I hope that made sense.