My Real Estate Advice:
Work hard & have a good Employment Record. Get pre-qualified for a 15-year loan at your income level. Buy LESS house than you can afford. Have a BIG cash down-payment. Work like H#ll to pay it off as soon as you can. Sell house. Plow the proceeds into a nicer house. Repeat until retirement.
1. Buy less house than you can afford.
2. Buy it with a 30-year fixed rate mortgage.
3. If you want to prepay the mortgage, DON'T. Instead, put any excess payments you were considering aside in a mix of investments that is somewhat conservative but has some growth-oriented assets.
4. Refinance the mortgage if rates fall. Enjoy a rare opportunity to screw the bankers/investors if rates rise.
5. Item #3 is critical. Prepaying the mortgage ignores a very important element of personal finance: liquidity. It also works against another important element of personal finance: diversification. If you pre-pay a mortgage, you end up with a huge asset on your hands but you reduce your cash reserves and increase your odds of being in a position where you must sell your home to meet your need for cash in the event of unforeseen circumstances.
Speaking of the housing market, the US is overly dependent on the lopsided 30-year fixed-rate mortgage. Where under inflation and rising rate, the lender (investor) loses. If inflation cools and rates fall, the borrower refinances.
The author is really late to the game on this one. I've been saying it for years. Retail banking is one of the few sectors where the industry gets screwed at the expense of the customer. Under current banking laws in the U.S. there is no such thing as a fixed-rate mortgage. It's only "fixed" for as long as the borrower wants to keep it fixed. The borrower always has the option of refinancing it, but the lender does not.
“My Real Estate Advice:
Work hard & have a good Employment Record. Get pre-qualified for a 15-year loan at your income level. Buy LESS house than you can afford. Have a BIG cash down-payment. Work like H#ll to pay it off as soon as you can. Sell house. Plow the proceeds into a nicer house. Repeat until retirement.”
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^^What She said^^
Why would I pay my loan off as soon as I can?
It takes “X” dollars to pay my loan off.
I have “X” dollars in a 5% CD. My loan is a 3% loan.