Financials
February 2nd, 2007As you will have noticed, there’s a few developers who are quite interested in financial matters. We’ve had quite a few great discussions about investing and various options of money making in the developers channel. As well, we’ve helped some developers gain a wiser understanding of their money situation and how to earn a better return on they money they worked for.
I’ve recently noticed how lucky I actually am. I’ve put enough away in the last two years to have a decent start to a retirement account, between the last job and now maxing out a roth ira every year..I’m well on my way to hopefully a independent comfy retirement. as well, every month I’ve been putting a bit away in two accounts thanks to being able to save money at home. One is of course the emergency fund to save me if I should be out of work for an extended amount of time.
The second on the other hand is quite a sizable for me at least downpayment for a first home. At the currently market value in my area it would seem like its about a 10% or so down payment that I have. I’m amazed that I’ve managed to get that much money in one spot for a goal t hat is in all reality quite scary. As you are willingly going to heavy debt to afford the house.
I’ve been in true debt two times before, the first of course was student loans that I paid off relatively quickly, no doubt in thanks to my grandfather who paid for the beginning of my schooling, and the parents helping me out as well with more money then they really could of afforded to give at the time. The second time was by choice on a car. I didn’t have any real credit history at the time, so taking out a small loan on a car that I could of paid off right away was a perfect way to build up that initial credit score and then get onto the credit card train that I of course pay off every month.
Now I’m considering a 30 year repayment play on a home, that I’d like to think I’d pay off much sooner but with the reality of the paycheck I bring home, wouldn’t be that much sooner no doubt. It also means that I plan on living in an area for a while, that I’m tying myself down instead of where I’m at now..that if need be i could pick up and go if that’s what really needed to happen. I’m just not sure what I really want. I just look at the market, and see that renting is the same price as buying..if I can get a house in the range that I could afford the loan at. If you notice I said what I know I could afford, not what the real estate agent or loan company say that I could afford.
Its a confusing time for me right now…and having talked with a few friends who are barely making it on the income of one person..makes me feel really lucky financially. Just need to avoid women who are attracted to the guy who has money….
February 3rd, 2007 at 7:19 pm
I really think you should consider 15yr loan. I got a 30 on my house and even paying extra realized after 7 years didn’t have that much principal. Typically if you look at a 15 vs 30 you don’t really pay much more for the 15 per month AND you really build up your principal. I got it even better when interest rates dropped. Replace the 30 with 15 and dropped two percentage points.
Regardless, if you look at the math, your really better off with a 15 year loan. The I’ll get a 30 and pay extra doesn’t work as well as seems in reality. If my math was correct, I saved a buttload of money over the life of the loan, just switching to the 15. Wish I had done it to start with.
February 4th, 2007 at 11:16 pm
In my case however its not that easy. As I’m doing it on my own, a 15 year loan would make me extremely house poor and I’d have nothing but the home, I’d be paying more then a good portion of my salary to cover the cost of just the payment itself without home owners insurance and other things involved. The 30 year puts it into the same area as a moderate to slightly higher range then I’d get with a apartment by myself.
I’d love to be able to do a 15, but for financial reasons..its just not possible, with the size of the loan and what my pay grade it like currently.
February 5th, 2007 at 10:18 am
Just my two cents….
We’ve always done the 30 year loan and paid extra. It does work out fine. I also think it depends on the loan at the time you get it, whether a 15 is better or not. In our case, a 15 year loan would have not worked. We would not have been able to pay extra and build up the principal.
The important thing isn’t about money, it is about doing what makes you happy. You have to decide if you want to live in one house for a very long time or not. I know that at one time you were thinking about moving to another state. If you still have those kinds of thoughts, you need to consider them a little more before you buy a house. Granted, If you do buy a house, after 2 years, you can sell it, and still be okay. Eeeerrr, wait, I’m thinking California here. In Cali, if you live in a house for two years you get a break on the taxes you pay when you sell, but if you sell before two years, the state nails you for it. I don’t know if they do that where you are at. That would be something to look into, just in case you are thinking you might change your mind after the fact.
Oh… and look out for us women who like the idea of you having your own home and money, etc.
Whatever you decide, I’m here for ya.
EDIT:
Just spoke with Don. Only once has he done a 15 year loan, and it was because the interest was so low that he could make the payments and still pay 1k extra a month. He says interest rates are not that low anymore and never will be. The interest was under 5%, I want to say it was 4 point something, but I can’t remember, I was 17. I do also remember that it was a Cal Vet loan and they do give really good interest rates to veterans.