|10/15/2020 2:13:23 PM patatty|
|Bought a house! Pretty scary to have so much debt, but it's cool to be a home owner. Even though I have a feeling that we're at the peak of some kind of housing bubble, I also think we got a good deal on the property, and we plan to live here for a while. Another reason I am justifying the purchase is that it seems that relatively high inflation will come at some point, and make our mortgage payment (and super low interest rate) feel insignificant over the next 10 to 15 years. Plus, our monthly mortgage payment will be about half of our current rent. So, all-in-all, while it's scary to buy our first non-investment house, and our debt sounds like it's crazy high, it's also manageable and seems like a reasonable financial risk/judgment. I'm curious what other people's thoughts are about buying a house in the current market, with all the economic craziness we're going through as a country. Did we make a huge mistake?|
|10/20/2020 1:02:39 PM Aweaverii|
|Congrats on buying the house. That's one thing you'll notice quickly is how much faster your net worth will start increasing when you add more real estate.
Regarding your question on whether its a good time to buy or not, ultimately it doesn't matter if it's your home and if you plan to stay there for a while. Time heals all and if you plan to buy more properties then think of it as dollar cost averaging properties. |
|11/1/2020 9:38:51 AM larry|
|Congrats on the new house, Pattaty!
Regarding your question, I think it depends on how you financed the house. Real risk in real estate can arise from asset-liability mismatch (i.e. borrowing "short-term" to finance a "long-term" asset). If you locked-in a very low mortgage rate for a long period of time—say 25-30 years—then you're all good. Over time, you can be sure that inflation will erode your mortgage payments and therefore in real terms your mortgage payments will be lower and lower over time because you'll be repaying in "worth-less" (not entirely worthless yet!) dollars.
Conversely, if you took on a variable rate mortgage, you are exposing yourself to a rise in interest rates which could make your home purchase much costlier than anticipated. If there is a currency crisis and the dollar is quickly losing value, the Fed will likely not be able to contain interest rates as it has in the past and therefore your mortgage payments (and purchase price of your house) will sky|
|11/1/2020 9:39:12 AM larry|
|...rocket because interest rates will have spiked to account for the added currency risk and inflation risk premia.|
|11/1/2020 1:38:32 PM minwage|
|Something to think about....
Adding TRILLIONS to the national debt every year acts as a spoiler to the FED raising rates, they simply can't afford it anymore! If they do, they risk pushing the USA into default.
Of course, the prime rate could be manipulated to cover the shortages (for everyone else, not the government).
|11/2/2020 9:09:48 AM girlnextdoor|
|I find it interesting that you mention DR in your profile and more or less followed his teachings, up until buying the properties. Personally I'd be nervous to have that many mortgages and that much mortgage debt, but given your high income and relatively low monthly expenses odds are that it'll work out for you. Especially if you're able to keep renters paying and/or keep your jobs for a while. I'd stockpile cash for a very high emergency fund that includes covering 6+ months of mortgage on all 3 properties, just in case of another market crash and/or government rent forgiveness programs. |
|11/13/2020 5:22:39 PM patatty|
|Thanks for everyone's thoughts! My thought process/justification for going into low fixed rate debt, despite still having some trauma from the process of getting out of massive student loan debt, is basically what Aweaverii, larry, and minwage said. The low interest rates, plus what I expect will be moderate to high inflation in the future, will make our payments seem tiny. On the other hand, I have Dave Ramsey and the memory of living on rice and beans looking over my shoulder and saying it's too risky to ever be in debt. Overall, obviously, the first though process outweighed the spirit of Dave Ramsey, because while I think Dave Ramsey is very motivating and has a great message for getting out of consumer debt, I think he is overly cautious when it comes to using debt for income producing real estate. |