Comments on: Buying A House: Should I Borrow More Money Than I Need Since Rates Are Low?

By: Sam Sam

Sam Sam — Fri, 11 May 2012 19:14:00 +0000

Hedge it.. go half way between borrowing too much and borrowing too little
In the same situation and planning to do what I say. But looking at the future – I am tempted to borrow just a bit more… Inflation is coming

Sam Sam

By: Mortgage Brokers Melbourne

Mortgage Brokers Melbourne — Sat, 16 Jan 2010 06:48:32 +0000

Buying a house and deciding how much to borrow is really a hard decision. You made a great job weighing of the pros and cons. It is tempting to borrow more now simple because rates are low but it can be risky. You could get a good return on your investments but you also risk getting in over your head.

By: Tina Su - Think Simple Now

Tina Su - Think Simple Now — Wed, 04 Nov 2009 17:06:13 +0000

We’re in the same situation right now with shopping around for a house. We decided for put down between 20-25% to reduce the mortgage, as long as we have 6 months worth of emergency fund (cost of expenses x 6) in savings left.

We also lowered our budget by $50-100K, and are started to see a number of houses that we liked, in good shape and are much cheaper in price than the houses we started with our first budget. The goal here is so that one person’s income can cover the entire monthly house payments, to reduce pressure.

Good luck!

By: Financial Samurai

Financial Samurai — Wed, 28 Oct 2009 05:30:44 +0000

Steve, have you saved up in cash 30% of the value of the house? If so, that’s the first thing I do as part of our 30/30/3 rule. The other two is spending no more than 30% of your monthly cash flow on the mortgage, and the house costing no more than 3X your annual income.

That said, if you’ve got mad cash in the bank, put 0% down and take advantage of the cheap rates. It doesn’t matter if you have a $1mil mortgage and $1mil cash in the bank, so long as you know what you’re doing.

Best

By: Evolution Of Wealth

Evolution Of Wealth — Wed, 28 Oct 2009 03:08:46 +0000

My vote depends on what you do with the extra money. If you are going to throw it in the market or stuff it in a savings account then why borrow more? It’s not going to help you. If you are serious about leveraging that asset then I think you should borrow as much as you can. How else can you get tax-favorable access to that sum of money? If you needed to access it later then you’d have to ask permission. It’s your money take it. Remember the return on equity is zero. It’s the house that appreciates, hopefully!

By: Steve

Steve — Tue, 27 Oct 2009 14:59:38 +0000

@Gail
Very sound advice. I’d like to think that we’ll be in this house for quite a while but you are right, we probably won’t be here forever. I’m going to go check out your real estate blog now!

By: Steve

Steve — Tue, 27 Oct 2009 14:58:05 +0000

@Thursday Bram
Congrats on your house! Our house is a bit on the older side as well but we should find out if there will be any major expenses this thursday when the inspections take place. If anything has to be fixed immediately, that will greatly influence the loan amount I take out. The thing I don’t like about borrowing more but paying down the mortgage faster is that the monthly payment remains the same. In theory it has the same effect of increasing your principal but psychologically it doesn’t feel that way.

By: Steve

Steve — Tue, 27 Oct 2009 14:55:16 +0000

@Christine
I see what you are trying to illustrate. But if you change the scenario up a bit. Let’s say in the next year interest rates rise like it did in the 80′s. The bank starts paying out high interest rates and you can actually make some money by keeping the borrowed money in CDs in addition to having a nest egg. The situation is unique right now in that rates are extremely low and can only get higher. There will be inflation, it’s just a question of how much.

By: Steve

Steve — Tue, 27 Oct 2009 14:52:34 +0000

@Matt
Interesting. If your house only costs 21% of your net income, how would getting a much smaller mortgage impact your life today? Since the percentage is not a huge percentage of your earnings, why do you regret getting the larger loan? Thanks for all of the kind wishes. Right now the house is ours to lose and I have a few weeks to decide on the loan amount.

By: Steve

Steve — Tue, 27 Oct 2009 14:49:18 +0000

@Michele
Thanks Michele. Your comments are always appreciated.