Any reason to ever put down more then 20% How about now?

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[quote author="roundcorners" date=1214351546]Awgee,



But if you think about it again, equity is the worst bank. It doesn't do anything there; it doesn't pay you a dividend or a rate of return, well unless it is a rental property. Real estates is a great investment but the worst bank. I have been reading a lot of RE investors who are constantly stripping away equity, putting most of it in cash bank reserves and using the rest to leverage more rental properties. If I had huge amounts of equity and some natural disaster happens, I?m the one out of luck; I rather be completely leveraged and have my mortgage company go after the insurance companies than face them myself.



What so many people made the mistake during the housing boom was that they didn?t build enough of a liquid reserve; they bought (re-invested) in hugely inflated areas or probably most likely just spent the re-financed money.



You also mentioned inflation, you home equity, cash, CDs, mutual funds, etc? are all under constant attack by inflation. Why not let inflation work for you, YES inflation will be my best friend, how? Again by leveraging! Why not put as little down as possible (again having enough reserves) and leverage as much as possible. Having a fixed interest rate say 30 years, interest only for the first 10, will ensure that your fixed payments will depreciate as the dollar gets weaker and weaker.</blockquote>


Did some say Ponzi? Or Pyramid? :)
 
[quote author="PANDA" date=1214359869]I think the problem comes in when we believe that our primary residence is an investment. It is your home and I don't believe it should be counted as an investment like your stocks or rental properties. When money magazine had a report of millionaire households in Orange County, they did not include one's equity in primary residence as part of their networth.



Personally for me, no matter how much cash I have on hand, I don't feel comfortable when I have a mortgage that is more than $417,000. If i were to buy to a $650,000 home in Irvine, that would be mean I would only need $130,000 down (20%) and a mortgage of $520,000. I feel much safer putting down $233,000 and getting a mortgage of $417,000. The problem is that most of us are not diciplined to keep our cash liquid and not spend in bad speculative investments or spend it. For example, even for Panda, I am constantly tempted to put some of my down payment money in speculative assets like gold, silver, asian stocks. Once that equity is in the house, you can't gamble with it.



I learned a great deal from many of you that my Irvine Down Payment fund is not gambling money, so I need to put in a 100% safe place CD or Money Market, and not dump into more gold or foreign currencies. I am constantly tempted that gold can go up to $2000 an ounce by next year from books I read and looking at CNBC every morning, but I can not gamble with my down payment fund. That could be a problem when you have too much cash and you are not disciplined to keep the cash liquid. Many of us fit in this category.



Panda</blockquote>


I agree w/your logic of the $417,000 mortgage...if you can get it to that level might as well instead of paying the extra 50-75 bps for the jumbo loans.



BTW...advice, do not mistaken luck for skill (i.e. investing in Chinese equitiees, foreign currencies etc)



World markets are down 15-20% and the S&P;is down 10% for the year.
 
I had originally thought that you HAD to put 20% down on a house so when we bought the Paso house we didn't even look at loan options that were greater than 80:20 LTV. We drained so much of our cash and assets that it made me really nervous. Luckily, we were able to get a line of credit greater than what we had tied up in the house. That cushion eased the worry. When we went to buy here I compared the rates for 20% down and 10% down and found that the 10% down option didn't make enough of a difference in the payment to justify going 20%. Our loan amount isn't that much, so maybe that's why it wasn't that big of a diff in payment. Anyway, it might be worth looking at 10% options as well.
 
As we all know there are bad debt (consumer debt) and good debt (RE & student loans) and there are great debt (rental income). And yes there is a difference between your primary residence and income property. Your primary residence is just a complete liability, well again unless you have someone renting a room or something. Good debt or borrowing (as much as you can) at a fixed rate to purchase rental properties is how five of my multi-millionaire mentors built their wealth. Credit is capital; it is an asset that most people don't realize. Your ability to borrow is a critical asset. Without leveraging none of my mentors would have made it, not through stocks, not through saving & investing, and not only through their primary residences. Yes debt does not equal liquidity; which is why I stress having enough cash reserves, usually 4% of the purchase price. This usually can ensure any downturns, vacancies and unexpected expenses.



I'm not sure where you are going with your inflation comment. All I know is that my $1500/month payment today is worth more than my $1500/month payment ten years from today. Most middle class have no idea how bad inflation is going to get. How the middle class is basically disappearing; either they are going to use inflation to their advantage and use good debt to leverage themselves to the wealthy; or have inflation eat them out of cash, house and stocks.



The mentors I know will Re-Fi until they die. They live on tax-free refi money checks; some I saw well into the $500,000s. It is crazy how much the government is allowing them to get away without paying taxes on appreciation. The other exit strategy is just simply sell and consolidate; yes you have a million of refi appreciation money in the bank, you owe two million but your property is worth two and a half million. Sell it and simply pay all your debts. Now what if that million is 10 million in the bank and the 2 mill is 20 mill, and your investment portfolio is 25 million?
 
[quote author="roundcorners" date=1214390012]...

The mentors I know will Re-Fi until they die. They live on tax-free refi money checks; some I saw well into the $500,000s. ?</blockquote>


You may wish to review with your mentors how many got rich buying properties that didn't cash flow.



If you check their refi's you'll see the properties still cashflow. If they don't your mentors are killing their golden goose.



A 4% liquidity reserve isn't going to save you from a property that doesn't cashflow.
 
[quote author="stepping_up" date=1214362307]I had originally thought that you HAD to put 20% down on a house so when we bought the Paso house we didn't even look at loan options that were greater than 80:20 LTV. We drained so much of our cash and assets that it made me really nervous. Luckily, we were able to get a line of credit greater than what we had tied up in the house. That cushion eased the worry. When we went to buy here I compared the rates for 20% down and 10% down and found that the 10% down option didn't make enough of a difference in the payment to justify going 20%. Our loan amount isn't that much, so maybe that's why it wasn't that big of a diff in payment. <strong>Anyway, it might be worth looking at 10% options as well</strong>.</blockquote>
I agree, especially using BofA's No Fee Mortgage loans when the loan amount is less than $250k-$300k because they don't charge you PMI.
 
roundcorner is right on the money. buy real estate with leverage. live off refi's, heloc's, and other credit opportunities. just sell when you need to, duh. only chumps would do otherwise.



sincerely,

marty mcfly transported back to 2006
 
[quote author="25w100k+" date=1214288574]So, here I am again asking the financial and RE gurus of the forum to dispense their wisdom on the issue....



There is a real possibility I might pick up a condo at the end of summer since we're finally hitting the point where its cheaper to buy then rent in some cities.



Now, I don't think i'm going to put down more then 20% for a couple reasons. One, I like having money liquid (I might want to quit my job, maybe I want to splurge on that six series ten wants me to buy, who knows) and two, I want to hedge against my purchase in case housing crashes a lot more.



I figure if I put 80k into a condo and have another 60 or so in the bank, if things fall a ton even more, I'll just pick up a bargain as an investment property with the extra cash.



Is there ever a reason to put more then 20% down for a place, (barring exceptional circumstances such as buying a multimillion dollar property)? If so, is there a reason to put more down for myself?</blockquote>




This would depend on how long you intend to reside in the home, and how long you intend to keep it.



If you plan to keep the property for 20+ years, putting >20% down to afford a 15 year fixed-rate loan might be worth it. This works for either primary residence, or a future income property. Time goes by pretty fast, I have a few friends who purchased homes with 15-year loans and they've already paid off 9-10 years. In another 5-6 years they'll done. They bought smallish homes on large lots and will have the option to flatten the old house and put a newer, bigger one on top, financed with a construction loan or some other method.



If you don't intend to keep the property long-term, or don't know, then consider 20% down with 30 year fixed rate loan, and just make 1 extra payment every year.



Is there a pressing reason why you want to buy a condo this year? I think the stars will align better for property purchase later next year.
 
<em>make 1 extra payment every year.</em>



Momo's right....simply doing this shaves almost 7 years off your 30 year mortgage.
 
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