Do you own your own home?

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Recently, my best friend got engaged to her boyfriend of only 6 months (they are both only 21..). They are both heavily in debt with credit/debit cards and other payments–yet they want a huge wedding and a big house that will cost them a fortune. They can do what they want with their lives, but it doesn’t sound reasonable.

Seeing their money problems and unrealistic expectations scared me. My boyfriend and I are only 18 and have been together for 2 years. Despite being younger, we’re learning from our friends’ mistakes. We’re putting off marriage (hopefully with each other) until we’re done college. That means we’ve given ourselves about 5 years to get ready.
Most girls want a dream wedding, but I want a secure financial future without worrying about a mortgage.

Is it possible to straight out BUY your own home, or is it really better to take out a mortgage?
On a side note, my boyfriend has excellent credit whilst I abhor credit cards. Cash only in my book haha.

11 Comments
  1. Reply
    RRK
    July 17, 2011 at 6:57 pm

    Either put the minimum down payment or pay 100% cash, whichever makes the most sense for you. Remember, home loans have tax benefits.

  2. Reply
    Jen
    July 17, 2011 at 7:56 pm

    The main reason people have a mortgage is because the cost of home buying is so high (in most areas) that people cannot afford to pay cash outright.

    The other reason is for tax purposes. Because mortgage interest is tax deductible, you can help lower your taxes.

    In California, no matter how financially stable I was, I could never have over $ 300k cash at one moment and still pay rent etc.

    If you can afford a paid off house, way to go!

  3. Reply
    Loves the Ponies
    July 17, 2011 at 8:01 pm

    It is certainly possible to buy a home outright and have no mortgage at all, only property taxes. However, there are far more tax breaks if you have a mortgage, I believe.

    Sounds like you and your boyfriend can handle having a house payment as far as financial responsibility goes….budgeting and making sure all bills are paid on time, etc, so it shouldn’t be a problem. Keep your head on straight and keep as much money in your pocket as you can!

  4. Reply
    Andrew Wiggin
    July 17, 2011 at 8:01 pm

    Very few people have the cash to simply “BUY” a home. You almost have to take out a mortgage. They used to say that you should buy a home that is about 3 times what you make in a year. (some say 5, some 2) but, being able to save that amount of money is (probably) unrealistic.

    My advice: Go ahead and buy a home, using a mortgage and plenty of “cash as down payment” (with a person you are going to marry FOR SURE) and take advantage of the fact that this is likely the best “buyers market” you are going to ever see in your lifetime.

    Good luck.

  5. Reply
    Bob
    July 17, 2011 at 8:24 pm

    Of course it’s possible to straight out buy your own home, if you have a couple hundred thousand dollars in the bank. Mortgages are pretty much necessary otherwise. I applaud you learning by your friend’s mistakes!

    My wife and I (married 7 months now) got married on our 5 year anniversary together, I was 23 and she was 21. I think you’re smart to wait. I bought a house at 19, and we both have a little debt but are revolving it regularly (paying it off and charging more, then pay it off etc) because that’s better for a credit score than never using any credit products.

  6. Reply
    Who fell for the AGW hoax?
    July 17, 2011 at 8:46 pm

    You probably both have great credit. It’s not bad to have a mortgage since most people don’t have that kind of cash and if you did you’d make more on the stock market than you’d pay in interest payments.

    You sound much smarter than your best friend. I’ve heard this come up on financial talk radio, and the answer is usually for young couples to rent for a while before going into the type of debt a house would bring. It makes it easier in all respects.

    Sadly, your best friend sounds like she’s heading for disaster. Being heavy in debt is a terrible way to start out a marriage and can cause a lot of extra stress. I wish them luck, but I have more confidence in you.

  7. Reply
    chstrtm
    July 17, 2011 at 9:29 pm

    if at all possible buy, buy, buy! Yes, buying a home through a mortgage is great for your credit score, you end up paying for your house at least twice, depending on your credit score, through interest alone.

  8. Reply
    Stacy
    July 17, 2011 at 10:04 pm

    Glad to hear at least one 18 year old in the world has half a brain! 🙂 Some of the kids out there scare me.

    The obvious advantage to buying a home outright is that you won’t be paying interest for 30 years. A 150,000 mortgages ends up costing well over $ 300,000 over the life of the loan.

    The disadvantages are that you could put that same money into higher yield investments to fund your retirement. If you have an investment that pays 10%, and your mortgage rate is only 7%, you’d be foolish to choose the house over the investment.

    Aditionally,
    When you make a cash purchase, you give up a sizable tax deduction.
    If top investment gains is your game, you could miss out on the possibility of larger returns for your money.
    What’s worse, in a down market, you could lose special legal protection for your assets.
    http://realtytimes.com/rtcpages/20000330_cashdeal.htm

    Lastly, it’s really hard for most of us to save up $ 20,000 to buy a car for cash. If you can manage to save up $ 100,000 or more for a house while going to college, please write a book for the rest of us.

  9. Reply
    venicefloridarealtor
    July 17, 2011 at 11:00 pm

    I think you are smart to be practical and not be overextended on anything.

    A dream wedding can mean anything – mine was on a beach at sunset in Florida. It did not cost a fortune, but was a sweet and tender moment for me, my husband and our friends and family. That was MY dream.

    Buying a house is a big investment, probably the biggest you will ever make. If you have enough cash to buy a house outright, good for you.

    I would still advise you not to put all your eggs in one basket. Keep a little $ $ $ on the side in case of emergency – don’t lock it all into your home.

    If you itemize on your tax returns, a mortgage has tax benefits. If you don’t, it won’t. However, a mortgage payment will help you create an excellent credit record (and rating) as long as you pay it on time.

    I applaud you for learning from other people’s mistakes. And for putting your education high on your priority list. You won’t regret it.

    Good luck and best wishes.

  10. Reply
    Beatrice C
    July 17, 2011 at 11:29 pm

    The only way you can “buy” your home without a mortgage is to pay cash. Do you have that kind of cash in the bank?

    At age 21 being in debt and already having questionable spending habits will cause problems in any relationship.

    You are on the right track. 18 or even 21 is much to young to get married. Take your time, get educated, get a job and get ready for the real world.

    You are only young once, there is plenty of time for work, bills and responsibility.

  11. Reply
    Open Book Advisors™
    July 18, 2011 at 12:16 am

    Good for you guys.

    You both sound like a very good financial match.

    I recommend you don’t buy a very expensive wedding gift for your friend as it will not last.

    It is possible to buy outright. But it takes living against the grain of our society or throwing away the TV. That’s nearly impossible for the MTV generation. They have to have their coach purses and chanel sunglasses in order to ‘be somebody’ and how bad their credit is doesn’t show in public or so they think.

    In 15 years when you and your hubby are doing well you will be living a stress free life while your friends complain about how the rich get richer and the poor get poor, as they stand in line to pay loan shark interest at the check cashing place because they can’t get a bank account due to habitual overdrawn funds.

    It really is true that you can’t fix stupid. Educate yourself about $ and when your friend comes to you for help because she needs to move out and can’t qualify for a rental……hand her some of that education……..not $ $ .

    When you do go to buy I recommend doing a 15 yr fixed.

    You’re on the right track. Your post gives me hope for the next generation.

    As far as the tax advantageous of paying interest……well if you HAVE to pay interest it’s nice to get to write some of it off but using it as a strategy?? Why would I keep interest accruing on a huge amount of $ $ ….. so I can spend $ 1 to get .60 cents back in return?? Where is the benefit in that?
    IF I told you to “give me a dollar and I will give you a reward you with .60 cents back” You would call me wacked!
    It certainly makes mathmatical sense to only pay interest you can write off but don’t have debt just so you can write off the interest. Invest and let your $ pay you….not invest in the lenders and let uncle sam let you pay less taxes…….That just means that uncle sam and mr. lender have a good thing going in my opinion.

    Use your home as a business and write off as much as possible but don’t get talked into thinking that paying interest is a good thing for anyone but the lender. Don’t finance a lifestyle. Send your money to work for you, don’t work for your money.

    The concepts on http://www.daveramsey.com are right up your alley. Be a good example to your friend. You are doing what’s right and you will reap the benefits of those positive choices. Our family saying is “You never regret doing the right thing.”

    You might find the movie “maxed out” pretty interesting.
    Our government is broke. NO surprise our government schools don’t teach this stuff……they don’t get it themselves. It’s the younger generations that will get nothing in return for the 50% taxes they will be paying.

    Kudos to you!! You made me smile today!

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