Re: Resurrecting the debate of Leverage using a house
Posted: Tue Mar 15, 2016 7:44 am
Often, the decision to buy a home has more to do with quality of life (and quality of housing) than finances. Barrett is right to call a home a consumption item. You can sell and move to a cheaper home later, but there's a huge overhead of cost & effort involved with that.
You may not agree with Tyler's rule, but it's better than relying on the real estate market's idea of affordability which I think is a catastrophic level of debt and a near-zero savings rate. I like the rule about spending no more than your current amount of liquid savings on a house, because I'm in compliance with that one :-). After that, it doesn't matter too much what you decide to do with the mortgage. For what it's worth, my handling of the mortgage right now hinges on where my savings are located (tax-advantaged vs taxable), so that may be something for you to consider before deciding to pay down the mortgage - which is an irreversible action.
You may not agree with Tyler's rule, but it's better than relying on the real estate market's idea of affordability which I think is a catastrophic level of debt and a near-zero savings rate. I like the rule about spending no more than your current amount of liquid savings on a house, because I'm in compliance with that one :-). After that, it doesn't matter too much what you decide to do with the mortgage. For what it's worth, my handling of the mortgage right now hinges on where my savings are located (tax-advantaged vs taxable), so that may be something for you to consider before deciding to pay down the mortgage - which is an irreversible action.