Dave Ramsey is very adamant that you cannot afford to buy a house unless:
1) you can put 20% down
2) you can pay it off in 15 years MAX
That is AMAZING! I've arrived at the same numbers myself, but there was a lot of "gut-feelings math" involved. Thus I stayed away from the property market here in Ireland - even if I "could afford it", by the popular standards back then, and "rent is dead money", as I've heard from then-happy house-or-flat-to-rent buyers around. You should see their faces today, when I show them the numbers, how much I've SAVED, by paying the rent for the last few years - if I was to buy their house at today prices, paying down 20% upfront, and getting 15 years mortgage TODAY. It is in the region of
hundreds of thousands Euro (depending on the house price, quite often the
savings are in the region of €250k - €300k - yes, that "k" is for THOUSANDS for the properties in the range I am looking at, and they are not McMAnsions, just regular family homes, or dilapidated small farms), if you do your diligence, and calculate the WHOLE payments, over the entire mortgage servicing period - and not just sheeplesly look at your "monthly serfdom costs".
Basically, my spreadsheets & guts are telling me now, that I will most probably buy something now, because today it will cost me LESS than renting, and getting 15 years mortgage, the overhead is NOTHING like it was when they were taking on 40-years ones, 105% of the home price (why, surely everybody "needs" some fancy Italian-designed appliances, and despite all that, house prices can only go up, nah? :rotflmbo
. Actually, it feels more like an actual NOTHING - example: total payments on €170k, 10acre farm (this one in a very good nick throughout), with only 10% down pay, over 15 years, is according to mortgage calculators online ~€190k-ish. Now, the rent on ANYTHING that size (land excluded - I am talking comparable house rent only!), for 15 years, would cost me AT LEAST ~€115k+ (and it is quite conservative rent estimate). So the cost of capital required to purchase it, practically without my own capital involved too much (stack is untouchable, until absolutely required!), is maybe a fourth/fifth of the rent over the same period of time, and I would be fully repaid just around the time when my kids are going to a college - hopefully, with my stack intact (or bigger). Now that makes sense, in my book!
Additionally, I fully expect massive money printing during that mortgage repayment timeframe, with artificially low interest rates - there is simply no other politically accepted way for western governments - least full-on economic breakdown, in which case, my stack should come in handy for mortgage payments, until the dust settles. So I'd rather tap on the "easy money" train today, together with JP Morgans of that world. Well, of course I am not getting anywhere near the 0%, but I still firmly believe it will be NOTHING, comparing to inflation that is inevitable to come. Maybe not in housing initially, but surely enough, at some stage housing will be back on the map - why, with the Irish government now bulldozing the "ghost estates", that they have previously taken off the balance sheets of the insolvent banks or otherwise bankrupt developers :rotflmbo: And I thought that joke is but a joke:
Q: What it is, TWO Irish, one digging one-spade deep hole in the ground, the other filling it back with the dirt, and moving on two meters, to repeat all over again?
A: They are tree-planting crew, normally THREE man strong, only the one that is putting the seedlings in, has a day off.
DISCLAIMER: I've heard that joke from my Irish friend, I don't mean to insult Irish, only I think that this example of an utter nonsense serves as a brilliant example of the stupidity of the governemnts, that all the nations got captured by - they genuinely think, that such barking mad policy of first fanning the fire, to waste time money and energy to build hundreds of thousands houses, and then taking on all that misallocated capital on the taxpayer's balance sheet, only to later DESTROY all these unwanted houses (=to reduce glut in the supply, thus supporting artificially high housing prices), is the way to achieve economic progress, to create wealth! That-is-unthinkable, for any sane person!!!!!!
Benjamen,
I think the idea of paying crazy interest to buy a fucking car is insane. When my wife wanted a GMC Envoy four years ago, we saved up the cash and bought a used one with 20K miles on it. Debt is for those who don't mind serfdom.
:clap: I've made that mistake once in my life - I was young and inexperienced, single & was making good money - so I have taken on the credit to buy a new car. You are getting double-whacked - the resale value of the car plummets in it's first years (well, it is getting few grands cheaper the moment it leaves the dealership - that's some achievement!), and the interest you paying, is ridiculous. So after three years of paying monthly car notes, I've sold it, and it was just enough to cover the rest of my credit remaining - with some ridiculously small spare change left. So, thinking about that, despite paying non-insignificant amount of money to the bank, for a car that was theoretically "mine", was I effectively it's REAL owner - If I couldn't get back ANYTHING, really, after selling it?
Since then - I only buy reliable, trusted models, between 5-10 years old, with low mileage and documented full service history, cash payment with a handsome discount because of that, thank you very much
. And laugh all the way to the bank at my colleagues, thinking that I am "extravagant" at best, and more like a weirdo, in the mean case - for driving "clunkers", that can "break up at any moment, and they just need a car that simply can be trusted that it works, and has a warranty". Each of these "clunkers" I've owned, can eat their new plasticky toys raw, in every regard: max speed, 1/4 mile, cornering, reliability, and pleasure to drive. And it cost me maybe a fifth of what they are paying (at most), over the whole life cycle/TCO. And it breaks up less than most of their cars still on a "warranty", but somehow, they still have to pay extremely expensive (in my opinion) service charges in the authorized dealership (=official monopoly - nothing like that to get your dick right up the customers' arse!), to avail on that guaranty. And still somehow, they quite often manage to get something broken, that accidentally, isn't covered ;-). True, my cars do not have integrated iPod docks, nor dash-installed GPS SatNav. I had to buy both, again for a fraction of the cost of these "options" (-:
Usually I am able to sell the car back after a year or two, for roughly the same amount I've bought it originally (I am diligent car shopper), to another happy owner.
cars (especially, NEW ones) + credit = big "no-no" for me. Farms, at the bottom of the market, with artificially suppressed interest rates, (thus allowing me to keep my PM stack largely intact), and at the verge of expected high inflation period - Hell Yeah!!!