I am about to purchase my first home for $310k. I could spend all my savings to get to 20%, or put down 10%?
I will easily be able to put down 10% or even 15%, but I could probably also put down 20% and spend everything I have in my savings. I want to be able to furnish the condo with cash and not go in debt. I also have an option to borrow $10k from my 401k, but that would have to be paid back.
Please let me know if I should put the 20% down if I have it or put 10% (have two mortgages or one mortgage with insurance) down and pay for all the furniture with cash?
- Jeanne RLv 71 decade agoBest Answer
First, do not borrow from your 401(k), if you do you are just stealing from your future. Give that money a chance to compound over the years. I think that I would put down the lesser amount and give myself a cash cushion for emergencies. You can always pay more on the principle loan balance and pay off the second mortgage ahead of time. Then when that is paid, you can put the money you were spending on the 2nd every month towards the remaining principle on the 1st mortgage thereby paying it off early too. In my mind, it is better to have a lower "required" payment every month and pay extra on it then to have a higher "required" payment and have to scrape along for years.
- 1 decade ago
If you can afford to carry a 90 percent loan balance (e.g., is monthly payment affordable and burdensome?), then I would suggest that you do so. The reason I recommend this is that you should have some cash on hand to cover some unexpected expenses that often occurs with home ownership. You will have higher mortgage interest deduction on your tax return to help ease the pain of higher monthly payments.
A disadvantage of having a second mortgage is that the interest rate will be higher than what is available on the first mortgage. I would stick with a first mortgage only.
The disadvantage of paying only 10 percent is that you will have to pay PMI fees.
I would refrain from borrowing from the 401(K) account, even though you will repay it back. It could affect your ability to participate in company matching. Also, the rate of return of the investment may be higher than the interest you pay to yourself. It would be best to think of the 401(K) as being untouchable until retirement.
I would suggest that you do not buy all the furniture now. In a few months, furniture stores will have sales - not only at lower prices but often you can obtain interest-free financing for up to one, two or even three years! You could put the cash in a certificate of deposit. This way you can earned some money on the principle that is used to pay for the furniture. Just be sure that you pay it back the consumer loan in full before the interest-free period expires!
- 1 decade ago
totally agree with the poster above. 10% down and as much as possible in savings. furnish your apt slowly - using cash! put some in CD's that you can have access to for emergencies; which usually show up right after big purchases. make sure you have condo insurance - do not delay! assume that your monthly condo maintenance will increase, trust me, it will (plan your budget that it will).Source(s): been there.
- Anonymous1 decade ago
Doesn't sound, like you can afford the condo. I would cut down notch and buy around 260,000.
Have you calculated, what the place cost with taxes, maintenance and utitlities?
Don't forget, that the price includes about 10% costs for variosu fees, which are lost and if you have to sell, this fees have to be part of the price again, doesn't matter who pays.
So, the moment you pay for that condo 310,000, its real value on the market for you is approx. 250,000.
Don't count on another bubble to push that price up anytime soon.
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- Anonymous1 decade ago
Put 10% down, or less if you can afford the monthly payments. For every 10,000 you put down, you only lower your payments $60 a month.