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Just got a job at Deloitte M&A in Atlanta and am currently looking to buy a house. Would you advise I buy closer to Atlanta or the suburbs? I personally want to be in the suburbs but I hear the traffic situation is quite bad. Current consultants in Atlanta, how much time do you actually spend in the office vs remote vs client site? Would you advise I try and stay closer to the office?
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You may be overly optimistic with that interest rate; factor 6.2% to 6.8% for credit scores between 750 and 850.
Subject Expert
What does your model say? You have all the numbers needed to calculate it…
Subject Expert
So model out 30 year with $1,000 in extra payments.
15 vs 30 amortization doesn’t start to pay off until year 7 or 8. With PMI, just model out getting the 30 year loan but making the same payment as the 15 year. Plus it gives you some flexibility with payments in case your situation changes.
Rate isn’t everything, the amortization table matters here.
(Contd.) With annual interest, PMI, and taxes and onetime closing costs, it looks like we'd barely break even buying. But renting we'd be sitting on $200k+ in savings after 5 years. What am I missing?
Anytime!— fwiw, we are also planning to only stay around 5 years at our first home and chose a home at a price range where our 15 year mortgage principal payment was a bit above what we would save to rent as well. Our homes value has already gone up 4% in the past 18 months, so that’s a nice benefit as well
closing costs will be around 9-18k depending on your taxes
that is a very optimistic rate, how would you possibly get that
Subject Expert
Run the model at the 30 year rate. Give yourself the flexibility, especially because it’s pretty much guaranteed that rates will come down in the next few years, and if you have PMI, you’ll be incentivized to refinance and get that removed.
Assuming 6.2% annual appreciation on $575k, wouldn’t it be better off to buy? You would have approx $300k+ equity in the house at the end of five years as opposed to $200k savings. The big question is whether 6.2% is a good estimate.
Also note that mortgage interest and property tax are tax deductible, but rent isn’t.
House
Add 40k at least for selling it
$150-$200 a month for home insurance
5% capital expense - fridge, stove, repairs.
HOA fees
Interest isn’t tax deductible unless you itemize, which 93% don’t.
Your interest exceeds your appreciation, but a refinance in a year or two could change that.
Renting
Switch to an index fund. I’m 80% VOO getting 7.73% 20% HYSA 4.65%. I mixed in a few side trades for a combined 11.27% return yoy. My other accounts are all similar index funds. 4.3% is not a normal return.
Normally I like the house play because you are putting peanuts 🥜 down and getting returns on the 575k. Right now though it’s a gamble on rates. 9-10% rates could kill demand and push prices down. Houses and rates are high. The same could happen in stocks too. I think if you really want the house I’m waiting until fall/winter for a 10-15% discount. Very few markets still make sense to buy vs rent. What market are you in?