MalibuRenter_IHB
New member
In my seemingly endless analysis and proformas of the housing market, I am looking at the issue of how much of a downpayment to make, assuming someone has much more than 20% down saved (for example the Troughers from an analysis post earlier this week).
I'd like any input on personal experiences, or factors I might be missing. It sounds to me like the following factors could push you toward higher downpayments (if they are applicable to you when you go to buy):
1. Very low income tax rates.
2. Not itemizing, or being at such a high income that itemized deductions aren't fully counted.
3. High mortgage rates, especially if they are higher than the aftertax return on other investments.
4. Qualifying for a lower interest rate loan (e.g., a program which requires 25% down. Yes, I expect to see those.)
5. A gain from a prior real estate transaction which needs to be rolled over.
6. Large downpayment required to bring debt to income or debt service to income ratios in line.
Factors which could push you to only put 20% down, even though you have a lot more in savings:
A. Higher expected aftertax return on investments than mortgages.
B. Need for liquidity or concern about job loss.
C. Expecting to do significant repairs or upgrades to property.
D. Increasing household costs, e.g., having kids.
E. High cost of turning savings into cash, such as illiquid investments (e.g., other real estate), or retirement accounts.
Am I missing anything? Appreciate your help.
I'd like any input on personal experiences, or factors I might be missing. It sounds to me like the following factors could push you toward higher downpayments (if they are applicable to you when you go to buy):
1. Very low income tax rates.
2. Not itemizing, or being at such a high income that itemized deductions aren't fully counted.
3. High mortgage rates, especially if they are higher than the aftertax return on other investments.
4. Qualifying for a lower interest rate loan (e.g., a program which requires 25% down. Yes, I expect to see those.)
5. A gain from a prior real estate transaction which needs to be rolled over.
6. Large downpayment required to bring debt to income or debt service to income ratios in line.
Factors which could push you to only put 20% down, even though you have a lot more in savings:
A. Higher expected aftertax return on investments than mortgages.
B. Need for liquidity or concern about job loss.
C. Expecting to do significant repairs or upgrades to property.
D. Increasing household costs, e.g., having kids.
E. High cost of turning savings into cash, such as illiquid investments (e.g., other real estate), or retirement accounts.
Am I missing anything? Appreciate your help.