How "bad" is* putting down less than 20% on a home really?
Wife and I have had a plan to wait 3-5 more years to buy a home with 20% down and are currently renting. We'd rather not wait, but we can if it makes sense financially.
However, both sides of our family think we're bonkers to not buy ASAP with 5% down and stop "wasting" money on rent. Had a couple lucky family members' homes double in value over the last 4-6 years.
Considering PMI and the higher interest rate it looks like we would pay an extra $120k-$140k over the life of the 30yr mortgage if we were to buy with 5% down vs 20%. Are we overthinking it? Is that peanuts? Doesn't feel like peanuts.
They're even suggesting we borrow against our retirement accounts. Which seems like a big "no" to me.
Hard to feel confident on a plan when it's coming at us from both sides... so why not listen to the advice of internet strangers? :P
Possibly relevant info:
- We have a 6 month e-fund we won't dip into for home purchase
- We plan on living in the same area, rent or buy, for at least the next 10-15 years
- First baby on the way
- We're slightly behind on retirement savings and prioritizing that. Which is why we need as much as 5 yrs to save for the 20% down payment.
Appreciate any feedback.
Edit:
- 5% down will be about $2200/month - could do it if we sacrifice retirement contribution a bit.
- 20% down will be about $1600/month - Likely wouldn't need to cut back on retirement savings.
- The above accounts for mortgage, home insurance, PMI, tax, HOA, and about 1% annual maintenance costs. Kind of a salad, but it's what I have in front of me if that's useful.
- My wife does not have a reliable income. So we do rely almost exclusively on one income. Bit more of a risk.
Submitted March 22, 2021 at 11:27PM by defenistrat3d https://ift.tt/315fLvE
