- 5 years ago
- Wedding: May 2013
My husband and I are in the process of buying our first home, we had an accepted offer on a short sale about a month and a half ago and are waiting for bank approval. My husband wants this home to be a starter home and while I am open to the idea of it being a starter home I wonder if buying a starter home with a 30 year mortgage makes financial sense in this economy, assuming the following factors-
1. Starter home= 5 years – 10 years
2. Closing costs are approx. 20K
3. Mortgage will be close to what we are paying in rent each month, not including homeowner’s insurance, utilities, repairs, etc. JUST principle and interest.
So based on the above factors, here are the reasons I am against it:
1. If we were to distribute closing costs of 20K over the length of our home ownership, we could tack on an extra 4K a year, approx $333 additional a month, and approx $165/month assuming a 10 year ownership.
2. The majority of your monthly payment in the beginning years of owning a home are interest payments, very little actually eats into the principle, hence leaving us with very little equity, which is our purpose for buying a home in the first place.
3. Interest rates are at a low point right now hence it has become more of a seller’s market in my area, more buyers are looking to buy to lock in a lower interest rate and homes are selling at decent market values. In 10 years from now the interest rates will likely be higher (obviously an assumption), hence the mkt value of homes could decline (depending on this single factor alone).
4. 5-10 years of home ownership will require hefty maintenance and based on the depreciable life of certain assets will more than likely include the following fixes – roof replacement (10K), boiler replacement (6K?), etc.
5. Most importantly (I forgot this originally) is the cost to sell a home. Seller pays all commission fees to the agents (generally around 4-6% of the selling price of the home), PLUS lawyer fees, and possible closing costs of the buyer.
Although my husband and I are “okay” financially, we are savers and always want to have an extra cushion to fall back on in case of emergencies, etc., so while this home is well within our means, I wonder if we should either consider this our forever home, wait until we find that home that could be a forever home OR jump into it with the mindset that it is a starter home and whatever losses we will take, we will worry about later on (although I am a planner, and not a fan of this idea!)…