Quote:
Originally Posted by will76
I don't think it will be worth less either but he hasn't answered my question yet on how much he put down. If he put down 20% he has more of a cushion if values do go down more. Also, I don't know how good of deal he got either, he could have paid more than he should have so he could be starting off at a bad point.
Allocating some money towards a long term retirement plan is a great idea even if he can spend a small amount per month. That is for another discussion. I'll close here with repeating my main thoughts, "investing the extra money" is bad for most people. Most people will lose that extra money one way or another. If they can afford it, it is simply safer for them to put it into reducing the amount of interest they are paying on their mortgage only if their mortgage is their highest interest rate expense. They need to start with credit cards, car loans etc.. anything that they are paying high interest rates on. Once you get all the high rates shit knocked out then you can put some more towards long term retirement. And if you don't know much about stocks, investments etc... and especially if you are risk adverse or using money that you can't afford to lose, putting it into reducing your mortgage payments would be better for most people.
Also, hell I don't even know if he is paying PMI, if so he needs to get his mortgage paid down enough so he stops wasting money each month on that. I was always a preacher of using the banks money to make more money and investing the difference, but i know it doesnt work for most people, especially when you talking about someone's primary residence vs commercial or investment type situations.
bossku icq me if you have any questions.
|
The part I have a problem with is that he is using money that he can't afford to lose. If he can't afford to lose it then that means he doesn't have much money elsewhere. So why trade a liquid form of money for something that he won't see until the he sells his house or gets 25 years into his loan? He might as well keep the money as cash and have it if he ever needs it to pay his loan or for any other surprises he has.
That should be his first priority with his extra money, build a 1.5 - 2 year emergency fund that can be used to pay all his monthly bills. Then if he invests the rest of it in something that is better than his effective 3.8% loan he'll still have liquid cash.