Blackrock1
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depending on when you bought an excellent house in an excellent location might have been a lot more affordable than it is now.
depending on when you bought an excellent house in an excellent location might have been a lot more affordable than it is now.There comes a point where you don't need the best house and location you can afford.
In my own case between savings and the amount we were mortgage approved for we could have gotten a seven figure house. We bought an excellent house in an excellent location that is more than big enough and spent a bit over half of what we could afford (if you consider the amount we were approved for the amount to be the amount we could afford).
We're not the only people in that (very fortunate) position. And I'd suggest the OP might be in that position also.
My thinking is this...
If house prices rise by say 10% over the next 3 years (which is conservative imo) then a 10% rise of a house of 300k is a capital gain of 30k, but a 10% rise of a house worth 600k is a capital gain of 60k which being its ones primary residence is a tax-free capital gain. If this house is your forever home then the return will be greater again in 10-20-30 years...
The point still stands. You don't need to get the best house in the best location you can afford.depending on when you bought an excellent house in an excellent location might have been a lot more affordable than it is now.
Where i am in the 5 years since i bought the prices have increased 40% (based on a recent sale v what the house was purchased for new) id argue that is a substantial difference.The point still stands. You don't need to get the best house in the best location you can afford.
And in any case we only bought a few years ago so they were not a lot more affordable than now.
I think you're missing my point.Anyway i think we disagree, if its affordable to you you should get the best you can, but i dont just see my house as somewhere to clean, i enjoy living in it and the surrounding area, if you have a more utilitarian view then you can make a more pragmatic financial decision.
I think you're missing my point.
I enjoy living in my house. The surrounding area is excellent. The local services and public transport are excellent (for Ireland). I'm not settling for less to save a few pennies.
My point is that I didn't need to buy the best house I could afford to get that.
And in the context of this thread I think the same could be said of the OP.
But yes - we disagree.
Your teacher was close but not quite right:I remember a secondary school teacher back in the early 80s authoritatively telling us that when it came to buying a house we should all borrow and buy as big as possible. I disagreed with him then. I still disagree with that as a general rule of thumb.
I also agree but that's quite different to what he advised.Your teacher was close but not quite right:
Should borrow and buy as big as possible for the house you want & can afford. So max out the mortgage credit line as far as you can for the house that you want & can afford.
I'd agree with that.
It's all of those.Your home is not an investment, its the place where you live, maybe rare a family, and find long term happiness.
It's all of those.
Including an investment.
I've been the most vocal in saying that you don't need to spend your full mortgage approval amount to get the best house possible.What's the point in "settling" for a house that you may not really like, or in a location that you don't really like, possibly having a longer commute, limited infrastructure, possible social issues etc.?
Of course it's an investment.It's not an investment - you need to factor in the cost of providing accommodation, which is a basic life-long need, unlike with investments. You don't acquire a home with the sole intention to generate a net positive cashflow, or future gain on the capital.
Is no more an investment then when you get dragged into a jewellery shop to buy your partner a very expensive peice if jewelleryOf course it's an investment.
Doesn't matter that it's not solely an investment.
It's not an investment - you need to factor in the cost of providing accommodation, which is a basic life-long need, unlike with investments. You don't acquire a home with the sole intention to generate a net positive cashflow, or future gain on the capital.
people who bought houses in good areas of South Dublin many decades ago, waking up in their 60's and 70's
The question is how big is that opportunity cost going to be in the coming years? Given the highs the market is at today, and with both QE being tapered off and interest rate rises already occurring, overpaying a mortgage, with an equivalent after-tax return of 3.3%, isn't a bad idea for most people, at least until the results of the above play out.For mortgages I typically borrow as much as I can for as long as I can at as low an interest rate as I can on the house I have in mind. My reasoning is that capital that I hold back from contributing to the mortgage can be put to work in investing at a significantly higher rate (even after capital gain tax is account for)
You cited a tax free capital gain of simple 3.3% per annum in your example above.
Very broad strokes: invest your retained capital in the S&P500 index and based on historical simple returns since 1957 you'll average out 10.5% return per annum before tax.
In short we're talking about opportunity cost here.
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