Should I pay off my car or buy a house?

[KenB925]

Originally Posted by hubbahubba

This is really great advice, and I wish I could have been in the financial position to follow it every time I bought a home. That said, even though I did not buy while using that criteria, if I had waited to get what I considered a liveable home for my family, I would have been priced out of what I was aiming for. Market timing also needs to be considered, and if done properly you could enjoy the tax benefit of a 30 year mortgage vs nothing on renting, and accrue some decent capital appreciation. Especially in Seattle. Yes, being house poor sucks, but at this point in my life I am pretty sure that if I had a chance to do it again, I would do what I did. Renting sucks (to me anyway) more than being house poor. For me, home ownership created other opportunities to leverage money as well, which also contributed to what has accumulated in my little nestegg. Rule number 1- capital appreciation, rule number 1A- capital preservation. Any way you slice it, to be thinking about it in this fashion for the OP is a great thing, and I wish him nothing but the best!

PS.. FWIW, I am on a 15 year now, and it really is the way to go if you can swing it.

When I got into my house I was definitely house poor, it was the dumpiest house in the neighborhood. I was about 23 when I bought it, it was $450,000.

After a couple of years a buddy of mine rented a room from me. I redid the kitchen by myself and used the money I saved to buy a new Porsche (sometimes you have to have a little fun).

I never planned on staying in the house, but I'm still in it. The real estate market went nuts (in the SF Bay Area), and I probably couldn't rent an apartment for what my 30 year mortgage is now.

I have put a bunch of money and sweat equity into the house, did an addition, put in a pool and an outdoor kitchen.

The house is worth nearly 3 times what I paid for it, and living 'cheap' (having a reasonable/comparatively low mortgage) has allowed me to buy vacation home (that I now rent out), and that crazy place has doubled in value since I bought it 7 years ago.

I'm not saying that I am some real estate genius, but owning your house allows you to control one of your biggest expenses, and it makes the money you were going to spend anyway (rent) work for you.

You can get someone to rent a room from you to help with expenses. You can also get a home equity line if you want to, so your money isn't completely tied up.

A home is a place to live and a very valuable/versatile tool.

[TXSTYLE]

Let me add... If you (figuratively) believe a "House" is simply a place to sleep and or simply an investment tool, you probably should stick with renting.

[NickyC]

People using their homes as ATMs, if only we had some kind of history on that being a bad idea......

[KenB925]

Originally Posted by NickyC

People using their homes as ATMs, if only we had some kind of history on that being a bad idea......

If you are referring to my post, you’ve got me completely wrong. My point is, if you buy a house you have locked in your biggest monthly expense, over time your locked in expense will be comparatively lower, and you are in control. You can rent out a room, or sell if you want to. Or, as I did, use the opportunity provided by your ‘low’ monthly expenses to save up enough money to buy another property, or invest in the stock market, or whatever.

I would never advise someone to pull out any home equity and buy some nonsense, like a boat or car etc, but it is a good tool if you want to do some improvements to your property.

[vreihen16]

Originally Posted by NickyC

People using their homes as ATMs, if only we had some kind of history on that being a bad idea......

...and then those of us who bought a responsibly-priced house and didn't leverage it to the max with equity loans wind up bailing them out with mortgage modifications and foreclosures.....

[Grumpy Old Man]

Originally Posted by Run Silent

Didn't accidentally own a Ferrari and two homes on an accountant salary. Being fiscally responsible so you can be fiscally frivolous (to some degree) later works.

I imagine the same could be said for you.....retired cop with a 993. Didn't happen by accident. Happened because you made smart fiscal choices.

I didi ok, considering I also have two divorces under my belt. But yes some good choices, some luck and lots of damn hard work.

[obert]

Wow this thread blew up today

Thanks so much for all your advise and I absolutely need to be as financially responsible as possible right now!

I am really upside down on my car that is why I would like to pay it off and can’t trade it in a something cheaper for a cheaper monthly payment. I have had so many cars over the last 16years I have no desire to get another one after I pay this one off unless it gets totaled.

I make good money but nit enough to not be completely house poor. I would be using over 50% of my income on a house payment even with the 20% down.

I think what I am going to do is to pay off my car and put the rest of the money into an account that can make money over a year. Take out a years worth of support and pay the monthly from that account while the rest earns interest and repeat yearly.

The only reason why I made so much money in my current home is because I bought it when the housing market was horrible and there was lots of foreclosure home everywhere.

I am hoping to possible buy a home again when the market is much lower in the future.

Even now my monthly rent is basically 50% of my income. And this is cheap when it comes to rent unless I mover over an hours away from work and I might have to move that far away next time my lease is up in two years. I am continually looking and working towards a better job so it’s just a matter of time before something happens for me and I make more money but this isn’t guaranteed.

Maybe in a couple of years I will be with someone that can help with the living situation but I don’t want to rely on a roommate to pay for my Morgage or rent. Been there before an it usually ends up bad.

My ex is a pill of garbage and likes to play games of not answering my text messages for days when I am trying to get her to move on the house situation. I paid to get a letter wrote up that once she signs I can take her to court to make her follow through with selling the home or giving me cash. But she is sitting on it and ignoring me so I am going to have to tell her sign it or we will take it to the courts.

Her and her new man are living fat and happy in a house and pay less monthly then I do for a one bedroom apartment so I know that is why she keeps stalling but I am done waiting. It’s working on 5 years.

Just to be clear I am in no why going to pay her everything at once. It will be monthly and I want her to cash be out so her house payment will double or she will be forced to sell the house and we both take the money.

[Run Silent]

Originally Posted by obert

1) I am really upside down on my car that is why I would like to pay it off and can’t trade it in a something cheaper for a cheaper monthly payment.

2) I make good money but nit enough to not be completely house poor. I would be using over 50% of my income on a house payment even with the 20% down.

3) Even now my monthly rent is basically 50% of my income.

Okay,

1) Give me some numbers on the car - seems unlikely that you are that upside down, but I could be wrong. If this is too personal - send me a private message.

2 & 3) I did some basic calculations based on where you live, what a reasonable home price is, reasonable rent, etc. This tells me you are making around $4,000 per month (net of tax). If this is the case, then you cannot afford a home in Seattle and you should move. Less than $50K per year in Seattle is near poverty level. You have an income problem and need to either further your education and get a higher paying job, or move to a new location with a lower cost of living.

I did some research and in Seattle proper, a small decent older home or a nice smallish 2br apartment is gonna run about $350K. 20% down is $70K. That puts a 15 year fixed rate mortgage at around $2,050 per month.

To afford that, you should have a minimum gross annual salary of about $115K to $120K. If you don't make that, then you cannot afford a home at that price point and not struggle.