Maybe I Should Just Keep Saving…

One of my friends recently bought a house and put about a down payment in the $400,000 range. That sounded crazy until I thought about it a bit more. He’s buying a nice house in a good area. Maybe he’s buying it to stay in for quite a long time.

I’ve been looking at places in the last few weeks. I’m pretty confident of the place that I want to live in now, but how do I know where I want to live for the next many years? With that the case, I think that I should keep renting until I find a place that I am somewhat confident I would want to live in for many years, not just now.

If I project my down payment fund savings out based on forecasted income and 0.84% interest paid monthly, I get the following end-of-year balances:

  • 2012: $91,800
  • 2013: $133,800
  • 2014: $176,200
  • 2015: $227,800
  • 2016: $279,800

I think that it is a better idea to keep renting and saving up cash than to buy a place that I end up wanting to sell in a few short years. Cash is king.

Renting definitely feels temporary and moving is expensive, but the great thing about renting is that I can try out different areas. I can rent a 2 bedroom apartment and see if that makes me happy by myself. If it doesn’t, I can go back to a 1 bedroom place. That option if I buy is a lot more difficult. (Though I really don’t doubt that I would be quite happy in a 2 bedroom apartment.)

Wow, I just found a 2 bedroom apartment in an area that I would consider living in for $1,300 per month! Where I am right now, 2 bedrooms go for around $1,800 to $2,200 per month. That’s a big difference, so I guess I will have to evaluate how much that $800 per month means to me.

I’m finally coming to terms with the fact that saving up a ton more money before buying a place isn’t a terrible option. I guess that’s the biggest thought I’ve gotten thinking about my friend doing a $400,000+ down payment on his house.

Everyone keeps telling me that they just knew when they found their house/condo. So it’s still possible that I could find the perfect condo in the next month. We’ll see what unfolds! In the meantime, I’m loving looking at gorgeous condos…


14 thoughts on “Maybe I Should Just Keep Saving…

  1. There is definitely no shame in renting, so no need to rush into anything. And you should really like the place you are buying but I am no longer convinced it must be love at first site.

    If buying is a lot cheaper than renting that would make buying really tempting. But I do think you should only buy a place you can imagine living in for at least 5 years.

    Your friend who is putting 400k down, what percent of the total purchase price does that represent?

    • I think that his price range is 400-500k, so he’ll put 400k down no matter the price and then take out a small mortgage for the rest. I believe he was putting down around 83%.

      For me personally though, I know that I have zero interest in maintaining a house by myself. So maybe I would consider buying a house with a partner, but I would only ever consider buying a condo by myself.

      I’m starting to be with you in that I don’t think it will be love at first sight again after the fiasco with the other place. A place came onto the market on Thursday that fits all of my requirements, so I saw it on Friday after work, thought about it all weekend, and I’m going to see it again this evening. It is a little lacking in closets and the kitchen isn’t spacious enough for too many people to be in it, but the place is definitely absolutely perfect for me.

      You’re right that buying being comparable or cheaper than renting helps to make it super tempting. The place that described above would bring my monthly costs down about $100-300 and they would stop going up 20% a year like with renting.

      My mom’s point on a two bedroom condo was that I could stay in it until a kid was four and I wanted to be close to a good school. She came up with this crazy timeline in which I gave birth in a year, making it five years later that I would want to move.

      Oops, this reply was almost post length!

  2. Our friends put down 400K on an 800K place. If we ever move to their town we’ll want to do that too, especially since it means avoiding a jumbo loan.

    We like our house just fine but did not “just know.” There were a LOT of amazing houses in our town, really a buyer’s market, and we would have been perfectly happy with our second and third choices as well, which helped with bargaining. We would have walked away above a certain price.

    • Avoiding a jumbo loan is a good plan.

      The condo market is pretty sparse in my town right now and I’m not finding a lot that I would be happy living in. So for me, my fallback is continuing to rent, whereas your fallback was a different house. I didn’t have this feeling when I put an offer in on the fiasco place, so I am in a much better place now.

      I actually found a place on Thursday that I want to put an offer in on :) I’m going to check it out again tonight with a measuring tape and I’ll wander by after dark too. (It is about four blocks from my current place.) But if I can’t get it for what I feel is the right price, I will walk and keep looking, renting and saving.

  3. I really love renting but I go so back & forth… like right now I’m thinking maybe I should just buy a place and if I get a two bedroom condo, I could rent out the second room? But then I read an article that we might be in a Canadian housing bubble and freak out and back down again.

    Your down-payment fund is solid. Is there a way to get more than 0.84% interest on it though? Even my non-registered ING accounts are at 1.35%. I know it’s not a lot but on balances like what you have it can make a huge difference.

    Good luck!! I can’t wait to see what you eventually choose and move into

    • I actually hate renting :/ Rent prices are so not stable here and then I have to pay for a parking spot on top of paying a ridiculous amount for rent and then still pay water, sewer, trash on top of that, which is completely random every month? Sigh. I also can’t paint and it just feels so temporary. I don’t want to rent out the second bedroom – I want to use it as an office/spare bedroom instead of having friends/parents sleep on the sofa bed in the living room.

      I keep freaking out that prices are going to drop more. I’m looking at places being worth what they sold for in the EARLY 2000s. You never really know if you’re in a bubble or if prices will go up or down. I figure though that if your monthly cost is about the same at the start and you stay there for 5-10 years, it should mostly work out okay to buy.

      I’ve looked around at the different banks. Ally is at 0.84%, ING at 0.80%. My credit union is lower than that. A friend tried to suggest that I put some in a bond fund, but I want to keep it all in cash until I make the purchase…


  4. Sounds like renting makes sense for you, and in just a few years you’ll have enough money for a great down payment!

    I just closed last Friday on my first home in Orlando. Very excited. I ran the numbers and length of time we’ll be there, and buying made a lot more sense than renting. It’s cool. I had no idea I’d be buying a house this year!

    • Renting does make sense, but I also have a 20%+ down payment saved and in some cases, buying is actually cheaper per month and I could quite easily pay off a mortgage in 4-5 years at my current income. For the length of time that I want to stay here, I definitely think that buying could make sense. I’m just tired of looking at places and looking at places and not finding something that I want to buy.

  5. I personally love renting; in the past few years, I have been able to live in 3 different parts of the city! All have their pros and cons, and I am definitely very glad that I did not buy the first place I rented as the location as very poor for me. Being able to rent has allowed me to try out different parts of the city, and I have a better idea of where I would (eventually!) like to buy and settle down. It is also great to be able to test out different features (1 bedroom vs. 2 bedroom or condo vs. house), but I’ve definitely received a lot of comments about how I am ‘throwing my money away on rent.’ If only they will sit down with me and I will go through the costs of owning vs. renting in a spreadsheet. :)

    I’m glad you’re enjoying looking at condos, though! :)

    • If only all naysayers could see our spreadsheets! That would solve a lot of problems… “Throwing your money on rent” is a terrible way of wording it. If you don’t have a 20% down payment or plan on living in a place for more than 5 years, renting is almost definitely better than buying.

      I lived in a townhouse in college and I hated how I was always going up and down stairs. My parents’ house is mostly all one floor, but on a good-sized lot so it is quite spacious, and I’ve lived in apartments for the rest of my life, so other than those two terms in the townhouse, I’ve lived in one floor home or apartments my whole life. I far, far prefer those layouts.

      I also know that I hate rectangular one bedroom layouts and really value having multiple rooms. Laundry in unit is also super important to me. Buses make me ridiculously anxious, as does driving, so under 2 miles walking to work and being able to walk downtown, but not being too far from the highway is important. I also know that there is no way I want to buy or live in a house by myself.

      This has been fun :)

  6. I don’t like renting but recognise it’s the best option right now.

    I don’t really like to compare renting vs buying because I have no intention of buying a small place (townhouses/apartments here are easy to buy because nobody wants them and they’re usually poorly made, but hard to sell) – I plan to buy our house for life.

    I ran a mortgage calculator the other day which was more promising than I’d thought, but right now I’m saving for travel (we can’t spend $6k a month and still come out ahead ;) )

    • I agree with you – I had no intention of buying a condo until I realized that I could afford to do so now and would most likely live in it for 5-7 years. I’m only looking at buying 2 bedroom condos though and so a rent vs buy calculator doesn’t make much sense because 2 bedroom apartments cost more to rent than 1 bedroom ones…

      Saving for travel is good too! I’m really enjoying my travel this year. I’m glad I finally gave in and just booked trips, without anyone to join me.

  7. Don’t forget to include taxes in your interest earnings. As interest is taxed as income, you should reduce any money made through savings by 35% or whatever your current federal, state, and local tax rates combine to be.

    • The income tax on interest earnings sort of comes out of my paychecks, so no, I’m not counting it in any of these numbers.

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