quote:
For some reason this 20% rule of thumb has never changed. The cost of borrowing money should play a factor in determining whether or not you can "afford" a home.

Another good point I hadn't considered.

Back then (50s-80s) I don't think interest rates fluctuated with the magnitude and frequency that they do today (relatively speaking that is....and I could be completely wrong), so that may have played a part in the development of this rule of thumb.

Sorry for coming across as telling you you "can't afford it". I guess I was just echoing my father. That being said, consider all of the costs associated with both, develop a long-term cash-flow model, and you should be able to determine which is the smarted decision from a STRICTLY FINANCIAL standpoint.

Factor in emotions, and determine what to do from there.

Good luck!

This post was edited on 3/26/10 at 12:35 pm

1 ...

Report Post

Posted by tirebiter

7K R&G chile land aka SF

Member since Oct 2006

9383 posts

Posted on 3/26/10 at 3:28 pm to Luke4LSU

quote:
Back then (50s-80s) I don't think interest rates fluctuated with the magnitude and frequency that they do today (relatively speaking that is....and I could be completely wrong), so that may have played a part in the development of this rule of thumb.

I'd suggest revisiting history of the mid-80's and find short term rates rose north of 15%, we had an inverted yield curve, and inflation was ridiculous compared to the past decade. Artificially low rates due to Fed policy is what has, in large part, caused such a significant rise in housing costs compared to median incomes.

1 ...

Report Post

Money Talk - Replies to Post

Return To Board

Page 1

Return To Board