re: 20% down on a house…is it dumb?

I don't think it hurts to have some equity. PMI sucks. Provides good cash flow if wanting to have it as an investment one day.

Getting a heloc to flip property has been my single greatest tool I've used for amazing returns.

I’m sort of in this boat of thinking of putting less than 20% but for slightly different reasons. The market where I am is moving extremely fast. Homes aren’t lasting more than a week or two. I’m wanting some flexibility with purchasing a house before I’m ready to sell mine in case the ideal home hits the market. I have probably 10-15% in liquid assets than I can put down now but would have much more upon the sale of my current home. Considering only putting that down on a purchase and then getting rid of the PMI once I sell my current house. Also thinking about a HELOC or cash out to raise the capital for 20% down. 401k and IRA are also potential sources I can tap but not sure I want to go that route. What say the MB??

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What say the MB??

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Might want to do some research on bridge loans that apply to your specific situation.

I put 10% down on my first house and regretted it. I got stuck paying PMI for 8 years due to decrease in property value. If I waited a year I would have had 20%. Large interest payments for 5 years which was frustrating. I refinanced to a 15 year 5 years ago and the principal is dropping fast.

My next house will be 20% down.

A lot of basic wisdom is 1st time home buyer just not going to have 20% down generally so it's not a bad idea then to put less down, even if the market might not be a great time to do that.

After that, for 2nd/3rd etc homes, I would put 20% down. By that point it shouldnt be as hard to come up with the money between cash/sale of home later in life (unless you just maybe move a lot or market took big down turn from when you bought current house). PMI is just an extra interest bit basically you're lining someone else's pocket with. Sure you COULD make more in the market and other investments, but also maybe not as well.

I absolutely think there's merit to having a mortgage in such a low interest rate environment even if you have the cash to buy in full and invest difference. But in the sense of paying for someone else's insurance premium, they can go fk themselves

Sometimes PMI isnt terrible, ours was $81/month on our house until we got rid of it after a refinance. But still, $81/mo just flushed down the drain for sure. For others I've seen PMI in the $150-$200 range which is just a little too cringe for me.

Debt in the hands of smart people, is a great asset. In the hands of the reckless or unknowing, isn't a bad one.

I generally think the decision making should be this:

(1) What are you EXTREMELY comfortable making on a monthly housing carry cost? Simple formula - > Take your monthly, after tax income and multiply by .25. Then, once you figure out what your ideal payment is, multiply that number by 1.1 (the average cost of annual upkeep an maintenance.

For example: $10,000 (after-tax, after 401(k) income x .25 = $2500. $2500 x 1.1 = $2,750. So, if you put down 5% on a house where your monthly payment is $2,500, you are likely looking at a home in the $425,000 range in terms of value at a 3.5% interest rate.

(2) Once you do that, it's basically a cost of capital analysis... You're paying a 3.5% interest charge for a house that, if you include upkeep (can be significant) only goes up over a 10-year average... roughly 3-5%. That is great as an inflation hedge, but if you consider transaction costs if you move, it's not a really an ideal investment considering the market has appreciated 10% on average YoY.

If you read "Rich Dad, Poor Dad," you'll see why a house isn't really an asset, because in general it doesn't make you that much money compared to easily found alternatives.

But to answer your question, 5% down is really a determination of whether or not it still puts you in a spot to save 25% of your after-tax, after retirement income to deploy towards investment opportunities.

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You avoid pmi with 20% down

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I got a loan through Huntington Banks with only 15% down and no PMI.