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Use money for down payment or debt/invest?

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  • Use money for down payment or debt/invest?

    Hi all!

    My wife and I are thinking about breaking the cardinal rule: buying a house. I just matched into fellowship and plan on training another 4-5 years and our location historically always has home prices rising (maybe I'm rationalizing). Anyways, we have a sizable down payment that we can put down (approximately $15-20,000). The mortgage we are looking at is at 2.75% and is a physician loan with the option of no money down and no PMI. We have two options that I am hoping to get your thoughts on. Option 1 is to put all of this money to the down payment and decrease the monthly mortgage payment by approx. $60. Option 2 is to pay off my wife's student loans (approximately $11,000 at roughly 4% interest currently in Covid deferment) and then put that extra monthly savings to the mortgage payment (we are very disciplined and will actually do this). We already have an emergency fund that we won't be touching with this money and we both max out our 403b accounts from our employers.

    Appreciate your help and insights!

  • #2
    Don't buy. RENT.
    What does wife do btw- are you certain on staying in the area past fellowship for her job, or will she move/quit her job/etc after fellowship if you have a way better offer in a different location. Only if your wife was working her way up the corporate ladder tying you to your current location would I even consider buying as a good option for you.


    • #3
      Sorry, did you just call 15K sizable?

      But yea you sound like the perfect candidates to buy. Go for it.


      • #4
        Household income?
        Price on house you want to buy?
        Comparable rental rates?

        Really don't have enough info in post which means you probably haven't thought it through enough.

        If interest rates are same between two mortgages though def don't put money toward 2.75% mortgage when you have 4% loans although maybe wait until Feb before putting anything toward loans...


        • #5
          Wife is a nurse and working on her masters of nursing education. She is working her way up the ladder but not her forever job. Won't be here long term but at least 4-5 years.

          Household income is $145-150,000 a year. Price of home we are looking at is $320,000. Rental rates in this area are about $1500-1600 a month and every year have gone up about 3% (we've been renting the past few years). Historically housing prices have risen 5-7% per year in this area.

          Thanks for all your advice!


          • #6
            Renting is smarter.

            Forget about appreciation. That's what's already happened.

            With that HHI you should have more down payment saved up.

            Best of luck!


            • #7
              Try renting a house if you want the yard and all that? You don’t have that much money saved up. If you assume the house appreciates as it has done historically. That won’t move the needle in your overall finances compared to when you start getting the attending paychecks. I would pay off the debt once the interest is accumulating again.


              • #8
                How certain are you that you'll:
                1. Be in the area at least 4-5 years?
                2. Want to stay in the same house that whole time?

                Your timeline is borderline. It's probably a mistake but only a small one.


                • #9
                  Terrible idea. 15k is nothing for a down payment. And you (likely) won’t have a cash cushion. AC goes out and you’re now in credit card debt. Car dies, now you have a car loan - oh, but you’re a doctor, so might as well get something nice since you’ll be an attending in just a couple more years. House doesn’t appreciate (or worse) and you have to pay to move. Just use the 15k as a down payment on a Tesla and do a 100% doctor loan.

                  in all seriousness, having 15k in the bank while renting and using cash flow to work on student loans sounds like a great position to be in. Be patient. The tortoise wins.