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Let's talk about housing prices here we have deflated home prices near record low interest rates and actually that's pretending for anybody thinks.
They might -- -- get into the housing market they might assume that now is the right time my next guest Michael Goodman president of wealth -- advisors says.
Not -- fast Michael why.
Is why this may be not the best time for everybody to just jump right in.
-- it seems really exciting as far as where interest rates are right now and that stuff when something that's tempting.
When housing looks like it might be turning we're not sure about that of course.
I think what people need to do though is get back to basics first before they make a long term commitment decision like that effect.
You have to really understand what you're committing yourself to long term expenses can you afford this house what we need to do.
In addition known in this house.
For example when you rent you clearly have some very stable expenses but when your own.
The boiler breaks this no.
-- -- -- now right exactly.
So what is and what is the goal I -- had.
There are some people buy houses as an investment other people buy them because they want to place to live and why spend money on rent if you can own so.
Sort of -- what what -- the guidelines that people should used to decided buying is right for them.
What if it's gonna be your primary residence.
I would say that you shouldn't really think of it as an investment.
You should really buy that home because that's where you wanna stay and speaking of staying I think you're looking at at least a three to five year commitment.
On staying in that residents there's too many potential friction costs buying selling moving.
That might come about a three to five year period to make it worthwhile.
See don't -- -- but up one bedroom house if you're planning on maybe.
Having future resident -- future or something along those lines.
Exactly and for younger people that's a really good point.
You know maybe to -- yourself you don't buy the most expensive house neighborhood but you buy an X and house that's maybe a little more modest than him read that -- hasn't expect expansion potential.
Or you can fix up and as as your income allows.
And so -- how much of that castle is it.
To transition from one place to another once you do have ownership of it.
So -- as far as moving goes and changing jobs could be one of the concerns right you don't buy it but apartment -- -- -- our house that -- you now if you think in a few years.
You're gonna need a bigger one because that moving -- at a much bigger project -- -- on the property -- just being renting or lease is up anything to back.
That's right in there are a lot of responsibilities.
Expenses as far as dealing with legal fees or brokerage expenses on making a transition like that.
So I think people need to be a little more sensitive to that.
Also when you own vs rent -- much more inclined to -- -- little things around the house when you on.
Fix this up you wanted to be a little nicer when you -- have more transit mentality and you -- you consider a deal with things that you might.
Not be as as focused on if you owned.
And -- about you know rainy day fund.
Murphy's law comes into play a lot of times -- situations like this.
How much is a safe amount to sort of say it's.
In case something goes wrong with -- that's a great question a lot of people focus on I think you have to always.
Have that reserve decide analyst Colin emergency because it sounds too negative let's -- and an opportunity reserve.
You basically want to have some money put aside I would say three to six months of living expenses is a good number.
Also at least if you own a home not a Condo but -- home with an exterior property roof siding all those kinds of things.
I think you should really be thinking on and -- need to spend on average about one to 2%.
And value that home and sort of some -- fix up stuff that you might not thought about so how do you put that in with the down payment and how much of it down payment you think it's a safe amount.
Put them well that's a good question because it relates what you need to keep left right so you want to make sure that you're not going down too much such that.
You don't have that money aside some people stretched down payment and something happens and they can even get through it so that's one thing to consider what you need to keep beside the second thing is.
You wanna have enough of a down payment that's gonna do couple things for you first is it's gonna allow you to have a monthly payment that you could tolerate.
Not second thing you -- to focus when you put down that net monthly payment is that you're not stretching yourself too much in the monthly payment and you have enough capacity to continue to do that.
On the also -- -- Michigan in the rate and your mortgage it's attractive based on what you put down and then finally I think that you wanna little's little room for equity.
If you put down too little in the markets change.
And you're forced to sell you might -- -- wind up in a negative equity position you really don't wanna be put in that situation.
And we had a kind of -- -- -- -- headliners funds you might this -- saying when you rent the weather still breaks the snow is still comes down and you pay -- if not now.
They pay for a later in Iran so house is still better that's his argument what's your response and -- Well -- I would say that it that that you definitely have expenses to renting but my experience has been that the expenses of more substantial when you on.
-- if the boiler breaks it's really the landlords cost if you're renting unless you have a triple net lease.
Residential rent which I haven't seen be very common.
And at one of our viewers his apartment that they uses -- -- 20% to put down and you can afford the mortgage plus the property taxes.
That tells you it's a good time to -- you don't have that much don't is that a safe.
I think that's a great starting point no doubt I am a big fan 120% at least kind of -- down payment.
And there aren't mortgages coming out we -- this in the last crisis that you know when they say no down payment red flags go up but there are new.
Mortgages out there now where you can put equity you can put stock options and so on.
On the line instead of the traditional collateral that comes with a down payment what do you when your thoughts on that.
Also little old school when it comes to buying a -- I really believe that you buy it you know the mentality gonna stay here for a while.
I really believe in the minimum 20% down payment in most instances I like the thirty year fixed mortgage -- -- today these race or just never going to be that good.
These interest only or or adjustable rate mortgages are very attractive.
But at this environment I just -- I would save generate generically speaking I'm I'm very old school when it comes at a residential when you talk.
About that variable rate and that's a huge issue or was at least -- the housing bubble burst because everybody thought that mortgage rates were never going to change even know.
-- it was possible they distance themselves it was gonna happen and then of course did.
And -- everything go -- so how.
Now when you -- -- get a mortgage -- sort of what's -- safe estimate we're trying to figure out whether this mortgages worth it not because obviously and I was in the same position you never know.
When those rates are going to change so how do you decide whether or not to get.
That markets well that's why I really feel this is an environment we want to be in a fixed mortgage environment.
If you're really think you're not gonna stay -- more than five or six -- seven years than a five year adjustable orchestra for you -- for five years at least in -- and yet bang on the back in a little bit its not too bad.
Thirty -- fix at these rates today are better than what adjustable for five years ago.
And night -- does a great environment to lock in on a thirty year you can always paid off sooner in everybody thinks -- 730 you'll be paying a mortgage Trevor.
These rates are great.
Take a thirty year make an extra -- once a year you know you can count amortizing yourself and pay off whenever you -- you know you don't have to have things turned sour.
A lot of people think rates won't go -- they also thought houses wouldn't go down in price.
I'm I'm I like the old school.
-- -- Michael -- and president of lusting invited Michael and people go to find out more.
On this lots of different places -- the NI CPA has a great financial literacy website -- financial literacy 360 dot com great site aren't gonna work.
Michael Goodman thanks so much for being -- thank you did it.
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