I'm currently renting, which leaves me with money left over to invest in my company's 401k. I'm considering purchasing a home, but won't have much money left over to invest.
Although I'm "throwing away" money on rent, I'm assuming my 401k will someday be worth more than any house I would ever own.
Any input would be appreciated.....
2007-03-22 16:53:15 · 6 answers · asked by bobguajardo2000 1 in Business & Finance ➔ Personal Finance
Rent and contribute, for a couple of reasons. First, real estate prices are still inflated - let it shake out. Second, you can use money in your 401(k) for downpayment on a home, without paying penalty on it (but check with your financial services advisor first, to be sure).
2007-03-22 17:02:13 · answer #1 · answered by Anonymous · 0⤊ 0⤋
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2016-07-19 05:15:01 · answer #2 · answered by ? 3 · 0⤊ 0⤋
It might depend on where you live. The first respondent was likely on target about real estate prices, but consider the whole picture. How much have the various stock statistics increased over the past 7 years? Not much the Dow finally got back to where it was 7 years ago. Real Estate? I don't know, but I'm relatively sure that prices have increased more than the CPI has. Neither is a given money maker. What is the 401(k) invested in? The company's securities? Mutual Funds? Self Directed? What? And more importantly, what is the 401(k) projection?
2007-03-22 17:13:10 · answer #3 · answered by Scott K 7 · 1⤊ 0⤋
Buy a small house, for about the same payments you are paying for rent and you will have more money, because you will pay less tax (sch A deductions) and you control the "rent" payments. If you continue to rent, the rent will continue to go up.... so buy now, and before many years go by, you will be paying less than rent because the rent will go up but your payments will not. You have to be "settled", (not changing jobs frequently) to do this. If you move or change jobs alot, continue renting.
Buy a small house, make extra payments when you can and then you can sell that small house to get a better house in a few years, and you will have more equity (money) to put into the second house and your mortgage payments don't have to go up much (keep in mind your salary will probably go up over the years). Don't trust the stock market. Buy a small house. Then after a few years, buy a bigger house. There is a tax election that allows homeowners to "exclude" the gain on home sales up to $250,000 (MFJ = $500K) if you lived in it 3 out of the last 5 years. So no tax on the gain. It's like living in your stock portfolio, only different. Happy house hunting.
2007-03-22 17:11:19 · answer #4 · answered by LuvDylan 5 · 1⤊ 0⤋
do both...just lower your expectations on what you can afford in terms of a home.
Very likely correct on the house appreciation. homes typically appreciate at a rate of 6-8% a year. Of course there are over inflated areas that fly by that....but in general it's true. The market appreciates 11-12% a year.
Tax deductible issues are on both sides...401k is limited to 15,500 while the interest deduction goes up to I believe the first million dollars in home loan. BUT if you aren't buying an expensive home it's very possible that your interest payment may not even get you out of the standard deduction. In that case the 401k is better as it at least lowers your tax bill.
Do both...just don't plan on living in that first home for more than 5 years.
2007-03-23 04:51:11 · answer #5 · answered by digdowndeepnseattle 6 · 0⤊ 0⤋
Buy a house, you can always get equity on you home. Buy a house that's a starter home so that it is cheaper monthly than you rent is now. I don't know what if you live in the USA, but if you do look at moving to Texas. Their homes are cheap and you can get a new house for about 120,000.
2007-03-22 17:04:33 · answer #6 · answered by patricia w 2 · 1⤊ 0⤋