🏡 Never put a downpayment on your house
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- Опубликовано: 14 авг 2022
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🤔There's a heavy debate on how much you should put down when buying a home.
However, if you're incredibly disciplined, the optimal route is to put the minimum amount down and invest the difference.
🔺 As shown in the example, with a lower down payment, you'll pay more in interest and fees (such as PMI).
💰But if you invest the difference wisely, you'll be able to make over $1,000,000 over the lifetime of the loan!!
#realestate #money #investing #downpayment #lowdownpayment #personalfinance #fhaloan #loan #mortgage
This is not good advice at all.
I mean using the banks money and keeping your own to invest is what all the richest people in the world do. Why would this not be good advice?
@@shawnsmith3741 are you joking. The amount of risk involved. This is a good idea if you have loads of liquidity. But if you’re just an average joe this is a terrible idea. 2008 ring any bells. The fact “investing” is never guaranteed and has its own risks.
@@shawnsmith3741 stock market is gonn be flat for the next 20 years most stock analysts agree monetary policy will hurt stock returns for at least the next 10 years or more stock market isn’t guarantee returns
@@piehamcake1 flat market for 20 years? Idk about that, but there is other financial investments outside of the stock market.
The more money you use instead of using the banks, the less liquidity you have. Are you guys not arguing against your own position when you say this?
"How to leverage yourself to another bankruptcy"
Dead ass 😂
😅😅😅😅😅😅
This is a brokie statement.
You're gonna be broke if you take this video's advice.
It's all personal preference. I wouldn't have that much leverage on a primary residence, but that's just me. I'd prefer to take the lower mortgage payment and instead take advantage of laddering into investments when the time is right with the money saved monthly.
Banker: Works great for me. Now sign here, here, here, here, here...
So true
😂
@TheFirstRealChewy
❤lol😂😅😄😂🤧
Sign everything and everywhere .
Sign on the bank walls , restrooms , cars , assets , sign wherever on whatever you can see in the bank .
Please do this everyone! I will buy your house when you are over leveraged 5-10 years from now. Thanks in advance
😂😂😂😂
They always talk about the gain scenarios, but never the losses 🤦🏽♀️
on god
Meh let them do it.
people's that become millionaire bc of this kind of advice will be an a*shole.
But then again, most likely it will not work and they ended up as homeless.
Over 30 years there is essentially ZERO risk in his strategy. The comment section is completely wrong, his advice is good.
Bingo!
@@chaseallen4352 You're still wrong.
POV: someone with no money is giving financial advice
I mean, most bank financial advisors have no money (in their early years)
If you knew your consumer laws you would know that down payments are against the law. But you have to actually read and study; instead of drinking, watching tel-lie-vision and playing games to learn these things.
God Bless.
@@jrngln Is this some Sovereign Citizen stuff?
@@dylanmerritt3396 Only idiots and morons use the term sovereign citizen.
You can't be a King/Sovereign, and a citizen/slave at the same time.
But like I said before, you must read and actually study to learn those truths. And all study should start in the Authorized KJV Bible.
And how could you come up with something like that? When all I said was to actually read and study the law, learn the truth for yourself, prove me wrong.
God bless.
Someone who gets all of their financial knowledge from 13 year old tik tokkers giving financial advice 😂
My husband and I put 20% down cash he saved and I saved over the years. We got in 2.9% on a 15 year fixed rate mortgage. Our purchase price was 127,900. Our original loans after down payment was 104,000. We now owe less then 50,000 after owning it little over 2 years. We have been investing in our home past year. (Debt Free). We will be mortgage free by summer of 2025. We don’t pay PMI we are beating the interest.
Sounds like you listened to ramsey 🤔 but congratulations it's not easy to stay on track
By investing you mean paying towards the principal?
Here in Arizona in Maricopa ( which is the outskirts of town) the least expensive house my wife showed me today was $360,000. interest was 6.5% and 20% down would be $72,000. 4 beds 2 baths 30 year fixed.
@@Moorfeeeus I’d like to know as well.
@@chuckytherapper I'm looking at a house right now in a town of about a hundred people near the oil patch in nd. 4 bedroom 2 bath a bit of a fixer uper. For 75k
One thing you forgot to consider was that the person who makes the 20% down payment can invest the $500 they save every month on the mortgage payment. The present value of those 360 $500 investments at 10% annual returns is $56,975. If we instead use a 6% annual return that comes out to $83,395, which completely offsets the extra $82,500 you get when going for the 3.5% down payment.
tl;dr using the proper math and a more realistic interest rate, you won't gain nearly as much as claimed using this strategy, if anything at all.
Plus, with a good credit score you might be getting 6.5 to 7% rate. If you ever lose your job, inflation spikes again, etc. you could be stuck with the higher monthly payment without investing any money
No. Money needs time to grow
It seems that the YT financial advisors forget about basic math….thank you for clearing this up!
If he puts those 500 dollars every month into the stock market at 10% earnings annually for 30 years he would have: more than $1,085,000 dollars
(500×12)×1.1(1−(1.1^30))÷(1−1.1)
Yeah it’s historically 8%
Translation: I’m going to gamble to difference and hope it pans out
The stock market isn’t really gambling. He is correct when he says that stock market returns around an average of 10% per year
Past performance is no indication of future results. “Historically” doesn’t mean “in the future”
@@amac6416 The stock market is gambling. My mother had about 80,000. Invested in 2008 with Sherson Lehman. She lost it all. Her broker lost it all for her. His reaction , so very sorry. That's it. No way to get the money back. He quit his job and went to work at a golf course . The stock market is gambling!
@@nancysmith2389 no offense, but your mom kind of deserved it. 1) never trust a ✡️ banker. The name “Lehman” would have me running. 2) in 2008 the market was obviously in a bubble
@@nancysmith2389 search for index funds and u will find why stock market isn’t always gamble.
Ah yes, an Economics graduate from the prestigious JTMBU.
Just Trust Me Bro University.
😂😂😂😂
Lmfaooo bro i swear I was thinking the same thing
LOL brilliant!
😂🤣😂
I’m stealing this! Lol
Note this only works when interest rates are low
Yes, that is correct
how come
Gonna be smoking a pack a day staring at the wall in silence after this one
This feels like the same advice that lead to the financial crisis of 2008
What lead to the financial crisis was lenders haphazardly loaning out mortgages to people who could ill-afford them, and no financial institution wanted to accept responsibility, which lead to the creation of the CFPB, holding now-subordinate organizations accountable for future mishaps.
@@GruppeSechs2004 "What lead to the financial crisis was lenders haphazardly loaning out mortgages to people who could ill-afford them" But that's what this video is saying... The Banker even tries to explain this and dissuade him from having higher monthly payments. All it would take is one medical bill and the entire monthly payment system would fall apart with the way our system is here in the USA.
EXACTLY!
a crisis brings millionaire opportunity. Same exact thing happened in 2020 during the covid market crash
@@GruppeSechs2004 That's a very rosy reading of history. But no, the lending was deliberately predatory and the ratings agencies tuned a blind eye as banks gave dumb people refi's that were based in complex derivatives that would inevitably bankrupt them so they can claim their house.
Also the part about CFPB is a joke right? RIGHT?? They were neutered under the Trump administration.
Step 1 have the $82.5k
Exactly. Forgot to mention that particular step.
😂😂😂😂😂😂😂😂😂
He said smart buyer
If you don’t have it, then you shouldn’t be looking for a home
Get a better paying job.
In that case, I would put 5% down and use the rest to renovate the house and make improvements. You’ll get another appraisal and the equity will be over 20% so your PMI will be gone
Renovations barely add any value to a home. A couple grand if that. Expansions/extensions increase the value.
People aren’t good with numbers. This actually makes sense and I do it with every big purchase. Most mutual funds worth a shit earn way more interest than a mortgage charges. Problem is that it requires discipline. If you have a 100k to put into a home for 5-10 years or a mutual fund that yields 20%+ compounding over 5-10 years then do the fund. You’ll get a free house but most people just don’t get the math because Merica 🇺🇸
If you listen to this man you gone f*ck around and find out… DON’T DO IT!!!
🤣🤣🤣🤣🤣🤣
Lol
LMFAOOOOO ON POINT BRO🤣🤣🤣 PLEASE DONT DO it, cuz if one of us go in then we all go thru it
😂
😂😂
Don't gamble on things you don't have
90% of America can’t afford a home with out a mortgage… they should take your advice
🎯🎯🎯
@@shaq9361 90 percent of the world population you mean?
What
Instead of putting a 20% down just do 100%🤦♂️
the hypothetical assumes you have the 16.5% to invest. most don’t. put 20 down, no PMI, lower monthly payment. Invest that difference over 30 years
Im so glad people are seeing right through him just goes to show how many ppl had enough of hearing bs
But he's right and the comment section is wrong. It's literally mathematically provable that he's right.
He is absolutely correct if you know anything at all about compound interest. I am doing this, except with $500k. I will pay $192k in mortgage interest over 30 years, but I will make a few million. It’s not a difficult decision. I am already up over $100k.
@@jesse_- The more people invest in the stocks, the more the rich owning the stocks will have a desire to sell to make a profit. So the higher the stock market goes, the more risks people take by investing in it. The longer it's been since the last recession, the less advantageous it is to invest. The best time to invest is during a crash or not at all. I prefer to invest in building an enterprise. That way I know what's working and what's not.
@@bornkinggamer3347
Let me ask your a simple question then. If someone wins in the stock market, what happens to the other person who bought/sold their stock to you? Do you think that person is getting the same return?
i feel sorry for whoever’s done this. the bottom is coming
The bottom has always been coming there’s always something happening
The bottom is the best time to invest. It's always bounced back
@@zzospreyzz55 yes, only took 15 years to bounce back from Sep 1999 to Aug 2014.
Or 19 Years from Jun 1968 to May 1987
@@Pilikio lol let’s cherry pick random dates, shall we? You’re an idiot if you’re trying to convince people buying real estate isn’t (arguably) the best way to build wealth.
This worked out great for my ex wife, she’s a millionaire because I did this. Lol
Ive got an even better idea: dont buy a house just now, instead GAMBLE the money and with the gamble returns youll be rich. And if youre saying thats unlikely, studies have show that 90% of gamblers stop right before the big win, so just keep on playing cause if you stop, youll miss out big time (this is a very real study but dont fact check me please)
Ever heard of "The house always win"?
😅😂
Please cite one study that shows 90% of gamblers stop right before the big win.
@@damonmoorepage I was making a joke, as I think the advice in the video is pretty daft, I was making fun of it. Obviously it's untrue that gamblers stop right before the big win, it's a common joke. Happy Holidays :)
@namenotimportant8408 If we were on Twitter, this would be the moment when I posted a gif/video of me slapping myself. 🙂
The study, the career, the time, the network, the investing… And none of them will have any real castles with real sheep on a real pasture prairie paradise!!?? 😮
I sold two properties in 2020 and am now waiting for a house crash to buy cheaply. Meanwhile, I've been considering stocks as an alternative; do you know if now is a good time to invest? People say it's a madhouse and a dead cat bounce right now, but I still see and read articles every week about people making over $$$k in trades. Why is this so?
Most people are accustomed to a bull market and are unprepared for a crash, but if you know how to navigate and where to look, you can make a fortune.
@@Drago250 That's amazing. Please let me know the name of the investment advisor you use. I've tried learning new strategies for making money in this market, but my portfolio has been in the gutter for the entire year.
@Tblaze Gutt He's full of crap. Don't listen to him.
I've asked literally every family member, friends, coworker, etc of mine how their 401ks and IRAs did in 2022 and no matter what financial firm they went through, every single person lost a lot of money.
TIME in the market LONG term will ALWAYS beat trying to time the market
Scam thread
And this my friends is how you end up poor with a mortgage payment…
In theory yes but in reality no one actually ends up doing this. They spend the difference on nonsense. Pay off your mortgage faster
Everyone saying you'll go bankrupt isn't getting it or just scared of losing money.
Next he will tell us to finance all our furniture and vehicles and grocery trips and invest the difference. Glad I followed Sean, Not only was I financially free in no time, I was also bankrupt!! Financial irresponsibility is the best way to build wealth
Mortgage rates are typically the cheapest loans that's the difference as far as I can tell and you can refinance when rates go down
Plot twist, almost no one will actually invest the difference
This is the most accurate reply I have found here lol
How did you know…….lol
They will most likely “invest” the 82k in a BMW or Mercedes SUV😂
Very true
lol an make 10% every year, "historically" lol
1) Don't use this trick to buy a house you can't actually afford. Make sure you can afford the monthly payments first.
2) This only works when % return from investment is more than % interest on your mortgage. Assuming 10% returns might be a bit optimistic, but regardless, the interest rate right now is maybe 8%. If it goes much higher, this is no longer a good idea even in theory.
3) Putting up a larger down payment and investing the difference in monthly payments in stock ALSO makes you a millionaire. ~1.1Mil vs ~1.4Mil, so it's less money, but still a millionaire.
I ran the numbers that way on the last home I purchased for myself. I opted to pay the PMI and invest the rest of the money to buy more rental properties!!
Love tiktok and youtube shorts. All of a sudden everyone is an expert in mortgage loans, bank finance rules, and house flipping.
You know what they say. When even your grandma is flipping houses the market is about to cycle
Comes back 12 months later... "My investment is down 50% and I lost my job!"
I can give you update my friend
S&P500 is historically 7%, not 10, but is likely what hes talking about. Not some random penny stock
@@jaquicx9500 It's ~10% not considering inflation (so assuming money has the same value all the time) and ~7% when you count inflation in.
@@tymondabrowski12 yeah but it's pretty senseless to not factor these things in while doing financial calculations.. nor to not leave a small buffering zone due to the market constantly changing and most folks not just leaving their money in the market for decades.
@@jaquicx9500 he’s not factoring it in as he’s making a comparison against the investment returns and the mortgage interest. Inflation is irrelevant here.
Theres actually no problem with using leverage if you actually have enough money to cover the loss. The problem is most people picking to choose higher leverage is because they can’t make the upfront payment, that’s when this advice is dangerous.
I put down 3% and refinanced in 2 years when I had the 20 % equity. It California, home prices are always going up.
10% a year 😂
Oh wait I didn't notice this nonsense
@@AgnotologyTV I bet its free to acquire that investment knowledge.
@@joshgoodman6534 you want the fruits of his labor without paying for it?
No wonder they call us the entitled generation.
I guess you believe teachers should work for free as well?
@@martian14 you must be really tall, nothing goes over your head
@@joshgoodman6534 your head must be really thick, being unable to learn for yourself.
He said “historically 10%” 😂😂😂
Yes. Throughout history despite recessions it continues to grow at an average of 10%.
@@bigoofinthechat5496and you think you will have a job or consistent income to survive recessions?
It's the one thing the video gets right. S&P500 has done 10%, even factoring in the great depression. However that number is not inflation adjusted.
your comment shows you know nothing about the stock market, on average these massive funds grow 10-12% a year. that’s a factual statement
@@bigoofinthechat5496that obviously doesn’t mean it’ll increase by 10% every year. Some years it’ll be closer to 3%. But the more absurd part is what does that have to do with you signing up for a $2,900 mortgage?? You should be autoinvesting before the downpayment and afterward anyways. You don’t have to choose between 20% downpayment and investing.
I’m glad to know I’m not the only one who realizes this isn’t the best advice.
This is actually great advice for people that know how the power of compound interest works. I do something similar to this, and in 1 year I’m up $60k. I was up $100k, but the market correction recently smacked me down, but I’ve been playing this game long enough to understand that was to be expected.
@@jesse_- yeah now imagine you leveraged all your house money and the market smacked you down right when you are nearing using it. its foolish, just secure a lower rate thats fixed against an inflating economy. money now is worth way more than in 15 years.
Yeah, there is a lot of “ifs” to make this correct. Your house history doubles in value every 7-10 years, making it a better investment. You can borrow against the equity in your house tax free. Also there is many other factors to consider such as interstate rate. With current high rates it makes more sense to put down a large down payment. So you aren’t paying 7.25% plus pmi, on a higher number.
My advice because it’s what it’s what I did: Put at least 20% to avoid PMI! Next do NOT even consider a 15 year mortgage; get a 30 year mortgage so that the monthly payments are lower ‘just in case’; however, you should MAKE EXTRA PAYMENTS OR ADDITIONAL PRINCIPLE PAYMENTS over time (treat it like a 15 year loan). I bought my house in 2006 and paid off in 2021 doing just that!!! Now debt free! (Credit goes to Dave Ramsey whose RUclips and podcasts motivated me to become debt free!)
Thanks for sharing your story!
You can refinance to get rid of it anyway. As long as the debt is being used to make profit who cares about being "debt free".
Sounds like you just threw a bunch of extra money into the property because you didn't take the time to learn how to invest it.
Don't give Dave Ramsey that credit. He doesn't recommend a 30 year loan even doing it the way you did it. That was you, take the credit.
@@MuscleMan500either way he’s home is paid off and he’s debt free its literally still a W
@@ouuyou6584 Even if he were to put in the s&p 500 which has an avg 10-11% growth for the past 50+ years that would be a better use.
The point of borrowing money is to pay it back later. Not to mention the rate of inflation is keeping up with your interest rate anyway. This guy gave the bank a bunch of money for no reason.
At least put it in an emergency fund or something. Look up what fractional reserve banking is and maybe you'll wake up
I did this and I'm 40% down. No joke.
just wait 60 years and you'll have millions.
Bummer! This is exactly what I cautioned him on in my comment. No guaranteed return in the stock market but the monthly savings with 20% is real and a guarantee. It’s a gamble for sure, not a slam dunk the way he presented it🤦🏻♂️
I did this about a year ago, and I am up 20%. It’s a long term investment, so being down 40% should t mater, because you have forever to make it up. Just hoping you weren’t foolish enough to pull out a long term investment because you got scared.
@@jesse_- I'm 60% down with averaging.
Its a better payout after 30 years. Not 30 months.
This is a very smart thing to do if $2,900 dollars is only like 15-20% of your take home pay after taxes for lower risk so that you can bounce back after sudden income loss. Whoever can make $11,600 a month after taxes... I applaud you.
Historically the stock market never skews positive here is a 8 year 10% average with the 82k, as an example 164k, 218k, 309k, 414k, 476k, 238k, 24k. 8 years average is 10% but no one accounts for years of negative gain, which happens all the time in the stock market just look at any stock graph. STOCKS DO NOT HAVE COMPOUND GROWTH, COMPARED TO AMORTIZATION TABLE IT'S A JOKE PAY OFF THE MORTGAGE.
He forgot that PMI is not for the life of the loan, once you hit 20% paid you can drop it and also you can refinance for a lower rate at any time, I also wouldn't suggest putting that amount of money in the stock market alone but spreading it out into things like retirement plans and more stable investments, you could always put that money back into the property with renovations to increase the sale potential of the home or use it as a down payment on an ivestment property. It's always best to diversify your investments incase one doesn't work out so well
Thanks for sharing!
ok this makes more sense
I’m 40, just bought my first house. Paid cash ✌️
💰🏡
Start a channel!
Inheritance pays off
@@penderyn8794 you wish. Me and my wife put our heads down and worked the good ole American way. We still drive 2 vehicles that have been paid off for a very long time, both with well over 150k but run perfect. We live way below our means, work really hard, and now we can enjoy. Paid off all her student loans and bought our house. We carry zero debt
Your story is what I to aspire to in life, the thing this guy in the vid lacks is risk. Davey, yours story is amazing, congratulations
When you get your investment booklet. It tells you in black and white. What the stock market has done in the past is not an indication of what it will do in the future disclaimer, but you hear these people say historically the stock makes ten percent. Lol okay but the next 30 years doesn't have anything to do with the last 30.
This is predicated on being able to Qualify for an FHA loan. You'll need sparkling credit numbers, a solid work history and assets.
PMI can be eliminated once your mortgage payments reach a 20% threshold paid into the mortgage. Still, if you can do it, do it.
The smart move would be to instead buy a house for 100k rather than 500k. It would be paid for. Then you can now use the cash flow you have monthly to invest. You will make and grow far more this way. Living beyond your means is why everyone is already in major debt. I own my house out right and have zero debt. I invest my money in to the future.
Thanks for sharing!
Good luck buying a 100k/ house in some areas it’s not even possible
@@teeszu your job would pay more in those areas making his 100k your 200k same way people in cali make more than any other state its cost of living pay at jobs
@@oplastkill7350 mostly true but not all the time.
I'm an electrician in socal and make ~100k a year give or take.
I've been looking into moving my family to the Vegas area and I see jobs out there that are exactly what I do (industrial steel processing) and offering the same hourly wage as me.
If I do end up getting a call back from one of those employers and land a job that can match my current pay, the wife wouldn't even have to work with how low the cost of living is there compared to here.
In my area, a decent 3bd 2ba recently built home is 500-550k.
That same exact home is listing for 350k in Henderson...it's insane how much cheaper it is.
Even renting out there is insanely low.
2 bd 2 ba for 1700 a month.
Same apartment is 2400 here.
Where are those
99.9% of us only have the 3.5% down payment 😂
Keep saving then
when you actually need at least double that and maybe more depending on closing costs...
@@KevinSamuelsKid keep saving for 5 to 10 years and by then a home will be 20% more expensive! Lol seriously think about it.
@@antoniot7928 Yep houses appreciate. But do a written budget and see how much you can save per month. You might be surprised to find out that you can save at a faster rate than a home appreciates.
Having 7% will only change your payment a couple 10s of dollars
I mean honestly putting 3.5% down has probably worked out for most people in the years since the housing crash but you are far more likely to end up underwater compared to someone with 20%
The reason why you put more down is about keeping debt payments to sustainable levels relative to income.
Its a strategy that minimizes debt in your life.
*JPowell enters the room* "I'm bout to end this man's whole career"
10% on average then proceeds to calculate 10% every year guaranteed
even if you use a more conservative 6%, you still make more money with the 3.5% option. your point is invalid
@@timhan8667 yea average mortgage rate in US has be 5% so your magic 3.5% is the days of old now. Video says never and is a poor example for people buying houses now.
@@ChrisHensley2 Please come back when you have some basic knowledge of anything. That's how averages work, And the 3.5 was not the interest rate
@@blakel4595 interest rates are around 5-6% right now for houses. your 80,000 has to do very well vs the 6% on a 450,000 loan.
@@joshgoodman6534 the stock market on average returns 10% a year..
now that he threw $82000 into the stockmarket moneypit gambling machine he will have to figure out where he will find that monthly expense that will haunt him every month with high interest. I will sleep good being poor and have a simple family life.
Thanks. This video convinced me to put down 20% on my mortgage.
it is called buy a home in a growth area and then re-sell the home after the price increases significantly.
IF it increases and doesn’t crash like 2008.
@@EVNL576
2008 crash isn't coming, that happened because of many, MANY bad loans being given out. It is now heavily regulated and banks don't even want to give out loans.
A 10% rate of return isn’t average, it’s generous. Very generous. I wouldn’t use more than a 7% rate of return for the high end, and 3-4% for the low end.
S&P 500 index has had average returns of 10% (not considering inflation, but the mortgage doesn't consider it either). But it's average - stock market is very volatile so it has all kinds of returns year to year, can be just as easily -20% as +40%.
@@tymondabrowski12 There is no such thing as 1 S&P 500 index. That could mean so many things. So many sectors involved in an investment.
@@cutty02s&p 500 index is literally 500 top stocks 😂
lol you’re forgetting about down years, the low end is negative. But the average with crazy bull market is +10%
The 7% figure you’ve heard is factoring average inflation against the 10%
If you're going to stay invested for 20-30 years then an index fund is your safest bet. But I'd wait 6 months to a year cause the markets are acting pretty weird currently and have to go through a huge crash first.
Did this a year ago and already up 20% on my S&P position with the money saved. Also working OT to invest more and pay down mortgage principle
And why should I go through this insane and soul crushing process just to buy a house!?
This my friends is how we end up over leveraged and the economy crashes every ten years as people accumulate more debt than they can handle. It's literally the economic cycle. People burrow too much money. Some unforseen market change happens. People can't afford the monthly payments. Economy collapses. Like clock work.
No.... no it isn't. If you can afford either payment, it makes sense short term to let your money make you money. It is a liquid asset, which means you have created something you can use for future expenses, including the loan if need be.
If your time frame is 30 years, you use the consistent long term gains in the stock market to invest your liquid capital to earn you more money, while still keeping it liquid.
In 12 years, you will have that 30 year mortgage paid off entirely. And you can spend the next 18 investing 3.2k a month and have 1.9 million dollars in liquid capital to retire luxuriously or make further investments.
Here's a fun number for you. Put $20 a week into the same situation when you are 18. Invest it. Don't touch it. 50 years later, when you are retired at 68 you will have 1.5 million dollars.
@@AgnotologyTV This is where the logic falls apart in your first sentence "if you can afford the monthly payment". The average americans primary and sole income is their W2 jobs. Not everyone's jobs are secure. So when the economy shifts, and they are out of said job, they have no cash to make those monthly payments and the whole stack of cards collapses. Our entire economy is built on the back of debt. If people can't service their debt, the entire economy collapses, which again, happens every 10 years or so.
Very well said!
The logic falls apart when you are applying average middle class income to upper middle class homebuying. You are talking about someone making 40-80k a year. We are talking about someone making 200k+ a year in this hypothetical.
Do you not understand how stock investments work? That the money put in is liquid, and can be converted back to cash at any time? Possibly at a loss if you take it out during a hard hit to the market, but no amount of advice will help someone who has all their proverbial eggs in one basket.
You are making an argument against yourself and you don't even realize it. If they are out of a job, their only lifeline till they get a new one is their savings. And If you have money in a savings account, It is actively bleeding 8.2% a year right now just to inflation. You are better off having that money in a place where it can actually earn. If you are out a job for long enough to burn through your savings, you are losing your house regardless.
@@AgnotologyTV Let me reiterate what you just said to me. You said my logic only works when we are talking about average middle class people who make 80k or less, which is more than 80% of the population, but doesn't apply to people who make 200k a year, which represents less than one percent.... when this video did not specify any income group at all, and you're saying "we" as if you work on the channel..
You can actually take out that loan at 3.5% on a multi-unit (4 max) and rent out the 3 other apartments. There are some caveats, but this is one of the ways to (moderately) sustainable passive income.
Househacking 🙌🏻☺️
😂 I love how he made this sound like everyone will just WIN 😂😂😂 I DONT TRUST FAST TALKING PPL FIRST OF ALL !!!!!! lol
Although it could work, it’s also taking on more risk. You are taking on more debt after all.
The PMI needs to be part of hurdle rate calculation. Meaning your portfolio better be returning more than what you are paying in PMI plus what that PMI would have earned if invested.
Also true for the difference in mortgage payments since paying more per month means having less to invest.
It could work if inflation really eats away your debt. Stocks go up as much as the historical or beyond that. And if the value of the house goes up due to the location becoming more desirable.
Except NOOOOOO ONNNNEEEEE follows through and invests the difference.
I did. I could have bought my house outright, but invested in stocks, instead. And made monthly payments on my house -- which are partially deductible from my taxes.
@@Duke_of_Prunes Invest in index funds. Don’t buy individual stocks. It’s too risky.
@@realnapster1522 I do have about half of my big account sunk into various Vanguard funds. They're so reliable that I seriously don't think about them unless a fund reinvests money that day.
This is good but always....always, consider the fact that your doing math with no risk. You may lose your job, natural disaster, something breaks in your house will cost you money and hurt your projections. Always consider risk.
Agree! Thanks for sharing
Terrible thought process. If you invest your down payment money and go with the 3.5% option you should end up with $1M+ after at least 20yrs or so.
That $2,900 mortgage is due next month though and the bank is immediately cashing out on all that interest and insurance. Your benefit is coming in 20yrs and you’re paying for it all in the present.
Another approach: Put the extra cash into an offset account (if available). These are like savings accounts that offset the interest on your mortgage so long as you keep the money there, very common in Australia where I live and invest. I’m at the beginning of a new rental property loan and right now every $1 put in early equates to approx $3 in interest savings over the life of the loan, guaranteed, a 300% return! Hard to find a mutual fund that matches that return in the immediate, certain way of the offset. IMO, always good to put down the minimum, then drop a bunch of cash on the loan in the early years when your payments are mostly interest.
Please don’t leverage your risk
He really rehearsed & recorded himself saying this w/a straight face
😂
This is how to become overleveraged and overexposed. These are the people I will be buying from in the next recession.
Me”it’s fine I’ll die before that “ 😂
Dave Ramsey has entered the chat 😅😂
What is not calculated here is the risk factor.
Not a big risk of he is investing that money for 30 years. The risk is virtually nil.
30 years invested carrys very little risk comparatively. The main "risk" he is creating is a $500/month increase in his mortgage should he lose his job/income source.
“Everybody’s so creative!” investment edition!! 😂
Currently in Australia, interest rates for home loans are 6-7plus percent. If you "invest" in paying off the loan your earning a guaranteed 6-7% return on your money in the short term, and variable returns as rates change. This is what I call, idiot proof investing with zero risk of panic selling, impulse spending etc.
Dear god please anyone watching this, do not listen to this man. This idea is only good if you are already rich AF.
If you’re already rich AF you wouldn’t be financing a house.
this is one of those things that seem smart in your head until the market goes belly up
This is great, IF you always get that return. Otherwise that house of cards will come crumbling down
Or... you invest in the stock market and lose it...and still pay the extra money in interest on the home.
Bruh 😂😂
This advice really depends on your current position. If the monthly payment is still below 34% of your income, then you’re okay. Money suffers from time decay, so the borrowed amount is affected by inflation during the lifetime of the debt. Across 25/30 yrs, that’s nothing and if the place is being bought in a new city that property hasn’t been massively inflated. Yeah you can lose your job, but again you can always sell the house. Look to live in a place for at least 5 yrs and you’d have some equity in the house.
All these better than renting a place and paying off someone else’s mortgage. Buy a place and pay for it across 5 yrs minimum and sell. Versus renting a place for 5 yrs and having nothing
Well said. Appreciate you sharing your thoughts.
"I will make x amount of millions in that time!"
A quick search. House price in 1998, $125k. Same house today $1.25mil
So that's a $1.125mil increase. being that you'd have to pay so much more in interest, the strategy appears to be a wash.
Besides, 10% is a pipe dream. I can point to multiple mutual funds and ETFs that were supposed to outperform the market, but their year, 3, 5, and 10 year are all below 10%. More like 5%
I own 20 apartments and 2 restaurants and I’ll tell you what save 100k cash and get good with your credit union not a bank and you can do something in life but make sure you save 100k in cash doesn’t matter how long it takes you to save or die working for others 🤷♂️
Lmaooo what’s he gonna invest in 😂
Bit Coneeeect!!!
UST
@@johnny5896 he said 10 percent up every year not 25 percent loss every year😂
I'm just gonna build me a tent in the woods and save my $$$$
Thanks for sharing!
@@seanlovesrealestate hello there Shawn I have a few questions but I'll ask maybe one of them so let's say your interested in buying a house the very first thing you do is look for an affordable house that fits your budget then you go to a bank get approved once you get approved now you find a realtor to help you seek other houses in case you don't get the house you saw if this is not right can you put it in order the necessary steps for a house this will be my first home I just want to go there with some kind knowledge or idea
I'm not getting it. Can you rephrase and what is exactly your question? Thanks!
@@seanlovesrealestate ok so let me try to rephrase it if a person is interested in buying a house In alphabetical order what is the first step into buying a house
the problem with the argument of saying if you invest that money and pay the higher mortgage and pmi, you would make millions more is only true if you would never invest the amount you are saving every month.
Using this example of $500,000 home 20% vs 3.5% and the payments of 2400 a month on 20% vs 3100 (2900 and 200) on 3.5% gives a $700 difference every month. if you did the same investing with that 700 every month for the lifetime of the mortgage at a rate of return per year of 10%, then you would have nearly the same amount as investing the $82500 initially. the calculation with monthly compounding investing the $700 a month over 360 months would give you $1,582,341.55. meanwhile the investment of the 82500 initially would give you 1,623,059.95. However the S&P on average has a 30 year average ROR of 9% not 10%. which if you factor that in, then the difference is for teh 20% it would end the 360th month with $1,281,520.44, while the 3.5% would end with $1,206,225.84.
also if you think that wouldn't be able to put down the $700 a month in investments, then you couldn't afford to only put down 3.5% anyway.
And when the market crashes and your house drops in value - which it will at sone point in a 30 year span - you’ll be over-leveraged and bankrupt. I’m old and a RE broker. Seen it happen many times before.
After reading comment I realized why only a handful of people are rich af. Because majority of people want to play on the safe side and doesn’t know about the leverage. That way you can not only invest in stocks or other night return investment but also can buy more homes with more cash flows. But you must know what you are doing. I have been doing this way and now I owned multiple properties and am having tenents paying down my mortgages every month. Smart money comes to smart people.
This is actually true. I appreciate you sharing!
Leverage is great when it works in your favor. Adjust to your own risk tolerance according to what you have to lose as well
And this is why everyone is broke, living paycheck to paycheck, and have a therapist on speed-dial every time there is a market “correction”. 😂😊😅
You can drop a 25% downpayment and then invest consistently with the extra room in your budget.
Good idea doing this right before the recessions
Nice!
Depending on your level of risk appetite. If you want to buy a property (to live in, in this scenario) and invest in shares etc, you carry a lot of risk of one failing affecting your ability to finance the other. Because ur primary goal should be to build capital here, you stand to lose too much if the stock market tanks and / or interest rate shoots up like it is now and you'd be forced to liquidate one or both asset.
However, if you're investing in a rental property, it'd be smart to be negatively geared, and invest your cash in shares rather than putting it towards the loan. The risk here is lower because you're mainly investing, rather than building capital. Assuming you already have equity in another property that you live in, you wouldn't be too fussed about short term stock market dips or interest rate rises, provided you're not overly negatively geared.
Edit: disclaimer: I'm not a financial advisor and this is not financial advice. General personal view only. Please see a professional financial advisor for advice tailored to your own circumstances.
I'd rather have as low of a monthly payment as possible, and get reputable tenants living with me to help pay my mortgage. I also would rather just spend less money on a home and ramp up as I have more and more cash flow. Having a more expensive property doesn't necessarily equal higher cash flow.
Lmao what lender ACTUALLY tells borrowers they are gonna pay all that interest😂😂😂😂 any lenders I chat with keep that a
HUSH HUSH 👀😂
You are right. But this only work for people who are financially savvy and disciplined. Negative comments are from people who lack both and operate from a position of fear and scarcity. That’s why the 1% rule over 99%. Becoming rich also requires taking risks AKA courage.
Well said! I agree with your thoughts. Appreciate you sharing ☺️
Don’t take any type of financial advice from RUclips shorts, good or bad 😅
You forgot risk and human nature
If you have 3.5%, closing cost and an emergency fund then buy a house instead of waiting. It will take many years to save 20% and by that time the house price will rise even more.
👋 Shawn, you fail you mention one😁 Major thing, which is that at some point after year or so your property gains value...Hoping the market does well, that's when you can 🔥refinance to
after a year or so🤣....oh summer child