Hear me out. Disincentivize investors from purchasing existing homes. Incentivize developers to build more. Currently there is a gap of 3.8 million SFH in the US in supply. If Investors sold just a portion of those houses to make up that gap, supply goes up, prices go down. Renters sitting on the sidelines get converted into homeowners.
Dave's advice isn't crazy if you're over 45. But we had a 30 for most of the life of our primary residence's mortgage until we refinanced to a 10 year because we got older. Total amount of time to pay off was 15 years and 10 months even with having a 30 most of the way and investing. We're climbing up to a 7 million dollar net worth now with no liabilities but it helped to have a heck of a bull market run in the 2010's. I don't think I'd have done it differently.
The problem with Dave’s advice on buying high with high rates (today) and refinancing later is that interest is front loaded. We don’t know when the rates are going down so overpaying today has real costs
Yeah it’s almost like some of the people saying “move somewhere cheaper” don’t understand that not all states have equal job markets, and not everyone wants to live in an unsafe neighborhood just to own a house.
Again, the whole if you do our system instead of theirs, you can afford more is so very cringe worthy. That is precisely the argument used that got people in so much trouble with their mortgages and other loans. "We know this is tough," so we are going to give you fudgy numbers to make it work, is cringe, cringe, cringe. Dave's if you financed higher you could have refi all the way down, yeah hindsight is 20/20, you don't know where interest rates are going to go in the future. That was cringe on Dave's part. It ignored the fact that even though rates decreased dramatically, lots of people weren't able to refi at a lower rate. Dave's oh you could just continue to refi is completely idiotic. The 2008 crisis and its aftermath exemplified that people just can't refi. Dave's just buy now has some merit though, since inflation is high even at rates today, you are actually paying negative rate due to inflation.
The monthly mortgage for a single family home was $2,434 in June, which is a 81% increase from last June. This affordability is unreasonable according to both the MG method and the Dave method, which say you would need income of $116,832 and $138,989, respectively.
You forgot that Dave does not recommend 5% down. He recommends 20%. Or at least 10% for a first time home buyer. That makes the mortgage cheaper and allows you to buy more house
Which sounds nice and sunshine and rainbows until you realize that most buyers aren’t getting close to 20% on their first home. I laid out the math in another comment that a 20% down payment on the median home would be almost $79K. The median household income is $87k. In order for the median family to afford the median home with 20% down they would have to save over 20% of their net income for almost 7 years AND the housing market would have to have 0 growth during that time. 20% down for first home is how you ensure you never will own one. Dave’s advice worked at a certain point but times have changed and the foundation isn’t bad but he hasn’t adapted for the market changing and shit advance like 20% down is simply not realistic any longer for a first home purchase for the majority of people.
What do they consider the differnce between net and gross income to be? I’m in Denmark, high taxes so for me it’s a huge difference, like 100% - say someone herr makes 100.000 gross - that’s about 60.000 net (or so)… so.. they want me to save up 25% of gross and I can spend 25% of gross on housing - in this example that would be 2x25 = 50.000 - but net is only 60.000, so only 10.000 left after investing and housing spend
the difference between net and gross is the same in Denmark as it is in the US. you are correct, 25k for housing and 25k for savings leaves you with 10k for everything else. that means you have to do something else to generate income, save more for house and defer investment to reduce the mortgage amount, or any other combination of stuff. However, the math ratios used by these media personalities isn't applicable to other countries. Denmark has a different tax and retirement system, has different mortgage system, etc. By statute Danish mortgages are capped at 80%, so you need 20% down either from cash or through other personal loans, which makes the math different, too. How Danish mortgage banks determine how much house you can afford based on income is also different than how US mortgage lenders calculate (denmark is simple). 25% is basically mandated in Denmark since the upper limit is 4 times your income. There are other differences with mortgages that don't lend themselves to using US media personality figures for Denmark. Same applies for retirement savings percentage given the different retirement, social welfare, and health systems.
Dave just isn't a good person to follow for finances. I'm glad it helps regular Americans, but thank god I realized his advice is extremely simple and not actually really efficient.
I would argue Dave’s has much more risk because the monthly payment is higher and should you experience job loss like a recession, trying to meet your mortgage payment is much more difficult. Even if I grant you that Dave’s way has less risk, you need to understand there no such thing as safe in this world. You can take all your money and put it into the bank as savings and that’s much less risky than investing it. However when you go to retire you’re going to be in a world of hurt because you will never earn enough to beat compounding interest. For my finances my deposits when I’m 60 will be around 400K. If I leave that in the bank sure there’s little to no risk but I can’t retire on that. If you take the MG approach I can retire on that same 400K deposits that will have earned almost $4million in interest. You can’t expect to achieve anything significant in your life if you’re not willing to take any risk. And the interest paid only matters if you think you’re going to stay in the house the entire life of the loan or that you don’t inverts the difference. If Dave’s payment is $1800 and MG payment is $1500. Sure Dave will pay less interest. However if the MG take the $300 difference and invest it even in the SP 500. Over that life of the loan they can have earned more that makes up for the difference in interest and comes out even more ahead than Dave.
Far too often, people misquote Dave Ramsey. The Money Guy are way too technical here. Yes, the math will always favor your advice but gives zero accountability to risk. Dave always say life will go wrong because its life. So don't buy a house till you have an 3-6 month emergency fund, 20 % down, and have a stable income. By following Dave, you have room to breath when life finally goes wrong. Secure your foundation than invest like crazy. All of this to say, slow and steady wins the race.
By following Dave you won’t ever be able to actually afford a home. I laid it out in another comment on the last video they did. Sure there’s always going to be risk. That’s the problem. If nobody ever took risk you would never achieve anything either. Dave’s advice on housing based on the current market simply is unfeasible for the majority of Americans. A 20% down payment on the median house price in the US is $78,490 with the house being $392,450. The money guys down payment advice of 3% is $11,773 The median household income in the US is $87,864 for 2 earners. So one is 13% of a years income and the other is 89%. So please give me an actual explanation on how you expect a family to save up 89% of their yearly income given the rate of housing appreciation? Also you can’t use the argument of move someone where cheaper because I used median numbers instead of averages specifically to remove outliers like high cost of living areas skewing the average.
@@mikeh197 it’s called “live like no one else so you can live like no one else”. Dave doesn’t push for average living. He just stating facts that you will most likely struggle if you buy a house outside of his perimeters. So if you need to get 20%, keep working 2 jobs and finding side gigs, or else move to a cheaper place. Reaching financial freedom isn’t a math problem, it’s a behavioral problem. 100% of foreclose happens on homes with mortgages. Do it once, do it right. 3% down and not changing your behavior to pay down debt, is the reason so many people have lost there homes.
@@jackstar254 execept that’s not true at all. You’re making your entire argument that if you don’t put 20% down you can’t afford a house which the money guys as well as many other show is simply not the case. You’re dodging the question because you don’t really have a good understanding of how this works and just are repeating things you’ve heard Dave say without grasping the implications. Your comment literally shows a horrific lack of financial knowledge and why gullible people like you listen to Dave Ramsey. 1) simply saying move somewhere cheaper isn’t a solution. Had you actually bother to read my comment you would understand that’s why I specifically picked median home prices because it prevents high cost of living areas from skewing the data. If the median family can’t afford the median house that means you’ll have more people fighting for that so called “cheaper places to live” and there won’t be enough supply. Additionally the money guys in the video showed following Dave’s advice (without 20% down even) the max house the median family would afford is roughly $170,000 which is less than half the median home price. That means you would literally have 50% of the population fighting over less than 25% of the available homes. 2) give me a single fucking side gig that would generate almost $80K. For context after taxes that median could save 20% of their income and it would take them 6.5 years to save up for that down payment ONLY if prices don’t increase at all during those 6.5 years. You literally would have to assume housing doesn’t increase at all for over almost a decade for a family to save enough to afford the down payment. 3) saying 100% of foreclosures happen on houses with mortgages is stupid nothing statement because forclosures can only happen on houses with mortgages. It means nothing. It’s like saying 100% of apples on the ground didn’t grow there. It means nothing. Dave’s advice doesn’t actually help you get out from under a mortgage because that 15 year loan while having less interest has a much higher monthly payment. Should you lose a job for example during those 15 years youre going to have a much harder time being able to meet your monthly payment without dipping into savings. Sure he recommends an emergency fund but that would require a much larger one as well which only pushes that window of down payment affordability even higher. 3) no it is a fucking math problem. This isn’t either or. You can have the best behavior habits in the world but as I outlined above if you have 50% of people competing for 25% of homes they can afford according to Dave theres simply a mathematical impossibility to be able for the majority of people to afford a home. 4) you’re incredibly short sided if you think Dave’s way is the “right” way of the do it once do it right. Sure plenty of people went under with 3% down. 20% down however doesn’t automatically mean a change in behavior. It also means many people will literally never own a home if they follow Dave’s advice because the math actually doesn’t work even if their behavior is good. so that isn’t actually a solution. Them being at lower risk of foreclosure because they never end up owning isn’t a good solution you understand that right? You really really need to be more open minded and listen to a greater amount of sources instead of falling into a cult of personality over 1 guy that has proven he doesn’t even follow his own rules and standards.
@@mikeh197 I appreciate the info. If more people followed Dave, there would be less foreclosure. Looking forward to buying more foreclosures when people following your thought process loses their home. Baby step millionaire 2026.
@@mikeh197 one more thing, two 50k jobs, and one side gig at 25k a year, 125k family income. Live on 50k, invest 75k. 8 years at 10% return, 950,000. Don’t say it can’t be done, when millions have done it. Whether you say you can, or you say you can’t, you’re right.
This is an interesting comparison, but it lacks the most significant metric, which is Networth. When you compare these two solutions, it is clear to me that Dave's solution results in the highest net worth and lowest interest paid. Although I personally used the 30-year fixed when we started, there is something to be said for the 15 years in terms of cash flow and cash utilization. Habits and behaviors matter and are directly related to the thought process of minimizing debt and maximizing outcomes. Lastly, we all have to pay the piper in one form or another. Early, in the middle, or at the end. You might as well pay early and move on with the rest of your life. What about affordability? What about it? Learned to live with less early so you can live with more later and longer. If you start in your 20s, sacrifice 10 years and live free for 40 instead of playing the debt game for life.
Dave's advice will result in lower interest paid, but it is NOT the approach to maximize net worth. You have to account for market rates of return, which long-term is greater than mortgage interest charged. I'm not sure how a 15-year mortgage results in better cash flow when minimum monthly payments are higher. And you can't ignore the affordability question given the higher mortgage rates and housing prices. The cost of home ownership increased by 90% since the pandemic started.
@@jz4461 Dave’s advice might not even result in lower interest paid. It only would if the person remains in their house through the entirety of the loans and the 30 year person never refinances and stops PMI once 20% equity is achieved.
Had I listened to Dave Ramsey I would not have bought a home and I wouldn’t be in great financial shape right now.
Dave has great advice, for Dave. It’s massively impractical for anyone who isn’t a multimillionaire. It’s also very lazy.
Ah yes first here! Inject that Money Guy advice straight into my veins.
Hear me out. Disincentivize investors from purchasing existing homes. Incentivize developers to build more.
Currently there is a gap of 3.8 million SFH in the US in supply. If Investors sold just a portion of those houses to make up that gap, supply goes up, prices go down. Renters sitting on the sidelines get converted into homeowners.
Dave's advice isn't crazy if you're over 45. But we had a 30 for most of the life of our primary residence's mortgage until we refinanced to a 10 year because we got older. Total amount of time to pay off was 15 years and 10 months even with having a 30 most of the way and investing. We're climbing up to a 7 million dollar net worth now with no liabilities but it helped to have a heck of a bull market run in the 2010's. I don't think I'd have done it differently.
The problem with Dave’s advice on buying high with high rates (today) and refinancing later is that interest is front loaded. We don’t know when the rates are going down so overpaying today has real costs
$175k vs $272k makes no difference. Homes in that price range don't exist anywhere that anyone who could afford them would be willing to live.
Yeah it’s almost like some of the people saying “move somewhere cheaper” don’t understand that not all states have equal job markets, and not everyone wants to live in an unsafe neighborhood just to own a house.
@@mikeh197 pa has tons of great priced houses but nobody wants to live in places with poor weather anymore it seems lol.
Small towns within 45min of Charlotte, NC has plenty. But maybe I was raised to think a 1hr drive isn't bad lol
Probably depends on the market you’re buying into.
Depends the market 100%
Again, the whole if you do our system instead of theirs, you can afford more is so very cringe worthy. That is precisely the argument used that got people in so much trouble with their mortgages and other loans. "We know this is tough," so we are going to give you fudgy numbers to make it work, is cringe, cringe, cringe. Dave's if you financed higher you could have refi all the way down, yeah hindsight is 20/20, you don't know where interest rates are going to go in the future. That was cringe on Dave's part. It ignored the fact that even though rates decreased dramatically, lots of people weren't able to refi at a lower rate. Dave's oh you could just continue to refi is completely idiotic. The 2008 crisis and its aftermath exemplified that people just can't refi. Dave's just buy now has some merit though, since inflation is high even at rates today, you are actually paying negative rate due to inflation.
The monthly mortgage for a single family home was $2,434 in June, which is a 81% increase from last June. This affordability is unreasonable according to both the MG method and the Dave method, which say you would need income of $116,832 and $138,989, respectively.
There are small towns with house prices coming down. Industries left town and only old people staying behind.
Property taxes are going to be much higher on the 275k house depending on where you live which will cut into the 25%.
REFINANCING: “. . . Down the Road, if Interest Rates Drop - I’ll Refinance”
* Let’s Talk about CLOSING COSTS each time . . .
Realistic vs unrealistic
You forgot that Dave does not recommend 5% down. He recommends 20%. Or at least 10% for a first time home buyer. That makes the mortgage cheaper and allows you to buy more house
Which sounds nice and sunshine and rainbows until you realize that most buyers aren’t getting close to 20% on their first home. I laid out the math in another comment that a 20% down payment on the median home would be almost $79K. The median household income is $87k.
In order for the median family to afford the median home with 20% down they would have to save over 20% of their net income for almost 7 years AND the housing market would have to have 0 growth during that time.
20% down for first home is how you ensure you never will own one. Dave’s advice worked at a certain point but times have changed and the foundation isn’t bad but he hasn’t adapted for the market changing and shit advance like 20% down is simply not realistic any longer for a first home purchase for the majority of people.
DR is OK with less than 20% on a 1st home. He prefers more (20%)
Daniel is starting to get so creative with the graphics. Very visually appealing but not over the top! Great work
Do Your numbers make sense for Your situation.. I mean including water, garbage collection etc. Etc.
Might want to make it about true take home After withdrawals like SS payments.
*Whose
My first thought as well! Haha
What do they consider the differnce between net and gross income to be? I’m in Denmark, high taxes so for me it’s a huge difference, like 100% - say someone herr makes 100.000 gross - that’s about 60.000 net (or so)… so.. they want me to save up 25% of gross and I can spend 25% of gross on housing - in this example that would be 2x25 = 50.000 - but net is only 60.000, so only 10.000 left after investing and housing spend
the difference between net and gross is the same in Denmark as it is in the US. you are correct, 25k for housing and 25k for savings leaves you with 10k for everything else. that means you have to do something else to generate income, save more for house and defer investment to reduce the mortgage amount, or any other combination of stuff. However, the math ratios used by these media personalities isn't applicable to other countries. Denmark has a different tax and retirement system, has different mortgage system, etc. By statute Danish mortgages are capped at 80%, so you need 20% down either from cash or through other personal loans, which makes the math different, too. How Danish mortgage banks determine how much house you can afford based on income is also different than how US mortgage lenders calculate (denmark is simple). 25% is basically mandated in Denmark since the upper limit is 4 times your income. There are other differences with mortgages that don't lend themselves to using US media personality figures for Denmark. Same applies for retirement savings percentage given the different retirement, social welfare, and health systems.
Dave also says 20% down
He also said they wouldn't be hyper inflation.
He also said housing won't drop.
He also said 10k in students loans won't be forgiven.
20% down for a first time buyer is simply a pipe dream for the majority of Americans. The market has changed and adapted and Dave hasn’t.
This is SO helpful, thank you!!
If you are using gross income you are budgeting for money that isn’t realized because of taxes. Dave’s method budgets for money in the bank.
Dave just isn't a good person to follow for finances. I'm glad it helps regular Americans, but thank god I realized his advice is extremely simple and not actually really efficient.
Dave is good for people in debt. But not to get you wealthy.
@@saulgoodman2018 There is no need to be really wealthy.
@@amireallythatgrumpy6508 Then don't save for you retirement, if there's no need to be wealthy.
@@saulgoodman2018 You can save for retirement without being wealthy. Duh!
@@amireallythatgrumpy6508 So you can live on 100k in retirement?
"Refied all the way down"? There are costs to every refinancing event.
But how much risk do you have. And how much more interest do you pay. 175k vs 275k. Should have compared same priced home then Dave vs MG.
I would argue Dave’s has much more risk because the monthly payment is higher and should you experience job loss like a recession, trying to meet your mortgage payment is much more difficult. Even if I grant you that Dave’s way has less risk, you need to understand there no such thing as safe in this world. You can take all your money and put it into the bank as savings and that’s much less risky than investing it. However when you go to retire you’re going to be in a world of hurt because you will never earn enough to beat compounding interest. For my finances my deposits when I’m 60 will be around 400K. If I leave that in the bank sure there’s little to no risk but I can’t retire on that. If you take the MG approach I can retire on that same 400K deposits that will have earned almost $4million in interest.
You can’t expect to achieve anything significant in your life if you’re not willing to take any risk.
And the interest paid only matters if you think you’re going to stay in the house the entire life of the loan or that you don’t inverts the difference.
If Dave’s payment is $1800 and MG payment is $1500. Sure Dave will pay less interest. However if the MG take the $300 difference and invest it even in the SP 500. Over that life of the loan they can have earned more that makes up for the difference in interest and comes out even more ahead than Dave.
Far too often, people misquote Dave Ramsey. The Money Guy are way too technical here. Yes, the math will always favor your advice but gives zero accountability to risk. Dave always say life will go wrong because its life. So don't buy a house till you have an 3-6 month emergency fund, 20 % down, and have a stable income. By following Dave, you have room to breath when life finally goes wrong. Secure your foundation than invest like crazy. All of this to say, slow and steady wins the race.
By following Dave you won’t ever be able to actually afford a home. I laid it out in another comment on the last video they did. Sure there’s always going to be risk. That’s the problem. If nobody ever took risk you would never achieve anything either. Dave’s advice on housing based on the current market simply is unfeasible for the majority of Americans.
A 20% down payment on the median house price in the US is $78,490 with the house being $392,450. The money guys down payment advice of 3% is $11,773
The median household income in the US is $87,864 for 2 earners.
So one is 13% of a years income and the other is 89%.
So please give me an actual explanation on how you expect a family to save up 89% of their yearly income given the rate of housing appreciation? Also you can’t use the argument of move someone where cheaper because I used median numbers instead of averages specifically to remove outliers like high cost of living areas skewing the average.
@@mikeh197 it’s called “live like no one else so you can live like no one else”. Dave doesn’t push for average living. He just stating facts that you will most likely struggle if you buy a house outside of his perimeters. So if you need to get 20%, keep working 2 jobs and finding side gigs, or else move to a cheaper place. Reaching financial freedom isn’t a math problem, it’s a behavioral problem. 100% of foreclose happens on homes with mortgages. Do it once, do it right. 3% down and not changing your behavior to pay down debt, is the reason so many people have lost there homes.
@@jackstar254 execept that’s not true at all. You’re making your entire argument that if you don’t put 20% down you can’t afford a house which the money guys as well as many other show is simply not the case. You’re dodging the question because you don’t really have a good understanding of how this works and just are repeating things you’ve heard Dave say without grasping the implications.
Your comment literally shows a horrific lack of financial knowledge and why gullible people like you listen to Dave Ramsey.
1) simply saying move somewhere cheaper isn’t a solution. Had you actually bother to read my comment you would understand that’s why I specifically picked median home prices because it prevents high cost of living areas from skewing the data. If the median family can’t afford the median house that means you’ll have more people fighting for that so called “cheaper places to live” and there won’t be enough supply. Additionally the money guys in the video showed following Dave’s advice (without 20% down even) the max house the median family would afford is roughly $170,000 which is less than half the median home price. That means you would literally have 50% of the population fighting over less than 25% of the available homes.
2) give me a single fucking side gig that would generate almost $80K. For context after taxes that median could save 20% of their income and it would take them 6.5 years to save up for that down payment ONLY if prices don’t increase at all during those 6.5 years. You literally would have to assume housing doesn’t increase at all for over almost a decade for a family to save enough to afford the down payment.
3) saying 100% of foreclosures happen on houses with mortgages is stupid nothing statement because forclosures can only happen on houses with mortgages. It means nothing. It’s like saying 100% of apples on the ground didn’t grow there. It means nothing.
Dave’s advice doesn’t actually help you get out from under a mortgage because that 15 year loan while having less interest has a much higher monthly payment. Should you lose a job for example during those 15 years youre going to have a much harder time being able to meet your monthly payment without dipping into savings. Sure he recommends an emergency fund but that would require a much larger one as well which only pushes that window of down payment affordability even higher.
3) no it is a fucking math problem. This isn’t either or. You can have the best behavior habits in the world but as I outlined above if you have 50% of people competing for 25% of homes they can afford according to Dave theres simply a mathematical impossibility to be able for the majority of people to afford a home.
4) you’re incredibly short sided if you think Dave’s way is the “right” way of the do it once do it right. Sure plenty of people went under with 3% down. 20% down however doesn’t automatically mean a change in behavior. It also means many people will literally never own a home if they follow Dave’s advice because the math actually doesn’t work even if their behavior is good. so that isn’t actually a solution. Them being at lower risk of foreclosure because they never end up owning isn’t a good solution you understand that right?
You really really need to be more open minded and listen to a greater amount of sources instead of falling into a cult of personality over 1 guy that has proven he doesn’t even follow his own rules and standards.
@@mikeh197 I appreciate the info. If more people followed Dave, there would be less foreclosure. Looking forward to buying more foreclosures when people following your thought process loses their home. Baby step millionaire 2026.
@@mikeh197 one more thing, two 50k jobs, and one side gig at 25k a year, 125k family income. Live on 50k, invest 75k. 8 years at 10% return, 950,000. Don’t say it can’t be done, when millions have done it. Whether you say you can, or you say you can’t, you’re right.
This is an interesting comparison, but it lacks the most significant metric, which is Networth. When you compare these two solutions, it is clear to me that Dave's solution results in the highest net worth and lowest interest paid.
Although I personally used the 30-year fixed when we started, there is something to be said for the 15 years in terms of cash flow and cash utilization. Habits and behaviors matter and are directly related to the thought process of minimizing debt and maximizing outcomes.
Lastly, we all have to pay the piper in one form or another. Early, in the middle, or at the end. You might as well pay early and move on with the rest of your life.
What about affordability? What about it? Learned to live with less early so you can live with more later and longer. If you start in your 20s, sacrifice 10 years and live free for 40 instead of playing the debt game for life.
Dave's advice will result in lower interest paid, but it is NOT the approach to maximize net worth. You have to account for market rates of return, which long-term is greater than mortgage interest charged.
I'm not sure how a 15-year mortgage results in better cash flow when minimum monthly payments are higher. And you can't ignore the affordability question given the higher mortgage rates and housing prices. The cost of home ownership increased by 90% since the pandemic started.
@@jz4461 Dave’s advice might not even result in lower interest paid. It only would if the person remains in their house through the entirety of the loans and the 30 year person never refinances and stops PMI once 20% equity is achieved.