How much debt do you want when you buy your house?

When purchasing a house you must be aware of the potential debt. How do you avoid it? It has been said, "you should ever borrow money." Furthermore, "you should save your money and wait for your purchase." But, we all know that saving that much money before you buy is almost impossible. Another strategy would be to have at least 20% or more saved. By choosing a fifteen or less year mortgage you will limit your monthly payment to 25 percent or less. House debt isn't an easy thing to manage. So, following a anti debt stance is the best.

Those with the financial ability to take on the 30 year term mortgage can earn a higher rate of return somewhere else. If you opt for the 30 year term at 5% one would think that you can earn a higher return with a portfolio of index funds.  But, it comes down to how much risk do you want to take? You might get a better return with a 30 year mortgage. But, putting money toward the  purchase is risk free.

Conclusion

The answer is simple. There are pros and cons every where regardless if you want to be in debt with your home or not. The best way to go would be to save as much money as possible to put down and then take out a mortgage only for as long as you need to. This way your house will be yours in less time.  Also, you'll be able to own your home out right.

Apr. 24 12'

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