Thursday, January 03, 2008
Back in 2004, my wife and I felt that we had enough of a down payment (better than 35%) to buy into what we thought was an outrageously over-priced market. Problem was, we saw very little that caught our fancy, and what we did look seriously at were all involved with bidding wars. I thought to put an unconditional, full asking offer on a character house that had obvious issues, but my agent suggested not to bother. It went for $150K over.
So what if we had been reckless, and got the place? It needed foundation work, modernized plumbing and wiring, a new heating system and a new roof, not to mention windows and what not. I could have done a lot of the heavy-lifting, but it still would have cost at least $50G's that we did not have. Second mortgage? The first mortgage, including property taxes. would have been $500/month over what we were/are paying in rent. We would have had some tough months even without a 2nd mtge. Doing the work mostly myself would have been a few years' project in itself. Looking back, I'm glad that we didn't, because we would have been buying at our margin, and at the time, I thought that a turn-around was probably imminent. Appreciation was far from my mind.
I guess I was wrong about the appreciation, the place is probably worth $700K now. Maybe more. We missed out on a couple of hundred G's. That sucks. At the same time, we had a kid, and our income has dropped a bit, so we might be a bit uncomfortable now.
There are certainly intangibles to owning, and I wondered what those might practically be. Starting with interest rates: we were approved at 4.2%/5 years. If we had taken a 3 year term and had to renew at today's 5.79% or there abouts, we would be priced out and would have to sell. Mind you, we would walk away with a nice chunk of change, and go travelling for the time it takes for fundamentals to return. I would have gone for 7 years at a slightly higher rate though, and would be sorely tempted to cash out. Ooops. I forgot about li'l solipsist. I guess we would be locked in... But, as of December 07 we would have paid down $18,174.81 in principle, and $30,102.78 in interest. Instead, we have saved over $24K in the difference between rent and own, and we have been making interest instead of paying it, and I always feel better about that. And then there are those pesky repairs and maintenance, and increasing property taxes. But oh, yeah, the paper equity.
Bottom line is, I don't really have any regrets. It was over-priced.