12-04-2012, 04:44 PM
Look at it another way. Two people each buy a house for $400k. One puts down 5% (20k). The other puts down 20% ($80k).
Massive depression occurs, they both lose their jobs, house value falls to $200k. At that point they both have a house way underwater, but one is out $20k in "real" cash while the other is out $80k.
Opposite occurs - massive recovery. House value goes up to $600k. The first person has seen their $20k investment rise to $220k (equity in the house) - 11 times it's original value. The second person has their $80k rise to $280k in equity. Still very nice, but only about 3.5 times the original stake.
For the record, I have always put down 20% (including my current house), but the options trader in me says that lower percentage gives the best bang for the buck.
And of course until they axe the mortgage deduction, the more interest you pay the better (especially if you are high income).
Massive depression occurs, they both lose their jobs, house value falls to $200k. At that point they both have a house way underwater, but one is out $20k in "real" cash while the other is out $80k.
Opposite occurs - massive recovery. House value goes up to $600k. The first person has seen their $20k investment rise to $220k (equity in the house) - 11 times it's original value. The second person has their $80k rise to $280k in equity. Still very nice, but only about 3.5 times the original stake.
For the record, I have always put down 20% (including my current house), but the options trader in me says that lower percentage gives the best bang for the buck.
And of course until they axe the mortgage deduction, the more interest you pay the better (especially if you are high income).
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