MAKE YOUR CHOICE, HOME EQUITY OR $$ MONEY IN THE BANK!

GIVE ME THE CASH! 

WHERE DID MY HOME EQUITY GO??

Inspired by Jim Crawford's thoughtful examination of budgets, down payments, and more, I can relate the the matter of larger down payments vs. cash in the bank. 

Tim Maitski says it best in his comment to Jim's post.  "Jim, I don't understand how having a bigger downpayment benefits the homebuyer."

In a volatile housing market, I'm less interested in home equity than I am leverage and money in my bank accounts.

Back in June 2005 when I began to finance the home I was building, my lender tried his best to get another $80K from me for a higher down payment.  For some reason, I resisted and thought I wanted to keep the cash for a rainy day.  Little did I know that we'd face a Tsunami in housing values and I'd see about $400,000 wiped out by a gigantic wave of negative equity shared by about 15,000,000 other home owners. 

HA!  I watched $400K evaporate from house equity, but I still have that $80K.

Until the market recovers and I see sound appreciation, a home is for living, not investing.  Your mileage may vary.  However, our personal security is probably a tad more important than protecting the lender.  I higher interest rate means a higher mortgage payment, but that interest is deductible and that helps. 

Often the choice is a lower mortgage payment vs. cash in savings.  I like cash. 

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988.

                       

                           
"Honey, are we going to make the higher down payment that the loan officer suggested?"

"No Dear, I believe we need to preserve our savings.  We never know what might happen in the future."