Originally Posted by bode316
First off, HOW BOUT THE STEELERS!!!!!!
While I didn't see the whole game, I couldn't believe the 'offensive pass interference' call against Seattle's first touchdown....then, to add insult to injury, the imagined Pittsburgh first 'touchdown'. Even though I had some ties to Pittsburgh (5 years hard labor at Carnegie Mellon), when I saw the injustices by the referees, my Guardian personality kicked in and I started routing for the victimized underdog.
Originally Posted by bode316
That PMI can really get ya. I thought it was 25%?
The standard is that if you have less than 20% equity in your house, you will have to pay PMI.
Using Yahoo! Finance's mortgage calculator, here are some comparisons:
$150,000 home price
10% down (which you already have from your grandparents' gift), 6% 30-year mortgage: $809/month (not including PMI)
I think I've heard some people say PMI could run about $100/month, but I think that would be for a fairly larger mortgage (?)
If you wait to save up 20% down, but mortgage rates rise to 7%, your monthly payment is $798/month. At $3k/month in disposable income, you'd save up the extra $15k in, say, 9 months...but you'd need to rent an apartment (probably sign a 1-year lease) at, say, $750/month ($8,000 total rent).
Advantages of buying with 10% down:
--You avoid throwing rent money down the drain (all that rent would go straight into paying off your mortgage)
--You lock in ultra-low mortgage rates now (they may not jump up as much as people expect, but they sure aren't going to drop down to 4% for a 30-year mortgage..and if they do, refinance
Disadvantages of just having 10% down:
--You pay PMI. However, as noted, when you reach 20% equity, the lender (by law) has to stop charging you. Of course, it might take some prodding and instigating on your part. But, the PMI you'd pay for less than 1 year (when you'd be able to accumulate enough extra payments to grow from 10% to 20% equity) would be far less than signing a 1-year apartment lease.
Whenever you do do your mortgage, see if the lender will offer bi-weekly payments. Send in your mortgage payment twice a month instead of just once a month...that two week advance payment alone can shave off something like 4 years from a 30-year mortgage, without you paying anything over and above your traditional monthly mortgage payment. So, if you add in additional extra payments, then you'd be saving even more interest...plus, as you noted, if you go w/ a 30-year, and for some reason you can't make extra payments, you have lower monthly payments to deal with instead of getting closer to maxing out your budget with a 15-year mortgage.
And yes, thanks Marshac for catching my error (one of those brain farts). Bode's taxable income would be 60k, not 52k, assuming $30k in 401 (k) employee contributions and $8k in ROTH (advanced reminder: in 2008, they increase the annual ROTH contribution to $5k)
The 15k I suggested would be before the company match....so, if you (and your spouse) are able to sock away $30k combined (before company matches) into your 401(k)/year, plus the $8k in your ROTH, you'd have a hell of a jumpstart to FI. By the time you're 30, the two of you will have invested almost $350k (with 6% company matches), without any growth (over $450k assuming 7% average annual growth)! That's almost where the two of you could then simply stop contributing altogether to your 401 (k)s/ROTH IRAs and simply let that ride until you're 60 and retire at the 'traditional' retirement age and spend every dollar that you earn at work in the meantime...or, continue saving and retire much earlier.
Sure, it's forgoing a lot of income...but, you'd still have approximately $37k/annual disposable income, which you'd probably use as a very rough guesstimate budget (in 2005 dollars) for an early retirement lifestyle...so it's something you could use as a preliminary test run (of course, after 20 years, you'd likely have your house paid off, so that'd be an extra $10k/year in free cash flow to spend).
However, as I noted in my first post - what kind of investment options do they give you in the 401 (k) plan? That would be the big deciding factor on whether to contribute just enough to get the match, or if I think you should max out (if possible).