Home Buying in 10039>Question Details

Acey, Home Buyer in 10025

Dear real estate finance pros -- is a greater downpayment always better, even on a restricted home?

Asked by Acey, 10025 Sat Jan 10, 2009

I'm buying a co-op in Manhattan sponsored by the city. It's kind of a "gentrification" program -- the city subsidizes buyers to move into buildings in rougher areas of town. You have to stay for awhile though, to prevent flipping. In my case, if you sell within 4 years, any profit you make is reclaimed by the city.

So one of the questions I'm dealing with right now are:

1) I only need to put down 10%, but I have enough to put down 20%. Obviously, I'd like to put down more to reduce my monthly expenses, but my lawyer suggested that I put down as little as I need to, since that money could be earning more elsewhere, and because of the lock-in, I won't be making any money at all on that extra 10%.

On the other hand, if my mortgage payments are small, I'm saving on interest -- and there aren't a lot of investments doing that well nowadays. So I'm thinking of going with 20%.

What do you think? Is this a reasonable strategy?

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Answers

1
If you believe that the market will be staying relatively flat, and that neither investing in real estate nor some types of stocks and bonds will provide you with a significant difference in return on your investment, than put more down now. If that extra 10% brings you to the brink of what you can afford, than consider 15%. It is important to keep a certain level of liquid assets available for the unknowns in life.

I think given the uncertainty of the market, neither is a bad choice.
0 votes Thank Flag Link Sun Mar 14, 2010
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