anyone good w/ finance?

[Hammrhage]

Okay... heres the situation: i went to my financial aid counselor to go through a mandatory counseling session. He explains to me that I should buy a house asap after pharm school and build up equity on the house then take that equity out in 6yrs to pay off my 30yrs term loan thereby limiting my interest on the loan. When all is done my fixed rate loans (minus some pts off for consolidating w/ them according to him) is 5.25%. Seeing how interest rates won't be coming down at time soon my question is how the heck am i saving money buying a house? I am just transferring equity from source to another and not a good one at that since I most likely will be prolonging the higher interest rate(mortgage) which will cost me more down the road. {the option is adjustable mortgage; but i think i can do a lot better in a stock portfolio}. Anyone good at finance wanna crunch the numbers for me? the myFico site doesn't really help (It does say I will be better off renting than owning a house if i invest wiser and do not speculate/day-trade). Darn nonsubsized loans and darn cost of pharmacy school.

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[davidgayz]

I've struggled with this concept myself. I think (not sure) a big reason they bring the house into the mix is that that is the only thing most people have the discipline to consistently put money into (because they are forced too). It also depends on the real estate market in your area. Here in South Florida over the past 5 years or so there has been about a 100% inflation in house prices, but its leveled off as of now. You probably could not have matched that with any investment portfolio. But people buying homes now will probably not have this good fortune over the next half decade, so If you have the discipline to invest and your real estate market has leveled like mine than do it.

 

[off2skl]

Also, the interest on your mortgage (and any home equity loans) are tax deductible regardless of your income, whereas interest on student loans can only be deducted if you make under a specific dollar amount (I can't remember the exact numbers, but most pharmacists would be over this limit). At least, that's what a financial advisor and an accountant explained to me. But, I would think that you'd have to determine if the $ you would save via deductions would be enough to offset the extra interst you would be paying.

 

[ZpackSux]

So..your counselor recommended you use the equity on the house to pay off the student loan... now, how long will it take to pay off the 2nd mortgage..u took out to pay off the loan??? Where is the guaranty that your house will gain that much of equity in 6 years?? What if you want to move???

I don't know..is your financial conselor financially independent and wealthy?

If not..sounds like blind leading a blind... I don't take financial advice from a man wearing jewelry...and I don't take financial advice from someone who is not financially independent.

 

[Frankkrunch]

Please do not EVER, under ANY CIRCUMSTANCES pull equity out of a piece of property to do ANYf*&kingTHING but PURCHASE ANOTHER UNDERVALUED PIECE OF PROPERTY. The truth of the matter is this: No matter where you live, buy as many houses under fair market value as you can possibly afford. Education is an expensive way to "buy" a job. When you start flipping your houses for cash, then go back to school. I made the same mistake (financing my education). The Student Loan Payment (which is not deductable) is like having an brand new BMW, without the pleasure of driving it. Do not listen to ANY COUNSELOR who tells you to pull equity out of a house for school. SWEETBLEEDINGJESUS you will be bankrupt before you even have a chance at wealth.

 

[sdn1977]

Please do not EVER, under ANY CIRCUMSTANCES pull equity out of a piece of property to do ANYf*&kingTHING but PURCHASE ANOTHER UNDERVALUED PIECE OF PROPERTY. The truth of the matter is this: No matter where you live, buy as many houses under fair market value as you can possibly afford. Education is an expensive way to "buy" a job. When you start flipping your houses for cash, then go back to school. I made the same mistake (financing my education). The Student Loan Payment (which is not deductable) is like having an brand new BMW, without the pleasure of driving it. Do not listen to ANY COUNSELOR who tells you to pull equity out of a house for school. SWEETBLEEDINGJESUS you will be bankrupt before you even have a chance at wealth.

I may not be the vehement....but....I'd have to agree.

Do you even want to own a home right after school? Is your life that stable? Do you have an SO? If so, are both of you in agreement of what you want in a home? What about the rest of your life? Do you want to travel, try to live in different areas, does your SO have a need to move with his/her job situation?

Its expensive to buy & sell a home...so what you may want at 24 may be different from what you want at 30. Also...homes are lots of responsibility - you always have to mow the lawn, fix the toilet, replace the garage door opener. You need liquid money for the repairs...so plan on that.

 

[bananaface]

Moving to the finance forum for better response.

 

[curious1]

It seems like this plan is way too dependent on the housing market going up.

 

[RRS]

I would add that the financial aid counsellor at a university isn't probably the best person to talk to about personal finance. The two aren't really connected - loans and personal finance. Of course, it helps them to have their loan default rate be low if people are borrowing against your house to pay back their student loans... but they can come after your house if you default. If you default on loans, they don't throw you in jail.

And per the comment about student loan deductions - just to clarify that there are limitations to the home mortgage deduction. Particularly in high income tax states where the AMT kicks in.


Your home is a place to live first and foremost, not an investment, and certainly not collateral for a loan.

I'm about to swoop in and buy a condo in a resort area from a guy who borrowed against it significantly for patent work on his inventions that haven't turned out. Now he's stuck trying to sell in the winter in an area which gets little traffic this time of year. Using my home equity to do it would be a bit risky (and I don't haveto, luckily) but it wouldn't be terrible idea. Using it to buy a car - that's a bad idea.

 

[mshheaddoc]

I would add that the financial aid counsellor at a university isn't probably the best person to talk to about personal finance. The two aren't really connected - loans and personal finance. .

I fully agree as well as I also agree that you should never pull equity out of your home for student loans. Pay off private loans first, then federal. They are the 2nd "free-est" money you'll ever get next to your mortgage.