Wednesday, February 13, 2008

To buy or not to buy

So this is the ultimate question me and BEB are facing these days. Here's the deal, we want to move to a better apartment. The one we are living in is pretty...err..basic. We moved into it right after coming from India, when money was a big constraint, so was commute, 'coz we didn't have a car then. Now that we are settled here and can commute a bit, we want to move to a better 1 bedroom apartment. So I started looking for a rental apartment nearby. And I couldn't believe my eyes when I saw the kind of rents they were asking for in this area. 1800+ bucks for a single bedroom...???
Then one day while discussing this with BEB, we thought of an alternative, maybe if we throw in some more money than the rent, and settle for a less fancier house, and be willing to move a tad bit farther from this area...then maybe....and its a big MAYBE...we would be able to Own it instead of renting it. "How about that?" BEB asked. "Sounds like a plan, I'm in."

So this is where it all begun. So we set a budget and I started looking for a house within that budget. And guess what, I did find a couple of them which I liked enough to live in and which were within reasonable distance from our workplaces. There was one that we went to take a look at and I found myself swooning all over it, I was sure that it was the dream house for me.

Now came the big question. Ok we find a house, we're able to secure a loan on it and suppose we buy it. And we can comfortably pay off the monthly installments as well. Then one day our visa might expire ( it has a 7 year limit) and we may find our selves packing bags for India. What do we do then. Sell it and pay up the bank dues? What if the real estate is still down and we cannot get back the amount we paid for it?
Another option: Rent it while moving back to India? Will we really be able to pay off mortgage installments just by the rent? And what about the rental agency charges.
Btw, just in case you are wondering, It is next to impossible to pay off the EMI from Indian salary, because even a well off Indian makes much less as compared to an average American, this is due to lower cost of living as well as currency conversion rates.
Yet another option: Take the mortgage now, and pay it off like crazy within the next 7 years.
This is not really impossible for us. But BEB doesn't think it is a good idea to put all our eggs in one basket. He wants us to diversify our investments a bit. If we try to pay off our mortgage in 5-6 years we may not able to have any savings and investments at all.

But with rents going up like crazy in this part of the world, buying a home sounds too good an option to rule out.
So there we are, going back and forth on this one. For now we have deferred the decision until end of march, by then we are hoping to come up with at least 10% down payment. Rights now we have about 3% in savings. With some big expenses coming up this goal is really stretched but I'll keep you posted on how well we do on this goal of ours.

Do you have any thoughts on what route we should take? Do you think its a risk worth taking? Do you think its a risk at all? Are there some factors that I am overlooking? Do share your thoughts and views on this one.

1 comment:

Angela said...

I lived in San jose for 13 years and the housing prices were always rising. They say over the next two years the housing prices will continue to go down and then they will rise slowly. From what I am hearing about real estate in the Bay Area it is not really crashing like it is in other parts of CA. I live an hour east of Sacramento and we bought our house 6 years ago. Over the past 6 years at one point we had made 200,000 on our house. It has currently fell to making 100,000 profit on our house. I think if you are able to stay in it at least 7 years you will not loose money. If you look at the amazing tax break you get that is worth it alone. Renting you don't get a tax break but you get a huge tax break on the interest you pay on your house. I think you should go for it in the next year and try to buy.