Outdated Financial Advice

January 31, 2019

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There is plenty of free advice out there and some of it is helpful. Then there is advice that is simply outdated such as these financial tips. The old advice of waiting until your student loans are paid off before buying a home simply doesn't apply in a world where student debt averages $37,000. If paying loans is a big reason why you're delaying buying a home, it may be worth it to talk to a finance professional about options. For instance many student loans can be switched to a graduated student loan repayment plan. Your loans will start low and then will be incrementally raised every two years to match your income. You'll have more cash to save and it will help you with your debt-to-income ratio. However it is likely you will pay more over the life of the loan in interest but you'll be building equity in a property too. Speaking of property the old advice of needing 20 percent down to purchase a house is outdated too. Many first time home buyers believe this even through there are many options available that require significantly less than 20 percent. Potential first timers to look at low down payment options like rural development loans and FHA loans, as well as conventional loans with PMI. The old advice is it is better to buy a home than rent is not always the best either. Buying a home renders a large portion of your monthly housing as an investment, it may not be for everyone, especially if you are planning a move to another city within the next few years. For some people it may make more sense to funnel money into short- and long-term savings first, such as saving future childcare expenses, invest in your retirement fund, pay down personal debts, or build up an emergency fund. Finally the advice of paying off your mortgage as soon as possible is definitely outdated. If you can contribute to a retirement fund or investments that are earning more interest than you are paying on your mortgage loan, do it.  However it is always best to speak to a financial planner who can give you more detailed and personal advice.

SOURCE: Apartment Therapy

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