Hello everybody, Abe Safa here with Century 21 Harrelson Group in Myrtle Beach, South Carolina.
Today's conversation is buying a house in Myrtle Beach. How much should you put down? That's a big question we're getting right now, especially with the way interest rates are. So to me, it's a very simple formula. I'm a finance guy, so to me it's always about numbers, it's always about the best use of money, the cost of money. So right now when I'm looking at the interest rates being ridiculously low my advice would be put as little down as possible. I mean, I've seen people come in with 3% down and then finance the rest with interest rates of 2.9, that's insane to have interest rates that low. So my advice would be put as little down as possible, and if you had the funds that you were going to put 20% down, take that extra 17 or 15% that you're going to put down and then put that into CD or a savings account, and have it sitting there for your family in case you need it, in case you want to remodel the house, or whatever it may be, you've got that extra cash siting around, because the borrowing cost right now is so low. But here's what you got to do before you do that. Now, if you have less than 20% equity in your home you're going to have to pay mortgage insurance, or PMI, and that's going to vary depending on your lender, depending on the cost of the home, the value of the home, and other variables. So what I would recommend is get with your lender and find out what your PMI is going to be, and they're pretty cheap nowadays. So take a look at that. If that number is very low or really significantly low, then my advice would be to put as little down as possible, put the rest of the cash in the bank, save it for a rainy day, and then use the bank's money over the next 15 years or 30 years, depending on how long of a mortgage you want to get, because borrowing costs are so low right now. That's what I would do. So double-check with your lender, see what your PMI is. Now if that PMI is really high, or if you're the type of person that really wants to get this home paid off as quickly as possible and have equity, then go for it, put as much down as possible. But I always look at the cost of money and the most efficient way to use money. And when I see interest rates as low as they are I typically want to use the bank's money at that point.
- Abe Safa