The current real estate market challenges conventional wisdom, especially when it comes to mortgages.
For generations, people have been told that when buying a home they should:
- Make a big downpayment
- Obtain a fixed-rate-mortgage;15 years whenever possible
- Make additional princible payments whenever possible
- Pay off your loan as quickly as possible.
- Will have the same job for life. Most people will have 5-6 different careers and therefor won't have a company pension as part of their retirement strategy
- We cannot realistically count on Social Security to make up the difference
- We won't have "Mortgage Burning Parties."
Additionally, owners have been told to put money towards their 5% tax deductible mortgage, while carrying 18% non-deductible credit cards. In this case you would be far better off to forget the mortgage princible and pay off the credit cards.
These examples are just a small part of how you should adjust your buying strategy to better meet market conditions. Can you think of others? Feel free to comment!