vania-janet/multiturn-rag-retrieval-data huggingface dataset:
"With no written agreement in place, the ""right"" rate is whatever both parties can agree to. I could argue that I could have invested the money in S&P 500 index funds and made about 9% annually over the last 15 years and the 15,000 would have been over 40,000.  The ""fair"" rate would be whatever rate of return could have been expected from whatever your father would have done with the money otherwise - keep it in a bank account, pay off debt, invest in the market, start a business, whatever.  Your father has the benefit of hindsight to know what would have been a good use of the funds over 15 years. Using the rate of inflation results in effectively a zero-percent loan in real interest terms (meaning no profit was made, just accounting for the time value of money). Both parties need to either decide on an amount or equivalent rate, or decide if squeezing the other for a few thousand Euros is worth the strife."
justkt's answer lays out the opportunity costs aspect of your question pretty well.  But if I were in your position, extra payments on principal for a home I wasn't planning to retire in isn't the way I'd invest the money.  Housing prices are awful (hence the great deal on what you just bought), and given the number of foreclosures outstanding and the existing uncertainty over the legality of some of them, they're likely to remain awful for years.  Depending on the size of your monthly mortgage payment, if you've got that much free cash after expenses each month, I'd consider the following options instead: You could go with a non-qualified (no tax-deferral benefit) account for the cash emergency fund so you could put any amount above and beyond 3-6 months of living expenses into stocks, index funds, mutual funds, etc. All of these options have the advantage of being more likely to provide a positive return in the 5-7 year time frame.  The cash emergency fund option has the additional advantage of being more liquid than housing--regardless of the current economic environment.
A few things to keep in mind.  A 90% mortgage is $76,500, PMI for 10% down is $76,500/2300 = $33/mo. This, plus $557 is still lower than your rent. I'd take the 15 since you want to get rid of that PMI as soon as you can. Often the bank will require the PMI be removed only after the regularly scheduled payments have gotten you to 20% equity, prepayments mat not count. This may have changed recently. Check to be sure.  Even in 5 years, you'll save compared to the rent, and from this point, odds are it will increase in value. I'd not count on any tax deduction. Your standard deduction is $11,400. Even at the higher rate, you'd have $3200 in interest, property tax can't be over $2000. You have an easy tax return, I'd say. Good luck.  UPDATE - it's now 2016 - The standard deduction is $12,600 for a couple. With the interest maybe at $3200, and property tax at $2000, curious why any other readers would think the OP would be itemizing.
I'm going to take a different path than the other answers: Given how low interest rates are (depending on your credit), buying a house may be a great strategy.  However, I would not put more than 20% down.  Putting more than 20% down unnecessarily ties up cash that could be used more productively elsewhere. You need to figure out your cash flow situation both for the near term, and for the long term. For the short term, you probably won't need to help your kids with tuition.  They will likely be able to get a combination of grants, scholarships, and loans that will cover the cost.  However, the loans are generally not low interest, and that is a huge amount of debt for someone so young.  If you want to help pay your kids tuition, you should at least guestimate/budget that amount now. For the long term, without any retirement savings, you may be hurting in a couple decades.  Since you also don't have a home, your living situation may be a problem.  Buying a home today may be the prudent move, because that will hopefully be an appreciating asset, and, with a 30 year mortgage, you'll own it outright by 75, which takes a big strain off of retirement costs. $1400 a month in bills (apart from rent/mortgage) with no kids in the house (is this correct?) sounds high.  I would also recommend looking at your basic expenses and seeing what you can do without if you are cash strapped.
But even if you borrow only 12K (or half the more accurate number), it will still be 15 years of payments. Running slightly more realistic versions of these calculations where your salary goes up, and you take interest into account, I think you will discover, for each possible salary path, a number that represents how much of your loan is really loan: everything above that is actually a grant you do not pay back. The less you are likely to make, the more of it is really grant. On top of that, it seems to me that no matter the loan/grant ratio, ""borrow as much as you can from this rather bizarre source"" appears to be the correct answer. In the cases where it's all loan, you have a lot of income and don't care much about this loan payment. Borrowing the whole 51K lets you invest all the money you get while you're a student, and you can use the returns on those investments to make the loan payments."
Edit After playing around with a spreadsheet a bit, I found that if payments are made every two weeks (14 days apart) rather than 26 equally spaced payments in one year as I used above, interest accrues at the rate of 5.75 x (14/365)% for the 14 days rather than at the rate of (5.75/26)% for the time between payments as I used above each 14 days, $2299.56 is paid as the biweekly mortgage payment instead of the $2299.61 stated by the OP, then 455 payments (slightly less than 17.5 calendar years when leap years are taken into account) will pay off the loan. In fact, that 455-th payment should be reduced by 65 cents. In view of rounding of fractional cents and the like, I doubt that it would be possible to have the last equal payment reduce the balance to exactly 0.
Say the rate is 6%, and the payment is $500/mo. If the bank credits on the day received, the .5% per month is $2.50 for the whole month. In other words, pulling in the payment by the full 30 days will save you about $2.50. The whole loan may be costing $3.50/day, but you can only impact the amount one payment at a time.  To be clear, you need to find out exactly how they credit you. Some loans do not accept partial payments separate from the normal payment. If a $500 payment is due, that's the time to prepay principal, but they might not accept, say, $200 each week.  As a side note, mortgages typically don't credit the way you'd hope. I have a standard 30 year mortgage and whether I send the payment a full 15 days early or 14 days late, the next month shows a balance that I can pull from an amortization table assuming all payments are on the 1st of the month. If I were you, I'd make a full payment 2 weeks early, then check your balance and see what the impact was, just to be sure.
If you have any non-mortgage debt – e.g. a credit card, a line of credit, a student loan, or a car loan – then I would pay that down first.  The interest being paid on that kind of borrowed money likely exceeds what you could expect to earn in reasonable investments. If you don't have any non-mortgage debt, and your mortgage is large (e.g. thinking about it keeps you up at night, sometimes :-) then go for the the extra mortgage payment.  Also go for the mortgage if you're paying at a relatively high interest rate compared to what you could expect from investments. If your mortgage is small (e.g. it's going to be paid off in a few years) and at a relatively low interest rate, then I would choose the RRSP or TFSA. Unless you're in the top income tax bracket, I would favor the TFSA over RRSP – TFSAs were only introduced this year and any balance there already is likely tiny compared to the RRSP. For retirement, I'm aiming to have equal amounts of RRSP and TFSA money. One option you haven't mentioned is an RESP.  If you have children under the age of 18, your bonus could also be used to make next year's RESP contribution and qualify for the 20% matching Canada Education Savings Grant (CESG) from the government.
That said, a mortgage is not about total cost. It is about cash flow. To the extent that a mortgage makes your cash flow situation better, it provides a benefit- just not one that is quantifiable in dollars and cents. Rather, it is a risk/reward situation. By taking a mortgage even when you have the cash, you pay a premium (the interest rate) in order to have your funds available when you need it. A very simple strategy to calculate and/or minimize this risk would be to invest the funds in another investment. If your rate of return exceeds the interest rate minus any tax preference (e.g. 4% minus say a 25% deduction = 3%), your money is better off there, obviously. And, indeed, when interest rates are only 4%, it may may be possible to find that. That said, in most instances, a CD or an inflation protected bond or so won't give you that rate of return. There, you'd need to look at stocks- slightly more risky. When interest rates are back to normal- say 5 or 6%, it gets even harder. If you could, however, find a better return than the effective interest rate, it makes the most sense to do that investment, hold it as a hedge to pay off the mortgage (see, you get your security back if you decide not to work!), and pocket the difference. If you can't do that, your only real reason to hold the cash should be the cash flow situation."
I'm not sure about your first two options.  But given your situation, a variant of option three seems possible.   That way you don't have to throw away your appraisal, although it's possible that you'll need to get some kind of addendum related to the repairs.   You also don't have your liquid money tied up long term.  You just need to float it for a month or two while the repairs are being done.  The bank should be able to preapprove you for the loan.   Note that you might be better off without the loan.  You'll have to pay interest on the loan and there's extra red tape.   I'd just prefer not to tie up so much money in this property.   I don't understand this.  With a loan, you are even more tied up.  Anything you do, you have to work with the bank.  Sure, you have $80k more cash available with the loan, but it doesn't sound like you need it.  With the loan, the bank makes the profit.  If you buy in cash, you lose your interest from the cash, but you save paying the interest on the loan.  In general, the interest rate on the loan will be higher than the return on the cash equivalent.   A fourth option would be to pay the $15k up front as earnest money.  The seller does the repairs through your chosen contractor.  You pay the remaining $12.5k for the downpayment and buy the house with the loan.  This is a more complicated purchase contract though, so cash might be a better option.   You can easily evaluate the difficulty of the second option.  Call a different bank and ask.  If you explain the situation, they'll let you know if they can use the existing appraisal or not.  Also consider asking the appraiser if there are specific banks that will accept the appraisal.  That might be quicker than randomly choosing banks.   It may be that your current bank just isn't used to investment properties.  Requiring the previous owner to do repairs prior to sale is very common in residential properties.  It sounds like the loan officer is trying to use the rules for residential for your investment purchase.  A different bank may be more inclined to work with you for your actual purchase.
There are several factors here. Firstly, there's opportunity cost, i.e. what you would get with the money elsewhere. If you have higher interest opportunities (investing, paying down debt) elsewhere, you could be paying that down instead. There's also domino effects: by reducing your liquid savings to or below the minimum, you can't move any of it into tax advantaged retirement accounts earning higher interest. Then there's the insurance costs. You are required to buy extra insurance to protect your lender. You should factor in the extra insurance you would buy vs the insurance required. Given that you can buy the car yourself, catastrophic insurance may not be necessary, or you may prefer a higher deductible than your lender will allow. If you're not sufficiently capitalized, you may need gap insurance to cover when your car depreciates faster than your loan is paid down. A 30 percent payment should be enough to not need it though. Finally, there's some value in having options. If you have the loan and the cash, you can likely pay it off without penalty. But it will be harder to get the loan if you don't finance it. Maybe you can take out a loan against the car later, but I haven't looked into the fees that might incur.  If it's any help, I'm in the last stretch of a 3 year car loan. At the time paying in cash wasn't an option, and having done it I recognize that it's more complicated than it seems.
What are the risks, if any The risks are exemplified by the outcomes presented on this website, including: There's a chance you will end up paying large mortgage payments on a house occupied by an ex-friend and paying large amounts of money to lawyers to try and get things straightened out. You could come out of it a lot poorer and with your credit rating wrecked.
If you really want to help your friend buy a house, make a counter-offer to buy the house yourself and lease it to your friend, with the option to buy for original purchase cost, plus all interest paid so far to the bank, plus closing costs and other expenses incurred by you, minus payments made so far by the friend. Otherwise, just no. The other answers already detail why.
I would second the advice to not do this. Real estate ownership is complex to begin with, involving a constant stream of maintenance, financing, and other decisions.  It is difficult enough to do for a single individual or a family as a unit (a couple), but at least spouses are forced to compromise. Friends are not, and you can end up with long-running conflicts and impasses. Financial transactions of any kind impose tensions on relationships, and friendships are no exception. If you want your friendship to survivie, do not sacrifice it to the financial arrangement which seems like a good idea at the moment. My advice would be to steer clear, no matter how attractive on the surface the deal might look. Focus on your own individual finances and use discipline and patience to save the amount needed for acquiring a separate investment property. But it will be 100% yours, and will save tons of headache. Since you are still considering this deal, it's a great time to politely change your mind and walk away - believe me, a few minutes of inconvenience will save you years of frustration. Good luck!
"Risk is the capital you have staked in pursuit of profit. The danger is that you lose what you have risked.  For some bets (risks), you can get insurance to cover for losses.  Now the ""game"" of Landlord and Tenant requires you to play fully by the rules set forth by your legislators. In your case, that is the legislators of the State of Texas. Without knowing those rules, you could be liable (open to civil prosecution) for violating those rules. Tenants could be savvy to those rules or savvy enough to hire someone, a lawyer, who knows those rules. As well, in the game of Landlord and Tenant, you must ascertain the creditworthiness of your would-be tenant. If the tenant fails to pay rent, that tenant can detain the residence. You will incur additional outlays to gain possession of your property (ownership in your rental). Now the game of Landlord vs Landlord is different. You can't pick up houses easily enough and even if you could, likely the expense of doing so could wipe out any would profits from having the house as a rental. So, in Landlord vs Landlord, you get constrained by where your rental sits. Thus you must forecast what will the neighborhood look like in five, ten, fifteen years."
"Both names are on the deed, so the property is jointly owned. You're going to need the second person's signature to be able to sell the property. Ideally the way to know ""what happens now"" is to consult the written agreement you made before you purchased the house together. The formula for dividing up assets when dissolving your partnership is whatever you agreed to up front. (Your up-front agreement could have said ""if you move out, you forfeit any claim to the property"".) It sounds like you don't have that, so you'll have to come to some (written) agreement with your partner before you proceed. If you can't come to an agreement, then you'll end up in court, a judge will split up the assets, and the only winners there are the lawyers..."
There is some element of truth to what your realtor said.  The seller takes the house off the market after the offer is accepted but the contract is contingent upon, among other things, buyer securing the financing. A lower down payment can mean a higher chance of failing that. The buyer might be going through FHA, VA or other programs that have additional restrictions. If the buyer fails to secure a financing, that's weeks and months lost to the seller. In a seller's market, this can be an important factor in how your bid is perceived by the seller. Sometimes it even helps to disclose your credit score, for the same reason. Of course for your situation you will have to assess whether this is the case. Certainly do not let your realtor push you around to do things you are not comfortable with. Edit:  A higher down payment also helps in the situation where the house appraisal does not fare well.  As @Dilip Sarwate has pointed out, the particular area you are interested in is probably a seller's market, thus giving sellers more leverage in picking bids. All else equal, if you are the seller with multiple offers coming in at similar price level, would you pick the one with 20% down or 5% down? While it is true that realtors have their own motives to push through a deal as quickly as possible, the sellers can also be in the same boat. One less mortgage payment is not trivial to many. It's a complicated issue, as every party involved have different interests. Again, do your own due diligence, be educated, and make informed decisions.
Disadvantage is that tenant could sue you for something, and in an unfavorable judgement they would have access to your house as property to possess. You could lose the house. Even if you make an LLC to hold the house, they'll either sue you or the LLC and either way you could lose the house. This might be why the landlord is moving to Florida where their house cannot be possessed in a judgement because of the state's strong homestead exemption ;)
Here is a pretty exhaustive article on that question. Long story short, it is an insurance policy against the possibility that the person selling the property to you doesn't legally own it. If there was some mistake or fraud along the way the proper owner could theoretically repossess the property without you getting your money back. If you are financing the property, it is almost a certainty that the lender will require you to buy it whether you want it or not.
You can't stop him from what he's doing any more than you can stop the sun from rising as long the message (and checks) he's getting from other people keep him convinced he's on the right path. EDIT After reading the comments posted in this thread, I do want to amend my statements, because many good points have been raised here. You obviously can't just sit by and do nothing while your friend talks others into taking the same (or worse) risks that he is. That's not morally right by any measure At the same time however, be VERY careful about how you go about this. Your friend, as you stated, sounds pretty much like he's all in with this scheme, so there's definitely going to be some serious emotional commitment to it on his part as well. Anyone and everything that threatens what he sees as his ticket to Easy Street could easily become a target when this all comes crashing down, as it inevitably will. You could very well be the cause of that in his eyes, especially if he knows you've been discouraging people from buying into this nightmare. People are NOT rational creatures when it comes to money losses. It's called ""sunken costs"", where they'll continue to chase their losses on the rationale they'll make up for it if they just don't give up. The more your friend committed to this, the worse his anxieties about losing, so he'll do whatever he has to in order to save his position. This is what gamblers do and why the house does so well for itself. Some have suggested making anonymous flyers or other means of communicating that don't expose you as the person spreading the message, and that's one suggestion. However, the problem with this is that since the receiver has no idea who sent the message, they're not likely to give it the kind of credibility or notice that they would to something passed to them by a person they know and trust, and your anonymous message will have little weight in the face of the persuasive pitch that got your friend to commit his own money (and future). Another problem, as you've noted, is that you don't travel in the same circles as the people he's likely to recruit, so how would you go about warning them?
"You are asking about a common, simple practice of holding the mortgage when selling a house you own outright. Typically called seller financing.  Say I am 70 and wish to downsize. The money I sell my house for will likely be in the bank at today's awful rates. Now, a buyer likes my house, and has 20% down, but due to some medical bills for his deceased wife, he and his new wife are struggling to get financing. I offer to let them pay me as if I were the bank. We agree on the rate, I have a lien on the house just as a bank would, and my mortgage with them requires the usual fire, theft, vandalism insurance. When I die, my heirs will get the income, or the buyer can pay in full after I'm gone.  In response to comment ""how do you do that? What's the paperwork?"" Fellow member @littleadv has often posted ""You need to hire a professional."" Not because the top members here can't offer great, accurate advice. But because a small mistake on the part of the DIY attempt can be far more costly than the relative cost of a pro. In real estate (where I am an agent) you can skip the agent to hook up buyer/seller, but always use the pro for legal work, in this case a real estate attorney. I'd personally avoid the general family lawyer, going with the specialist here."
The bank loaned you money. They have lien on the property. They have filed paperwork with the local government regarding that lien. If you want to change that paperwork you need them to cooperate. They need to make sure that their interest in the property isn't jeopardized by your actions. Their investors demand that their money be protected. They charge $100 for that service. The quit claim deed tells the world that you are giving up ownership in the property. Are you sure you want to leave the interpretation of your actions and intent to a corporation and the legal system. With only seven years left on the mortgage you most likely have significant equity in the home, even if the value of the property hasn't gone up. Don't you wish to protect that equity by spending $100?
Buying a house can definitely make your net worth go down because there are expenses involved (interest expense, closing costs, taxes, maintenance, etc.). So unless the house appreciates in value enough to offset these things, you will see a drop in your net worth from buying a house. More specifically it can have a negative impact on your net worth, since changes in your net worth are the cumulative result of all your inflows and outflows of money.