No. of Recommendations: 1
Hi fInvestor,

Actually, I currently live in the same residential complex as where I am about to purchase.
So... safe to assume you rent, then... and assumedly at a rental rate you feel is less than living costs as an owner? Why not (with your landlord's permission) remain responsible for your lease, and sub-lease to another tenant... then buy & occupy the other place as your true residence?

If you did that, you could get a long term rate currently around 3.5% with just 5% down, and no monthly PMI payments. (And although both mortgage interest and PMI are both tax deductible, the risk of that deductibility ever going away is higher against the monthly PMI, and the actual costs of mortgage insurance is lower by financing a single premium design on a 95% loan.)

I haven't signed anything that prevents me from renting the property, of that I'm 100% sure.
If you proceed to the point of signing an actual application (form 1003,) you will. You will certify whether the home used as the collateral for the loan will be your residence or an investment property... and you will sign and certify that you will occupy this as your primary residence within 30 days of closing, at risk of committing federal banking fraud.

So you think in general I would want to put the lowest down payment possible?

My main question is whether you think its best to have a lower down payment and a neutral cash flow (maybe negative with repair costs) or a higher down payment and a positive cash flow (maybe neutral with repair costs)?
It depends... is your non-real estate current cashflows such that you would need to rely on more cashflow from your rental? If so, then in essence you would need to inject more of your immediate liquid capital into the equity (regardless of actual return or yield) in order to have it generate more cashfow.

The post-tax costs of residential loan leverage is at generational lows, and can be made virtually permanent with long fixed rate terms. The safe rates post-tax of return you'll be able to generate on the same dollars will highly likely be much greater than the costs of those dollars outstanding as loans.

In other words, you can borrow at long term rates below 3%, and earn growth at long term rates above 6-8%

How many dollars do you want compounding toward your ultimate financial emancipation at that spread? Whatever you put towards down payment loses that spread as opportunity cost.

Its your call.

Dave Donhoff
Leverage Planner
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