Full Loan Amount vs. Mortgage

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Anonymous User
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Full Loan Amount vs. Mortgage

Postby Anonymous User » Fri Aug 02, 2013 10:39 pm

If someone lands an offer with a large law firm with a 90% offer rate to its SA's, and law school seems likely to wind up being a good bet does it make more long term financial sense to take out the full student living loan amount rate or tap further into their pre-law school savings, and take out a larger mortgage 3 years into practice?

Hypo 1:

Graduate with 185k in debt, 35k in savings, take out a 270k mortgage 3 years into practice.

Hypo 2:

Graduate with 165k in debt, 20k in savings, take out a 300k mortgage 3 years into practice.

I am already taking into account projected SA savings (probably 20k conservatively). I know mortgage rates are very competitive now, and student loans are rising. The pros are having a security blanket of money to be able to transition if something goes wrong: money in the account would buy time to form a plan B and execute it as well as the general security of having money. The cons are it's always possible that life will take me to a path where I'll meet someone from a wealthier background (not important to me, but still a possibility), and I would not need a mortgage.

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UnfrozenCaveman
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Re: Full Loan Amount vs. Mortgage

Postby UnfrozenCaveman » Mon Aug 05, 2013 11:54 pm

This is a totally confusing question. What are you asking?

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BVest
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Re: Full Loan Amount vs. Mortgage

Postby BVest » Tue Aug 06, 2013 12:16 am

It's not clear to me what you're asking either, but bear in mind that with only 20-35k in savings, you're not going to have 20% to put down on a home. As a result, you're going to have something other than a traditional mortgage on its own... whether that's a single loan alternately structured or a high interest piggy-back mortgage to cover whatever part of the 20% you cannot cover out of savings.

blsingindisguise
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Re: Full Loan Amount vs. Mortgage

Postby blsingindisguise » Tue Aug 06, 2013 12:34 am

Ok I think I sort of get what you're asking. I think you're better off taking on less student debt now and a larger mortgage later based on your hypo, because (1) although we can't say for sure where mortgage rates will be by then, they'll probably be lower than student loan rates now and (2) that's an extra three years in which interest will accrue if you do take more student loans rather than using savings.

I'm not sure the hypo is entirely realistic though. What makes you so set on buying a place the moment you start biglaw anyway?

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guano
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Re: Full Loan Amount vs. Mortgage

Postby guano » Tue Aug 06, 2013 9:09 am

BVest wrote:It's not clear to me what you're asking either, but bear in mind that with only 20-35k in savings, you're not going to have 20% to put down on a home. As a result, you're going to have something other than a traditional mortgage on its own... whether that's a single loan alternately structured or a high interest piggy-back mortgage to cover whatever part of the 20% you cannot cover out of savings.

What decade are you living in? Those things don't exist anymore.
FHA loans allow 5% down, but the mortgage insurance is a bitch. Even so, on a tax adjusted basis a mortgage will probably be much cheaper than a law school loan, even when rates rise (considering they'll be pegged to the same benchmarks, but with different spreads)

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Stanford4Me
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Re: Full Loan Amount vs. Mortgage

Postby Stanford4Me » Fri Aug 16, 2013 1:59 pm

guano wrote:
BVest wrote:It's not clear to me what you're asking either, but bear in mind that with only 20-35k in savings, you're not going to have 20% to put down on a home. As a result, you're going to have something other than a traditional mortgage on its own... whether that's a single loan alternately structured or a high interest piggy-back mortgage to cover whatever part of the 20% you cannot cover out of savings.

What decade are you living in? Those things don't exist anymore.
FHA loans allow 5% down, but the mortgage insurance is a bitch. Even so, on a tax adjusted basis a mortgage will probably be much cheaper than a law school loan, even when rates rise (considering they'll be pegged to the same benchmarks, but with different spreads)

More or less this.




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