Buying a home in NYC with student loan debt

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PowerBag21

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Buying a home in NYC with student loan debt

Postby PowerBag21 » Sat Feb 24, 2018 1:43 am

I am a third year at a V100 with $200k of student loan debt and about $60k of savings. I refi'd 2 years ago with FRB and am making minimum payments on my loans ($2300/month) with a 2026 maturity and investing the money I save each month. My parents have indicated that they would be willing to help me financially with a down payment/closing costs on a home. Is it worth buying in NYC now vs. continuing to rent for someone who's so highly leveraged? I am currently considering (1) whether I could even get a home loan with my current debt load, (2) whether now is a good time to buy in NYC and (3) whether it is worth the risk of taking on a great amount of additional debt. I would feel much better paying down a home loan each month and building equity vs. paying rent into the abyss, but somewhat understand the not-so-hidden costs of home ownership and potential implications of the new tax law, so I just don't know what to think. Also, it seems that most people my age/seniority at firms are renting and not thinking about buying anytime soon, so maybe I am just being silly. Any other junior/midlevel associates thinking about buying in NYC?

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Re: Buying a home in NYC with student loan debt

Postby Anonymous User » Sat Feb 24, 2018 2:32 am

PowerBag21 wrote:I am a third year at a V100 with $200k of student loan debt and about $60k of savings. I refi'd 2 years ago with FRB and am making minimum payments on my loans ($2300/month) with a 2026 maturity and investing the money I save each month. My parents have indicated that they would be willing to help me financially with a down payment/closing costs on a home. Is it worth buying in NYC now vs. continuing to rent for someone who's so highly leveraged? I am currently considering (1) whether I could even get a home loan with my current debt load, (2) whether now is a good time to buy in NYC and (3) whether it is worth the risk of taking on a great amount of additional debt. I would feel much better paying down a home loan each month and building equity vs. paying rent into the abyss, but somewhat understand the not-so-hidden costs of home ownership and potential implications of the new tax law, so I just don't know what to think. Also, it seems that most people my age/seniority at firms are renting and not thinking about buying anytime soon, so maybe I am just being silly. Any other junior/midlevel associates thinking about buying in NYC?

If your parents weren't rich enough to help you not take out $200k in loans, they probably can't help you with a big enough DP to make buying worth it. And anyway, buying in NYC absent being independently wealthy or job-secure is insane. Based on your student loan balance and the fact that you're a third year at an NYC biglaw shop, I'm going to guess neither criterion applies to you. I would keep renting until you think you're "in it" (i.e., on partner track or have developed enough transferable skills to never want for work in NYC) for the long haul.

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Re: Buying a home in NYC with student loan debt

Postby Anonymous User » Sat Feb 24, 2018 8:49 am

It is ok to buy with some student loans, but not with that much. I would try to get the balance down to at least 100k or so before thinking about buying. Too much leverage otherwise.

It is tough to time the market, but NYC real estate has a pretty good track record over the past few decades. Unfortunately, interest rates are trending upwards which weighs toward buying sooner rather than later. Although if this trend continues, home prices may drop because fewer buyers can afford to buy at higher rates. As you mentioned, it is also not clear whether the trump tax plan's MID + SALT changes have already been priced into the market. In theory, both should cause prices to decrease.

Some mid-levels do buy places, but when doing so your budget should be based on your "exit option" salary rather than your current salary given the inherent instability of large law firms. For example, mid-level in-house jobs in NYC now pay around 200k. If folks from your firm can usually get such jobs and you plan to do so as well if you get the talk, then you can use that salary as a proxy for your budget. Using the 3x rule, that would put your budget around 600k which would have you to look at mid-tier suburbs for homes or 2BR apartments in the outer boroughs. In Manhattan itself, you are looking at studios:

https://www.zillow.com/homedetails/31-W ... 3184_zpid/
https://www.zillow.com/homedetails/1092 ... 9518_zpid/
https://www.realtor.com/realestateandho ... 7865-21504

Given law firm statistics, you should also carefully consider whether an NYC "exit option" is really where you want to be in 5-10 years. In-house salaries go a lot further in North Carolina or Texas than NYC. If you are willing to move elsewhere, you would likely be able to get a much nicer/bigger home and live a more comfortable life. 200k in NYC does not go that far as you already know as an associate, but buying a place here will skew your future towards staying in the city.

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Toni V

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Re: Buying a home in NYC with student loan debt

Postby Toni V » Sat Feb 24, 2018 5:58 pm

Hard to conceive paying $600k for any of those places. You must really love NYC to put up with that and the sock-it-to-you taxes they charge.



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