So a little over a year ago, the wife and I started looking at houses. I initially had enough for 10% down and comfortable reserves after all closing costs.
After losing multiple bidding wars, many months down the line, my savings was still growing, and rather than letting it all sit, I decided to invest a significant chunk into stocks (mostly safer mutual funds/ETFs, some risker play around stocks), leaving enough for 10% down still if we found something we liked. I really wasn’t sure how long it would take us to get a house. It really felt like it could have been years and letting all that cash sit for that long felt like a shame. After talking to friends and family, and doing a good amount of research and crunching numbers, it really seemed like investing an additional 10% into long term stocks vs down payment on a house would yield more in the long run anyways.
Now, a little under year later, we finally went under contract for a house. I can still comfortably put down 10%, with good reserves/emergency fund. The only thing is, my stock investments are down pretty significantly (~15-20%) with how the stock market has been. I’m now thinking, I should have just saved that money and put 20% instead of 10%, which would have lowered my monthly payments by around $400-500, and saved me about $50/month PMI.
Part of me has been contemplating if I should just sell my stock investments at a 10-15k loss for the 20% down. The whole situation has me pretty depressed right now and feeling very remorseful. Now I’m sure a lot of my remorse is just how the market has been trending, and if it were trending the opposite direction I’d be feeling differently about my situation right now. What’s reddit’s opinion? Did I royally mess up?
> What’s reddit’s opinion? Did I royally mess up?
Yes, you messed up.
Money intended for short term needs should not be exposed to market risk.
But here’s the good news.
You didn’t *royally* mess up.
Why?
You’re going to own a house soon.
You’re going to achieve your goal.
It may not have been an efficient path to your goal, but you’re achieving it anyways.
I’m a little confused by your question, let me see if I’m understanding it correctly:
1. You initially had saved for and planned on putting 10% down on a house
2. As the house hunting was taking a long time, you took some *additional* savings that you *could* have put towards additional down-payment (up to 20%), and invested that in the market (but didn’t touch the original 10%)
3. Now that you’ve closed on a house, AND the market is down, you feel like you goofed by investing the extra in the market.
If the above is accurate, what you are guilty of is a lack of 20/20 hindsight. Would it have been better to have stayed out of the market with the extra money and put it into the down payment? Sure, if you could have seen the future!
General advice is “time in the market beats timing the market”. It wasn’t money you were planning on putting into the down payment in the first place, you did the smart thing and *didn’t* invest the original 10% you had set aside for that.
Don’t beat yourself up for not seeing the future. You didn’t risk what you couldn’t afford, that’s good! My advice would be not to sell in a down market. Wait until the market recovers, if you can. Then, if you want, pay down your mortgage below 80% LTV, and get rid of the PMI. Then you can ask the bank if they recharacterize your loan for you and lower your payment (they may or may not agree to that).
No don’t take a 15 to $20,000 loss just to put more down on a house
>> doing a good amount of research and crunching numbers, it really seemed like investing an additional 10% into long term stocks vs down payment on a house would yield **more in the long run anyways.**
>> Now, a little under year later, we finally went under contract for a house. I **can still comfortably put down 10%,** **with good reserves/emergency fund**. The only thing is, my stock investments are down pretty significantly (~15-20%) with how the stock market has been.
If your intent hasn’t changed, don’t let the volatility of the market get to you and do your best to take emotions out of the equation.
To answer your question, if based on the highlighted text above, if it’s true then and true now, did you mess up, no.
The only real benefit to selling now would be the pmi savings. And that market loss isn’t worth the 50/mo imo.
You sound like you still have the ability to save money. Sure there will be unexpected costs of owning a home. You will need to buy things and make repairs. Get your emergency fund back up and then make payments to principal until you hit that 20%. I would leave the stocks alone, but who can say really. I could cash my stocks for a 12K loss and pay off my house if I wanted to. That might be the right choice and it might not. I’d rather have the money in stocks, where I can have easier access to emergency funds, than have to take out a mortgage if I need money.
For a first house, is it better these days to only put down 10% and ‘get in first’ and start building equity instead of trying to save up 20% which can take a long time for most ppl, especially as house values continue to rise?
Let me tell you a 23 year old story.
In 1999 I bought a house for $110,000. I left it to my parents whims.
In 2019 my mother passed away and in 2021 my father passed away.
I sold the house in 2022 for $405,000. Dont get excited I lost about half of that to a heloc, taxes, agents, and some legal shit.
There have been many ups and downs in the market since 1999. But even losing half of that quadrouple growth doubled my “investment”. And that’s a fairly crappy ROI over 23 years really. But we’re still getting a quality of life boost from it.
All of that said is to put everything into perspective. Over time the downs are smaller than they feel while they are happening. You probably will ultimately benefit from any decision that you make.
Dont take out more than you need. Try to be conservative of your needs. And keep investing.
I want you to personnalt scour this sub every day for the next two months and tell people your story. You are not alone in your thought process.
Good news you get the house; bad news you have a tough decision ahead.
You could easily sell your stocks at a loss and put more money down; that might even make your partner happier.
You could wait until we rebound in 1-5 years
You should be VERY thankful you had kept that 10% out of the market and got the house; so no sense worrying too much. Now just make better decisions moving forward
With hindsight it is always easy to see what you should have done – alas, you can’t go back and change it. Don’t dwell on it and don’t overcompensate by reflectively doing the opposite next time.
Once the market recovers, you can then sell, make a principal only payment, and recast your mortgage to lower the monthly payment.
The market will recover. Let your money sit. As long as you put your funds in solid companies, index funds, or mutual funds, the prices will stabilize down the road. Investing your money is always a good move and it’s even better when you invest during a time when the market is depressed. You didn’t mess up. You made good, well thought out calls.
15k loss to save $450 a month = 34 months to be in the positive, no one can really say what the stock market will do by then
everyone has answered your initial question.
Let’s get on to the second because that’s all you can control right now.
– should you put down 20% or 10%. Part of this depends on what your interest rate is for your mortgage versus what your crystal ball says about the stock market but unless you have an unusually low interest rate I’d sell your stocks to get to 20% down and avoid PMI.
Shoulda woulda coulda will kill you cuz hindsight is 20/20.
Did most people see NFT and Crypto crashing in June back in April?
Yes. Yes they did. So. Bad example.
When you out money in long term stocks/bonds, you shouldn’t look at it because the market goes up and down. Down and up. And it doesn’t matter because it’s for future use.
You got a house. The more you can put in, the better you’ll be.
Very interesting details you have remarked, thankyou for putting up.
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