That's a toughie!! Normally I would say get a place and get that equity. BUT if your parents aren't charging you rent I would say you're smarter to pay off loans, first!!
The other question is if you put off buying, will there likely be a place available where you want to be? That's an important piece, too!
Would you be buying outright or is it with loans? Have you figured out what the mortgage would cost per month if it is with loans? and could you easily afford it with your loan payments? Have you also considered association fees to the condo association as well as property taxes? Does it have a yard, and if so does the association take care of it or do you? same with issues like plumbing etc
Owning is better then renting but comes with things sometime people over look and end up not wanting to deal with or being ready for.
If you have taken all that into account and it is still and equal choice, I personally would go with the condo (if I found one I liked, not just one I could afford) The loans will keep and generally have really good interest rates as long as you keep up on them, who knows how long the market will be a buyers market.
I'm in a similar boat. I am living at home and just finished my master's degree. I had no undergraduate loans but took out loans for my master's degree. I have one year left of supervised practice then...yippee!!!! I am a Suze Orman fanatic, she always says the best time to buy is when you are ready...not in a panic over interest rates rising. Alot of times people call in to her show wanting to buy a house because of interest rates, then once she looks into their finances, it is not such a good idea. Remember once you buy a condo you will also have to pay to furnish it and then pay taxes on it. Also if you have a mortgage you are required to hold homeowners insurance. Home ownership can get really expensive real quick. I personally would hold off.
I would open a Roth IRA savings account Tomorrow and Max it out for this year at $5,500. Getting a retirement account started early makes all the difference (because of compound interest). I have student loans and still make it a priority to max out my roth every year. Play around with retirement calculators online and you'll really realize how much holding off on starting one can cost you. I found this example
"John starts putting $100 a month in his Roth at age 25 until he’s 65. When he retires he’ll have $1,100,000. (assuming compound interest around 8%). Bob doesn’t start putting money in his Roth until he’s 35. He then puts the same $100 every month until he reaches 65. When he retires he’ll only have $300,000!!! Those 10 years of not investing cost him $700,000 OMG!!"
Then once you have your loans paid off and can afford to contribute to your roth, I would buy the condo. I whole heartedly believe that your 20s are the time to really suck it up and get your finances straight. It's much easier to make sacrifices now, then to find yourself at age 40 with $700 in your bank account and no retirement. Good decisions made now can pay off 10 fold down the road. Good Luck!!
If you don't mind living with your parents a bit longer, I would hold off on the condo and pay off your loans. Then, see how you feel being totally debt free. It sounds like you know how to save money, so saving up more money after paying your debt doesn't seem like it will be a problem for you.
No question. Pay off the loans, although John's idea is novel thinking.
Whether or not you do that right away should probably depend on how much interest you're paying on the loan.
For example, if you're paying 8% on your student loan, but can only make 2% on your savings (if you're lucky!) then paying off your loan early would likely save you a good deal of money depending on the amount.
Getting your own place involves expenses one can't even begin to imagine. Have you ever heard the saying, "new house poor"? It's much easier to deal with unexpected things without debt. Even property insurance, which you will need, is based on your credit rating, which would likely be better with no debt.
As for housing interest rates, yes they are rising, but anything under 8% in the next 5 years would still be a steal compared to the way they used to be.
I love this kind of question - they are both good options!
Since you didn't give a full run-down of the numbers it's hard to give a definitive recommendation of what would be best net worth-wise.
As pnkrckpixikat and Vex said, have you fully assessed the cost of owning the condo, including the larger emergency fund you would want? As Scarlett pointed out, do you have your retirement savings started already?
Personally I would be very attracted by the mortgage interest rates now if I was totally sure I could afford the debt payments as well as the condo. However, paying off debt first is definitely the safer route.
This kind of decision is ultimately going to come down to your values and your risk aversion. How much would you value being debt-free vs. owning your own home? Do you want your whole net worth tied up in a condo? Would you be able to sleep at night with student loan payments as well as the mortgage, after your savings goes into furnishings and a larger emergency fund? What would happen if you lost your job?
Not questions you need to answer for us but ones to ask yourself! I recommend you run down all the numbers you're thinking with at least one homeowner a little ahead of where you are (preferably one who owns or owned a condo) so she can tell you if you're being unrealistic.
I paid off my student loan first, which definitely helped my credit rating and enabled me to get a better loan rate for my two bedroom co-op apartment.
Unlike you, though, I bought into a co-op, not a condo, so there was a smaller pool of lenders to choose from, since co-op apartments pretty much exist only in the NY area and require a special kind of loan. I wanted to make my credit rating as attractive as possible.
The situation was slightly different in that I already had my own apartment, at an enviable rent that hardly changed for nine years, since my landlady wanted to keep a "nice girl" living upstairs. The savings on rent, and paying off my loan, really helped me sock away cash toward the down payment. I was able to pay 75% cash for my apartment (the co-op wanted at least 50% in cash).
Saving reminds me of losing weight ... both require patience in the face of incremental gains (or losses) and a focus on the long term over the short term, the same. For this reason, no matter whether it's a buyer's market or not, I do see you becoming a homeowner, and sooner, rather than later.
I did not even think of this!!! Something I will definitely consider...or maybe a roommate! I can buy the condo and get a roommate and charge them rent.
I know the rental market is pretty hot right now around here regardless, what with Sandy having displaced a lot of people.
If you do this I HIGHLY recommend getting a management company to handle the rent stuff, doing this can prevent the renter knowing you are the owner and hassling you over things, they will assume you are just another renter. The management company also knows how to properly (and legally!) handle things like lease contracts, deposits, damage charges and repayment, etc.
I am not sure what they charge, maybe a percent of the rent every month? But I know in the end it can be worth it. My grandparents did this for a number of properties they had before they sold them and I know it saved them sooooo many headaches over the years.
You also need to consider what your interest rate is on your student loans, what the interest rate is on the mortgage, and then a wide range of appreciation/depreciation situations in your area. Like what if condo prices go up in a year? Then maybe it would have been better to buy now. What if they go down? What if they go down and mortgage rates go up? I would sort of work this all out and estimate your net worth/long term debt based on different scenarios and see which one makes sense to your level of comfort/risk.
I'd say pay off the loan first. Paying it off early will save you so much in interest. It will be one less thing to worry about and will help your credit rating. A condo will probably involve a monthly fee for a whole list of things. And home ownership is always more expensive than you think. It will be great if you don't have a monthly student loan payment hanging over your head too.
I am Canadian, so not sure how helpful it would be...
I bought my first condo despite having to pay my student loans. My loan payments were something like $100/month. And the interest from them were tax-deductible. I could've paid off the loans a long time ago but didn't see the point. I bought my condo and three years later, my student loans were paid out. What are your student loan payments?
How much longer would it take you to pay off your loans should you purchase a condo?
I'll also say this. Once I moved out from my parents', I lost the weight SO FAST.
Buy my own place or pay off my student loans?
