In an episode of the podcast “Women and Money,” a 47-year-old caller asked Suze Orman if it’s too late for her to buy a home. Orman provided sound advice but ultimately told the caller, “It’s not enough” right now.
Nicole, a single 47-year-old, is ready to stop renting and wants to own a home. She lives on Staten Island, where the average home price is $700,000. Nicole earns $195,000 annually and has about $200,000 in liquid savings, $1 million in retirement savings, and $30,000 in a non-retirement investment which she doesn’t plan on touching for a while.
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“I’m beginning to wonder if I should rent for the next few years, keep my fixed expenses low, then buy a home in a lower-cost state,” Nicole told Orman. “The big issue for me is that this would require I move away from my mom who’s 75 and my entire family. I don’t really want to do that nor do I want to take on an overpriced 30-year mortgage at the age of 47 when I don’t plan to be in the same job for 30 more years.”
Orman told Nicole, “I think you’ve answered your own question. Believe it or not.” She then expressed a core philosophy of her show, which is “people first, then money.” Orman told Nicole that if she wants to be near her mom and family and can’t afford to buy in Staten Island, she can always buy something later.
“If I were you,” Orman said, “I would not be buying a home right now in your particular situation. I would wait to see what happens with your job.”
Another point Orman emphasized is that you never know what will happen. You could buy a home and get locked into a large mortgage payment. Then, maybe you get sick, get in a car accident, or lose your job, and you’re stuck with a huge mortgage, property taxes, home insurance, the whole gamut, without the money to pay for it.
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“Now I get you to have a good amount in liquid savings,” Orman states. “But if you’re gonna buy a $700,000 home, you’re gonna have to put at least $70,000 to $140,000 as a down payment … that then only leaves you $60,000 in savings, which isn’t very much of an emergency fund.”
Orman continued to tally Nicole’s remaining savings, which would be about $90,000 with her non-retirement investment, and ultimately said, “It’s not enough.” She recommended continuing to rent for the next few years and keeping expenses as low as possible.
“Then when you do decide either you have enough money to buy a home or you wanna move to another lower cost state for your own retirement, then you’ll be able to buy one outright.”
It’s not easy to decide when and where to buy a home, particularly with the current state of the housing market. Maybe you’re in a situation like Nicole’s, torn between purchasing an affordable home or staying near family. Or perhaps you’re contemplating rental real estate as a retirement investment opportunity.
Whatever your situation, and as sound as Suze Orman’s advice may be, consider consulting a financial advisor to help you outline your assets and make the best decision for your future.
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This article Suze Orman Tells 47-Year-Old Caller: $200K Savings ‘Not Enough’ To Buy A House originally appeared on Benzinga.com
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Source: finance.yahoo.com