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Originally Posted by Robin
I guess the risk in this situation is that if the economy in general hits a serious general speed bump, and this drives home prices down and interest rates up, you don't have the option of 'riding out the storm' along with people that have a long term fixed rate. And to complicate things a bit more, if the market looks like it is even heading that way, we could get a glut of houses on the market all at once, from people in your situation, and that could also drive prices down.
I certainly don't look forward to economic disaster for this country, but as the kind of fool who didn't crunch the numbers in the first place, who was an ignorant first-time home buyer, we have a 30-year fixed in a home that we are definitely going to sell LONG before 30 years are up (it was only a $75k loan, so the cost of our error isn't too deadly), we will be in a good position to pick up a 2nd home for cheap if the market ever goes belly up.
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We couldn't ride out the market even if we wanted to. We are only here for three years. Buying a house on a 3 year plan isn't the most risky investment but we know there is some risk involved.
The way I see it... Living somewhere costs money. I can pay rent for the 3 years or interest on a mortgage for three years. The way I've done the math the interest comes out cheaper and I get to deduct it from my taxes.
Ergo... Even if I only break even on the house it was still cheaper than renting.
Even if we take a hit when we sell the house, the hit would have to be fairly substantial to overcome the benefit of having the home vs. renting.