8/08/2005

Advice from Nashville's leading Financial Aid Advisor Dave Ramsey

 
Dave Says
By Dave Ramsey
Author of:
Financial Peace and
The Total Money Makeover

"Couple can not agree on when to buy the house!"

Dear Dave,

My husband and I have no credit cards and no debt, except for our current mortgage. We’re thinking of buying a bigger house. We have a small three bedroom house and we have two kids. We know we should put 20% down and get a 15 year mortgage. Our goal is to have the mortgage paid off by the time our first child, who is three-years-old right now, gets to college.

Our difference of opinion is on when we should buy the house. We don’t have the 20% down payment yet. I think we should sell our current house when we get to 20% equity and use that money for the down payment on the next house. My husband thinks we should pay off this house completely and then save up the difference for the next house.

Katie in Huntsville, AL



Dear Katie,

I’ve got two answers for you. First, I always answer questions by telling you what Dave and Sharon Ramsey would do in your situation. We don’t borrow money, so we would pay off the current house and have enough cash saved up above the amount the old house sells for to pay cash for a new house.

Answer two is that, while I believe in the 100% down payment plan on houses, I just can’t convince most people to take that route. So, mortgages are the one form of debt I don’t beat people up about – as long as they’re making a 20% down payment and the mortgage is a 15-year or less fixed-rate mortgage.

It sounds like your plan is the second answer I gave and his is the first answer. I would recommend you find some middle ground. Maybe get a seven-year mortgage with a bigger down payment. Find something in-between your two opinions that you can both agree on and be happy with. You’ve done a good job and you’re going to be okay with either plan or something in-between.

- Dave

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