On 27 Jul 2003 16:24:18 -0700, (Warren X) wrote:

Good day,

A friend and I had the following debate when I said that I would one
day like to buy an $800K house, upgrading from my current $200K
condominium apartment, and I would like to hear more opinions on the
matter.

I said that we planned to stay in the condo as long as possible,
putting extra money down on the mortgage.

My friend said that we should move to an intermediate house of, say,
$400K, as it would provide more "financial leverage" that would be
required for the big house.

I argued that selling a home costs a lot of money in real-estate agent
commissions, legal fees, moving fees, renovation costs, etc.

He argued that the value of the houses increases at a rate that more
than compensates for these charges.

This is a possibility, but the market is at a high right now (area:
Toronto, Canada), and could conceivably "correct" in the next few
years once the glut of new homes are bought-up.

I also mentioned that a larger (intermediate) house begets larger P&I
payments, and larger interest payments mean a greater waste of money
that could otherwise have gone towards principal on my current
mortgage.

He then mentioned that the increase in value of property is
proportional to the size of the property (i.e., greater absolute
capital gain on a larger property than on a smaller one), to which I
must agree.

Can anyone offer any thoughts on this?

Thanks
A. Huahua


I tend to agree with your friend tho maybe not for all the same
reasons. Unless you need a larger house, I'd go for the smaller house
now. Your values / needs may change and the savings in the difference
in the extra payments may help pay for them. Also its no guarantee
houses will go up in value; they can go down in value. If you think
of a house as an investment (I don't any longer), I'd rather hedge my
bets and buy the smaller house and spread my money out in other
ventures.


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