A 10% down-payment on a $500,000, 2 bedroom condo is $50,000. Saving that much would require putting away $1041 a month for 4 years. 4 years away feels like a very long time.
But in 4 years I’ll only be 31. My 31 year old self would probably want to take my 27 year old self out for a beer and thank me profusely if he looked at his savings account balance and found $50,000. Of course, between then and now, there’ll probably be a lot of plane tickets and other
unplanned spontaneous large expenses to account for. So saving $50,000 might take a little longer.
In 4 years Stephanie and I will have paid around $72,000 in rent. In 4 years I don’t know what “beginner” condos will cost in the city, I don’t know where we’ll be living or where (or if) we’d want to buy, and I don’t know where Stephanie or I will be working. So I probably shouldn’t be envisioning a condo in San Francisco, but rather one in the next place we live.
Wherever that is, a $450,000 30 year 6.3% fixed rate mortgage costs $2785/month, or $1200 more than we currently pay in rent. One hopes that in 4 years we could comfortably afford that. The funny thing is that $2785×12×30 = $1,002,600. It costs $552,600 in interest payments over 30 years to borrow 450,000. Wow, that is striking.
Things that would be worth paying $1200 more each month for: covered parking for 2 Vespas and/or a Smart Fortwo (or other city car). A washer and dryer in the apartment. A second bedroom. An outdoor space or balcony with room for a grill.