Shakira Pollard is a neighbor and friend of mine, who’s also a financial representative with a practice at Northwestern Mutual. With 2016 nearing a close, I wanted to pick her brain on the questions I hear most from clients and people out and about that I talk with. Here are her responses.
Is buying better than renting?
This is a great question, and to keep it simple there’s no hard and fast rule. A person’s choice depends on personal circumstances, access to capital and the time horizon for living in the home. In essence, one is not universally better than the other, but there are pros and cons to each choice. Check this link for a useful guide from Shakira’s firm.
I have student loans. Should l pay them off or buy a house first if I can swing it?
Again, this depends on circumstances. Here’s an example of how I recently assisted a client with a similar situation:I met with a newly married couple. The husband is a practicing physician who just completed his fellowship and the wife is a law student. Their major objectives are to strategically pay down student loans from medical school and also save for a home together. They would like to purchase a home around $500k and would like to have 20% of the purchase price saved. My recommendation to this couple was to continue to attack the student loan debt with aggressive payments while continuing to set aside funds for the home purchase. However, I also instructed them not to become distracted by the goal of saving 20% of the purchase price lest they miss an opportunity to purchase in a low interest environment. In summary, continue to pay student loans but don’t forgo an opportunity to purchase if for the sake of aggressively paying student loans.
Is it a good idea to use my retirement for a down payment?
I don’t think this is a question that can be answered in a vacuum. More information is needed to assess the person’s financial situation before my team could be comfortable making any recommendations. For example, an early careerist, mid-career professional, or pre-retirement professional would have different considerations. This could potentially be a very viable option to assist a newly married young professional couple with being homebuyers. On the flip side, a mid-career professional who has accumulated equity in the form of “cash value” through a permanent life insurance policy can access the equity in the policy for a downpayment.
So while there are not hard and fast rules, one thing is certain: Professionals such as Shakira and myself like to help out when you have questions. Even if you’re using us for information, it gives us a chance to foster a relationship and gain your trust and hopefully work with you or one of your friends one day. Contact me if you’d like to talk, or if you’d like an intro to Shakira.