Save for a house or take out a mortgage?

  • Dave Ramsey

    Dave Ramsey

Dear Dave,

Iím 28, single, and I just became debt-free. In addition, I make $70,000 a year and have the equivalent of six months of expenses set aside for emergencies. Should I save up to pay cash for a house, or is mortgage debt okay? Iíd like to keep the price of a new home between $200,000 and $225,000. Since I currently live in a nice apartment, I think I can save about $20,000 a year. What do you think?

ó Kathryn

Dear Kathryn,

It sounds like youíre in great financial shape. Congratulations on becoming debt-free!

Letís take a look at both scenarios. If you can save $20,000 a year, that means youíre about 10 years away from a nice, paid-for home, and youíre still debt-free. Thatís one option.

At the same time, I donít yell at people for taking out a 15-year, fixed-rate mortgage, where the payments are no more than 25 per cent of their monthly take home pay.

In this situation, you could save like crazy for a couple of years and make a big down payment on a home in the price range youíre talking about.

Then, you could pay off that house in just 15 years.

I honestly donít have a problem with either solution, Kathryn, but think about this. Wouldnít it be great to have your own home, and still be completely debt-free, at 40?

Itís something to think about!

ó Dave

ē Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 13 million listeners each week on 585 radio stations and multiple digital platforms. Follow Dave on the web at and on Twitter at @DaveRamsey

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Published May 19, 2018 at 8:00 am (Updated May 18, 2018 at 7:38 pm)

Save for a house or take out a mortgage?

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