3.3 vs 5 years = $0 vs $10,000

**dawnwes** · 02-10-2015, 07:33 PM

Ok, first of all, you are not throwing any money down the toilet! You are paying for a place to LIVE for the time being. In fact, you may pay more than $700 in interest every month anyway.

Second of all, there are too many questions for an opinion at this time. Here are MY questions:

1. How much more will you make after you earn this degree?
2. Is there potential to move physically after you have finished the degree?
3. Is there any cheaper place to get the degree?
4. Could you get an apartment for $900-$100 and get a 2 bedroom and split the rent, making your payment go down by potentially $250/mo?
5. Do you have any money at all saved up right now to put towards a downpayment?

**corn18** · 02-11-2015, 04:39 AM

2 separate issues.

1. 3.3 vs. 5: What are the employer's conditions for paying for your masters? I ask because my company requires a retention period after paying for all or part of a masters. Is there a difference in their requirements if they pay 75% or 100%? This will help determine that choice.

2. Rent vs buy: buying a house for 3.3 or 5 years will not result in building much equity. So what is your goal? If you don't want to waste $700 / month on rent, then getting a mortgage that is mostly interest won't be any better.

3.3 years
$27,720 Rent ($700 / month)

Buy $200,000 home with 20% down, 30 years, 3.5%
$10,000 Principal
$20,000 Interest
$1,584 Insurance
$3,960 Real Estate Taxes
$6,600 Maintenance (1% of value of home annually)
-$3,000 tax break (assumed 15% tax bracket and itemize)
$29,144 sunk cost (assumes you can sell and get your principal back)

5 years
$42,000 Rent ($700 / month)

Buy $200,000 home with 20% down, 30 years, 3.5%
$15,600 Principal
$30,000 Interest
$2,400 Insurance
$6,000 Real Estate Taxes
$10,000 Maintenance (1% of value of home)
-$4,500 tax break (assumed 15% tax bracket and itemize)
$43,900 sunk cost (assumes you can sell and get your principal back)

So unless you want to bank on your house value going up, then buying a house is no more throwing money away than renting. At least when you only own it for 3.3 or 5 years. You could go for a 15 year mortgage to reduce the interest and increase the principal paid and that would make buying more attractive but the payments might kill your cash flow. Roommates could help this.

In either case, getting a roommate(s) helps defer the sunk costs equally. The good thing about renting is you have the flexibility to change easily. The good thing about buying is that the house may go up in value (but it could go down).

Tom

**snafu** · 02-11-2015, 05:43 AM

not yet mentioned on home ownership...the amount of time and work devoted to home ownership costs over and above the cost of materials. The time and effort it takes to acquire solid room mates who pay on time, don't cause more work, don't make demands etc.

**greenskeeper** · 02-11-2015, 07:58 AM

Do you pay the tuition up front and then get reimbursed by your employer? I would do the 5 year no-cost plan.

**ua_guy** · 02-11-2015, 08:43 AM

Originally posted by dragonslayer View Post

My worry is that owning a house + being a landlord + graduate school + fulltime work is gonna be insane.

Thoughts from the older and wiser crowd?

I'm watching a friend do this exact thing right now. Can't say that I'd have taken the same path. I'd make it as easy as possible and as inexpensive as you can for yourself.

**Goldy** · 02-11-2015, 12:15 PM

Will you be up for a promotion once you get your degree? Grad school takes up a lot of your time and pretty soon you will want that free time back. That's one of the reasons I would recommend the short path.

**dragonslayer** · 02-11-2015, 03:26 PM

Originally posted by dawnwes View Post

Ok, first of all, you are not throwing any money down the toilet! You are paying for a place to LIVE for the time being. In fact, you may pay more than $700 in interest every month anyway.

Second of all, there are too many questions for an opinion at this time. Here are MY questions:

1. How much more will you make after you earn this degree?
2. Is there potential to move physically after you have finished the degree?
3. Is there any cheaper place to get the degree?
4. Could you get an apartment for $900-$100 and get a 2 bedroom and split the rent, making your payment go down by potentially $250/mo?
5. Do you have any money at all saved up right now to put towards a downpayment?

1. 7-9k/year If I move to a different company
2. Yes
3. Yes, my employer will sponsor 100% cost of a different program but the university I am enrolled in has specific courses I wish to take
4. yes. However, to retain use of a garage, I plan to add a third roommate to the current situation to drop the cost.
5. I have my emergency fund and the amount needed to pay for each semester upfront for one year. Not much for a downpayment.

**dragonslayer** · 02-11-2015, 03:27 PM

Originally posted by greenskeeper View Post

Do you pay the tuition up front and then get reimbursed by your employer? I would do the 5 year no-cost plan.

Yes, pay upfront.

**dragonslayer** · 02-11-2015, 03:28 PM

Originally posted by Goldy View Post

Will you be up for a promotion once you get your degree? Grad school takes up a lot of your time and pretty soon you will want that free time back. That's one of the reasons I would recommend the short path.

Nothing is guaranteed. Motivation for this degree is that long term, its better to have than not.

**dragonslayer** · 02-11-2015, 03:29 PM

Originally posted by ua_guy View Post

I'm watching a friend do this exact thing right now. Can't say that I'd have taken the same path. I'd make it as easy as possible and as inexpensive as you can for yourself.

Ask your friend if he would take the same path?

3.3 vs 5 years = $0 vs $10,000