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Wednesday, December 01, 2021

Even though most of you think that college will last a lifetime, at some point you will either have to graduate or drop out because you can’t pay tuition forever. When graduation day comes you will in almost all certainty have a panic attack concerning what you will do with your life. There will be one thing that you won’t have to worry about, that is how to buy a house, because hopefully you can understand what I am about to tell you.

My friend the other day said that she doesn’t want to start real life because she doesn’t know how to pay for things like a house or a phone bill or an electricity bill. Honestly, she just had a hard time realizing that she has to pay for things when she gets older. Although the house was a realistic concern because no one teaches teenagers how loans or finances work, so I’m going to do my best to explain it.

First things first, when you buy a house you make payments and that is called your mortgage. I’m assuming most of you will not make a starting salary that will allow you to buy a $300,000 house cash unless your first job is a drug lord, so in that case you can take a loan from the bank in order to pay the owner of the house so  you can live there.

Instead of paying the previous owner you will now pay the bank, and unless you can find a bank that will let you pay back the exact amount they loaned you at your convenience, you will have to pay an interest rate on the amount you loaned. That interest rate will vary based on your bank and many other factors but it will stay between 3.5 and 5 percent. This basically means that you will pay much more for your house than it is worth.

A common home loan is for 30 years and at a 4 percent interest rate you will almost pay double than the value of your house. The only thing I recommend is that you make the largest down payment that you can, because a larger down payment means a smaller loan and a smaller loan means a lower amount that you have to pay interest on.

Realistically buying a house is about 9 years down the road because the average age of first time home owners is about 30. Hopefully you learned something and if not I apologize for wasting your time with my nonsense.

If you have any questions or comments about houses or generic finances email me at bussj14@ufl.edu.

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