Hello! I'm going into my last year of grad school. I've been working full time and paying my way through up to this point. However I'm considering taking out a loan at 5.8% and paying that way instead of paying cash out of pocket. My thought is with using the loan I could stockpile more cash quicker in order to put a downpayment on a home when I find one. Thoughts? Thank you!
@James Fraundorf Is this a home for you to live in or rent out? What are your plans once you finish grad school?
@Theresa Harris thanks for replying! I live in Seattle right now so the odds of me finding a house hack are basically none...so I’m looking at cheaper properties for investment purposes in the Midwest where I have family.
@James Fraundorf Hopefully there are plenty of jobs related to your degree in that area (I'm sure there are). If it's the case that you will have to move before buying a house, I'd work on saving as much as you can right now. Finishing your thesis often takes longer than you think.
@James Fraundorf This is a question of opportunity cost and risk tolerance. A loan at 5.8% is cheap by historical standards for secondary education but really this really boils down to you and your level of risk tolerance and expected returns on your investment.
So unfortunately, because we do not know you the best most will be able to say is that you need to determine the following: 1.) How confident are you that you will be able to generate a return higher than your cost of capital & 2.) Second what level of losses are you willing and able to to accept.
Best of luck,