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goi_cuon asked this question 3 years, 7 months ago:

Current climate for buying

Given enforcement of the five year rule and the drop of the Euro against the dollar is anyone still buying houses here?

Can it still be worthwhile or is it just too risky?

I met someone recently who told me that his mortgage pretty much rolled up all of the normal out of pocket expenses into the mortgage and it wasn't hard to qualify using his GS level and TSP for collateral.



3 years, 7 months ago

Just my personal opinion, but I would not do it. Not until the roller coaster ride calms down.

Here is a story I read the other day...

http://www.telegraph.co.uk/finance/economics/11626969/Greece-to-miss-IMF-payments-amid-fears-of-catastrophic-eurozone-rupture.html

Of course, this would mean you would need less Dollars to buy Euro, which is nice. The problem is, everything seems to be a giant question mark. I love gambling, but only when I know what my losses will be before I start.

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3 years, 7 months ago

You are in a unique situation. You are either going to use your lqa to buy a house or rent a house.

Regardless of the exchange rate and the market you are still going to get LQA - you can either invest that in yourself by gaining equity or invest it for your landlord who will gladly let you pay for his equity.

As far as risk is concerned....what risk are you talking about? Personal risk or the risk of not being able to pay for your house? Even after you leave someone will rent it the next day if it's in a desirable location.

The Euro has been losing strength against the dollar, but it's hardly been a roller coaster ride.

3 years, 7 months ago

Quote by Bergman:
.... The Euro has been losing strength against the dollar, but it's hardly been a roller coaster ride.


In the past 45 days, it has been as low as $1.03 and as high as $1.14. Considering that the movement is usually less than a penny at a time, that is some big movement. I have been watching it very closely, along with a friend, because I am ready to pounce on a cheap exchange rate. I did manage to grab 500€ at $1.05.

3 years, 7 months ago

Quote by JOFTAA:
In the past 45 days, it has been as low as $1.03 and as high as $1.14. Considering that the movement is usually less than a penny at a time, that is some big movement. I have been watching it very closely, along with a friend, because I am ready to pounce on a cheap exchange rate. I did manage to grab 500€ at $1.05.


Regardless, buying a house on lqa will still put you in a place to walk away with 6 figures in equity in a very short time.

3 years, 7 months ago

Quote by Bergman:
Regardless, buying a house on lqa will still put you in a place to walk away with 6 figures in equity in a very short time.


Sure. I just didn't see where this was the case. What happens when goi_cuon is no longer in Germany, and has a lot of years left to pay on the mortgage without the LQA? Not sure how all of that works.

3 years, 7 months ago

Quote by JOFTAA:
Sure. I just didn't see where this was the case. What happens when goi_cuon is no longer in Germany, and has a lot of years left to pay on the mortgage without the LQA? Not sure how all of that works.


Depends on the loan, terms and the property. After someone leaves they can sell or rent out their property.

You can either pay 2500 Euro rent a month or 2500 Euro and build equity you can cash out later. Exchange rates won't play a role...the Euro costs to rent or own are still going to be there.

3 years, 7 months ago

But if I buy while the Euro is low against the dollar, what happens when the Euro goes up again?

If I bought a 300,000 euro house today at $1.10, that's $328,651. My LQA then goes to 1/10th of that per year - $32,865 per year or $2,738 per month (I know, it's paid over 26 pay periods per year but nevertheless).

Today that $2738 is 2499 euro. Assuming 2500 is the house payment, when the euro goes back to $1.3, then my payment in dollars is $3250. I could absorb that $500 per month, but I can see how it could balloon beyond the ability to cope.

I really appreciate the feedback. Knowing more about how it all works is helpful for making a realistic risk assessment.

I met someone recently who bought his house through Volksbank in Kaiserslautern. He said that he spent fairly little up front and the bank counted his TSP as collateral for the loan.

3 years, 7 months ago

Quote by goi_cuon:
But if I buy while the Euro is low against the dollar, what happens when the Euro goes up again?

If I bought a 300,000 euro house today at $1.10, that's $328,651. My LQA then goes to 1/10th of that per year - $32,865 per year or $2,738 per month (I know, it's paid over 26 pay periods per year but nevertheless).

Today that $2738 is 2499 euro. Assuming 2500 is the house payment, when the euro goes back to $1.3, then my payment in dollars is $3250. I could absorb that $500 per month, but I can see how it could balloon beyond the ability to cope.

I really appreciate the feedback. Knowing more about how it all works is helpful for making a realistic risk assessment.


I met someone recently who bought his house through Volksbank in Kaiserslautern. He said that he spent fairly little up front and the bank counted his TSP as collateral for the loan.


That's the "risky" part. The swing in the exchange rate, but it's hardly a reason not to leverage your LQA and profit from it. If you accept the risk and are okay using your base pay to cover your payment then you still come out ahead.

The TSP comment....you actually have to take a TSP residential loan that the bank holds. You could play the exchange game there as well. Moving your tsp back and forth...you could gain or lose there. If you can pay your tsp back in USD from your pay then you can leave the Euro alone and when the money is released you can use it to cover the house. Then you only exchange money once.

3 years, 7 months ago

I am a DoD Civilian and just bought a house here, just moved in two weeks ago. I lived here from 2007-2012 and paid 2,000 Euro a month to a landlord and always kicked myself for not buying. This time around I set my mind to buying and I'm so happy I did.

I receive approximately 500 dollars extra LQA per month than my current mortgage payment currently is, this I hope will help cover fluctuating costs in the Euro. My loan allows me to apply the extra money to it if I choose with no penalty or I can pocket the difference. But even if I end up having to pay 500 more out of pocket each month it's worth it.

I paid the 7% closing costs (no realtor) out of pocket and the interest rates are unbelievable, mine is 1.9%, to me it seemed like a great time to buy. And I know if I have to leave even in 3 years that I can rent the place to cover my mortgage easily.

I highly recommend buying and there are plenty of banks in the area still willing to loan to Americans. If you have any questions about the process of buying let me know, it's really simple and painless.

3 years, 7 months ago

Quote by Bergman:

The TSP comment....you actually have to take a TSP residential loan that the bank holds. You could play the exchange game there as well. Moving your tsp back and forth...you could gain or lose there. If you can pay your tsp back in USD from your pay then you can leave the Euro alone and when the money is released you can use it to cover the house. Then you only exchange money once.


From what he said he did not withdraw his TSP. I think maybe they looked at the TSP as a measure of credit worthiness and maybe he was in error saying it was used as collateral.

3 years, 7 months ago

Quote by goi_cuon:
From what he said he did not withdraw his TSP. I think maybe they looked at the TSP as a measure of credit worthiness and maybe he was in error saying it was used as collateral.


I had the same option but didn't use it becuase I would have had to take the TSP residential loan, give it to the bank as a security deposit and then start paying back the tsp loan. Once enough equity is built up in the house you can ask for the TSP security deposit to be released. Then you can pay back the TSP loan you took in full. The point is the bank is looking to secure their loan and without having you give them the money from tsp they have no way of getting the money and as such it's not reducing their risk.

3 years, 7 months ago

Collateral issues never came up in my loan, but I didn't have to make any down payment either. I did show them a copy of my US Credit Report and all my account balances to establish credit worthiness, however I didn't feel like they really cared to see this. Most banks will make you take out a life insurance policy to cover the amount of the mortgage if something were to happen to you.

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