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I feel like that's a lot of money in your house for your income and assets. If you increase the down payment to the point where you can afford the payments, you might end up house poor.
FWIW, when you apply the proceeds from the sale of your home toward the principle of the new home, it will not lower your monthly mortgage amount. To lower the monthly payment, you'd have to refinance the loan at the lower amount. Otherwise, you'd pay it off sooner but it wouldn't lower your monthly amount due.
I pay extra toward to my mortgage and car payment each month. They will be paid off sooner than scheduled but it doesn't change the amounts due each month.
Talk to your loan officer to see what your options and the costs are for refinancing/recasting (once you have the proceeds) soon after closing on the new loan.
Yes, my lender does allow recasting, with no waiti g period as someone suggested might be the case. So my payments after the reduction in principle will be around 2300. Add the 2.1k a month in other expenses, that still leaves me with about 3100 in cash at the end of the month. Most likely to invest back in the market. None of this accounts for the roughly 1700 a month I'm already saving in my 401k with a 120% match.
you seem to have a lot of retirement assets compared to non-retirement assets.
i hope you dont plan on doing much work to the new house. for the 2 years after buying my new house, my expenses skyrocketed. they have settled down the last 11 months but there is still a pool, exterior renovation, basement renovation on the horizon. home ownership can be very expensive, less if you avoid doing renovations/improvements.
also, moving to a better school district is very important. you should have done that already.
I concur with you...
But That's the thing....this home is perfect inside and out. Model home. All bathrooms recently custom redone at about 50k cost. Sellers also including home insurance for a year.
Yes, my lender does allow recasting, with no waiti g period as someone suggested might be the case. So my payments after the reduction in principle will be around 2300. Add the 2.1k a month in other expenses, that still leaves me with about 3100 in cash at the end of the month. Most likely to invest back in the market. None of this accounts for the roughly 1700 a month I'm already saving in my 401k with a 120% match.
Are you putting money into the 401K beyond what gets matched?
If so, I'd consider temporarily reducing your contribution so that it's still enough to get the match but not above that, at least until the current house sells and you get the mortgage recast and lower the payments. I wouldn't say that as a long term thing, but for a few months? You aren't going to lose that much ground in terms of retirement savings with the benefit of a bit more peace of mind over the next few months because there are always some extra costs that come along with a move. And then you'll have the smaller mortgage and can bump up the savings again.
I will add that in general terms, I think a lot of people on CD can be (IMO) overly focused on retirement savings at the expense of a good standard of living now. Yes, you can raise 3 kids in a smaller house if you had to. You can even send them to crappier schools. But you don't have to if you have the money to make that choice work, and it's ok to make that decision too. Maybe you work a few years longer, maybe you end up scaling down on something else later on, or maybe you are young enough as it is that it all works out fine anyway. But you only have one lifetime with your kids when they are young, and there's nothing wrong with wanting to raise them in a house that suits your family and the way you want to live, in a nice area and all that. People love to say that no one looks back on their deathbed and says gee, I wish I had worked more. But I also think no one looks back and says gee, I wish I had kept my family in that cramped house with the lousy schools.
Since you asked the question, I guess yourself are questioning the wisdom of purchasing the expensive house.
Yes, you can financially afford the house based on your assets. I am really amazed by how you accumulated the money despite a relatively average income.
However, a lot comes with a million dollar house. Landscape, utility and social pressure, etc.
Although a better education sys is very important, is there any alternative in between? The dream house sounds like a lot of extras that may not be needed. Would you find an older house in the same neighborhood that comes with similar square footage and in decent shape that fits your need? If you can save $20-40K on down payment, that should be sufficient to cover unexpected repairs.
By my experience, a good public school is not the final answer. We ended up paying a lot of extra for tutoring as I am not happy with the math curriculum. Neither is a dream house. Financial stability, family, travels and enrichment programs do.
Good luck,
You will be happy either way.
PS: if you are on track to increase your income dramatically or have a pension, forget all my suggestions above.
Are you putting money into the 401K beyond what gets matched?
If so, I'd consider temporarily reducing your contribution so that it's still enough to get the match but not above that, at least until the current house sells and you get the mortgage recast and lower the payments. I wouldn't say that as a long term thing, but for a few months? You aren't going to lose that much ground in terms of retirement savings with the benefit of a bit more peace of mind over the next few months because there are always some extra costs that come along with a move. And then you'll have the smaller mortgage and can bump up the savings again.
I will add that in general terms, I think a lot of people on CD can be (IMO) overly focused on retirement savings at the expense of a good standard of living now. Yes, you can raise 3 kids in a smaller house if you had to. You can even send them to crappier schools. But you don't have to if you have the money to make that choice work, and it's ok to make that decision too. Maybe you work a few years longer, maybe you end up scaling down on something else later on, or maybe you are young enough as it is that it all works out fine anyway. But you only have one lifetime with your kids when they are young, and there's nothing wrong with wanting to raise them in a house that suits your family and the way you want to live, in a nice area and all that. People love to say that no one looks back on their deathbed and says gee, I wish I had worked more. But I also think no one looks back and says gee, I wish I had kept my family in that cramped house with the lousy schools.
Thank you for taking the time.
So that would be a last resort action of course. My company's match is a bit 'unheard of' for lack of better word. They match 12% for the first 10% that i put in. So i'm maxing at 18500 and they're adding an additional ~18k (12% of my salary). would hate to lose that match, but you're right....it's an option.
Good points on your reply. i appreciate it.
Quote:
Originally Posted by fzx
Since you asked the question, I guess yourself are questioning the wisdom of purchasing the expensive house.
Yes, you can financially afford the house based on your assets. I am really amazed by how you accumulated the money despite a relatively average income.
However, a lot comes with a million dollar house. Landscape, utility and social pressure, etc.
Although a better education sys is very important, is there any alternative in between? The dream house sounds like a lot of extras that may not be needed. Would you find an older house in the same neighborhood that comes with similar square footage and in decent shape that fits your need? If you can save $20-40K on down payment, that should be sufficient to cover unexpected repairs.
By my experience, a good public school is not the final answer. We ended up paying a lot of extra for tutoring as I am not happy with the math curriculum. Neither is a dream house. Financial stability, family, travels and enrichment programs do.
Good luck,
You will be happy either way.
PS: if you are on track to increase your income dramatically or have a pension, forget all my suggestions above.
I'm absolutely questioning the wisdom of purchasing a new/bigger/more expensive home. Brain is stopping me from going through with it. I'm even contemplating leaving the 10k deposit on the table at the last minute, if i prove to myself that it's the wrong decision. hell, that's just 2 months of excess savings for my current savings rate. i'd much rather lose 10k that make a HUGE mistake. but 10 minutes after i decide it's the wrong decision, i start making sense as to why it's a good choice (much better home, better schools at least on paper and scores, more room, etc. etc.) and the cycle keeps repeating....ugh
I'm 38 so i guess we do have some time based on what you said; i've saved what i've saved (NW 1.72M) by being frugal and aggressively maxing out my 401k/IRAs and saving instead of wasting whenever possible. i also have invested in good companies like Apple/Cost/NVDA/Tesla/etc which thankfully have done well.
You're right about bigger expenses with a bigger home. some of which i've accounted for. some of which i plan on mitigating by doing the work myself (landscaping, etc.)
There aren't cheaper homes that are nearly as nice as this home. a 800k home will be decent, but this home would be above and beyond quality wise.
A problem is that i don't expect my salary to go up significantly....but my job is pretty safe hopefully. So i don't think our situation will get a whole lot "better" financially once we move in and settle......unless my wife gets a part time job once the kids are in school. who knows.
If your new house purchase requires a large down payment funded by taxable investment sales, additional dollars plus a recast and possible reduction of retirement savings rate you are over buying by a long shot.
Add in the op is in a single earner hh with 3 kids it’s an ever more dangerous scenario
If your new house purchase requires a large down payment funded by taxable investment sales, additional dollars plus a recast and possible reduction of retirement savings rate you are over buying by a long shot.
Add in the op is in a single earner hh with 3 kids it’s an ever more dangerous scenario
You forgot to mention the small detail of selling a fully paid off house worth over half the value of the new home.
Seriously, come on.. it's not what YOU would do, but he's put A LOT of consideration into this and has the numbers to demonstrate what will happen.
He'll end up with a mortgage principal that is just over his annual income and even you'll have to admit that's not typical.
OP has a long track record of being cautious. He'll be fine.
How do I know this? Because I did all of the above except for the loan recast. Maybe I didn't buy a million dollar home, but then again, I wasn't selling a half a million dollar home either. And I bet my interest rate is higher too.
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