Can I afford a $1 million dollar house? (PMI, banks, deductible)
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Your logic makes no sense there, chief. Prop 13 is great for EXISTING property taxes. OP would be paying 2016 taxes, which are insane. On a million dollar home, you're looking at well over $10k/year in taxes. This is on top of the ridiculous sales and income tax this state charges. Sure, in some states like New Hampshire, that number would be $20k, but NH doesn't have a sales tax or income tax.
Remember that with Prop 13, new residents are pulling up the slack for the residents who have been living there for 20 years. It actually makes taxes for OP worse.
If you're already stretching 40%, another ~$1000/month just for property tax isn't going to help you, at all.
Also, it has nothing to do with "Irvine paycheck" and everything to do with percentage of income. You could be living in Belmont, Louisiana making $20k/year and would be an idiot if you bought a $150k house.
40% is too much. If you do that, you're an idiot. Period.
Dude. Prop 13 is still protecting that million dollar home. The reason you're paying 10k in taxes is because you bought a million dollar house which the tax is based on. You wanna see high taxes? Go buy a million dollar home in Texas. The tax and the recurring annual tax is based on purchase price in California and it can only go up as much as Prop 13 dictates (there are some exceptions Mello russe special assessment etc)
For example my current property I'm paying 3k a year in taxes. On my new property I'll be paying about 6k a year in taxes. Why? Because the new property was purchased for a higher price. But in 20 years someone is gonna complain about how my (current) house taxes are too low and they are picking up the slack. Whah whah whah
I do agree with you on the million dollar purchase not being a good idea. There are PLENTY of cities that are safe good schools and houses don't cost 1 million dollars. But it's his money. I think calling people idiot will get you a visit from a Mod. Go easy on name calling
Last edited by Electrician4you; 05-08-2016 at 09:15 PM..
Your logic makes no sense there, chief. Prop 13 is great for EXISTING property taxes. OP would be paying 2016 taxes, which are insane. On a million dollar home, you're looking at well over $10k/year in taxes. This is on top of the ridiculous sales and income tax this state charges. Sure, in some states like New Hampshire, that number would be $20k, but NH doesn't have a sales tax or income tax.
Remember that with Prop 13, new residents are pulling up the slack for the residents who have been living there for 20 years. It actually makes taxes for OP worse.
If you're already stretching 40%, another ~$1000/month just for property tax isn't going to help you, at all.
Also, it has nothing to do with "Irvine paycheck" and everything to do with percentage of income. You could be living in Belmont, Louisiana making $20k/year and would be an idiot if you bought a $150k house.
40% is too much. If you do that, you're an idiot. Period.
I don't think 1% of property value is insane. In Illinois you'd pay 2%; same in NH or MA.
I think the 40% is PITI where the "T" is for taxes. If not, I am misunderstanding the OP.
The percentage is risky. I have no information about the OP's IQ but it needs to be below 60 to be an idiot.
My point about the Irvine paycheck is that the sky's the limit if you are an upwardly mobile professional in an area that has opportunity. If he's making $200K, he might be able to walk across the street and get a job with a competing firm for $400K. I should know, I did it once and was set for life. Try doing that in Manteca - "Would you like fries with that?"
Here is my situation. Looking at a house in orange county,CA.
The house is about $1 million. We can put half down, which leaves us with a $500K mortgage.
Our gross annual household income is $200K. After 10% contribution to 401K, 40% of our net income will be taken by mortgage, property taxes, HOA, home owners insurance.
Other factors, we have no other debt and have 2 young children. We live within our means and live a comfortable life style. We don't over spend nor do we penny pinch everything.
So is 40% housing expense against net income too much?
How about the risk of loss? Are you purchasing a home burdened by an HOA? If so, do you really want to give the HOA the $500,000 in equity in your home as security for whatever debt the HOA management company gins up? The primary defense in HOA properties is having your house burdened by a mortgage. The HOA has a perpetual security interest in the property. But be real clear that by putting $500,000 into the house, you just gave the HOA $500,000 of your equity as security for any debt the HOA corp chooses to incur and any amounts the HOA management company claims you will owe so long as you own that house.
Wow, in Columbus, OH, we pay nearly 3% in property value in taxes. A $1M home here would run you $25K-$30k a year on property taxes. I know we have excellent schools, but its expensive. I chuckle at people who think $10k a year in taxes is high for a $1M home.
Wow, in Columbus, OH, we pay nearly 3% in property value in taxes. A $1M home here would run you $25K-$30k a year on property taxes. I know we have excellent schools, but its expensive. I chuckle at people who think $10k a year in taxes is high for a $1M home.
My California city is about 1.7% and my friends 5 minutes away in the country are 1.15... so city living comes with a 50% premium AND the county schools are better
Wasn't directing "idiot" at anyone in particular. Just expressing my opinion that anyone that does that is an idiot.
A 15 year loan is a different story. You could always refinance and boom, that 40% becomes 30% or even less.
I should clarify: Anyone who takes a traditional 30-year loan at 40% of both incomes is playing with fire.
Sorry man I misread your post. It just read as if it was direct to OP. I do agree that 40% is way too much and it's on the tight side of the edge in a lot of cases but it really depends on the person. As for refinancing it's not that simple. Depending on rates or home values at the time you may not be able to refinance.
Right now people have gotten used to low rates. Unless rates drop to 1-2% where are you going to refi to?
I just bought a house at 30/3.6%. It's laughably low. The payment is very affordable. I have another deduction and tax write off. In fact the payment allows me to pay extra thus shortening my loan length. But if I need the money for something else I can just make my normal payment.
I'm not sure where you're gettting 40%. 200K should net around 11K a month. I don't see how a 500K mortgage is working out to ~4.4K per month. Even then, you'd still have over 6K to live off of.
I'm not sure where you're gettting 40%. 200K should net around 11K a month. I don't see how a 500K mortgage is working out to ~4.4K per month. Even then, you'd still have over 6K to live off of.
OP was referring to 40% of NET income. After taxes, after retirement savings, etc.
OP was referring to 40% of NET income. After taxes, after retirement savings, etc.
I'm aware of that.
That's why I put net in my post.
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