Buying a new home at age 50 in a nicer neighborhood

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fmzip
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Buying a new home at age 50 in a nicer neighborhood

Post by fmzip » Wed Aug 10, 2016 10:38 am

So here's where I am at. My wife and I live in our perfect home in a very low income neighborhood. As it was my grandmother's home, my dad made it affordable for me to buy 20 years ago which is why we live here. We never had kids to put through school and we made the home the way we wanted it. Nevertheless, the home has made us happy and served our needs. It's worth about 235K, we owe about 18K on it. We have zero debt other than the mortgage balance which is a 3.5 year heloc @ 3.63%

With turning 50 this year, my wife is 52 and had a breast cancer scare as well (very early stages thankfully), we are seeing that life can be shorter than we think. I'm starting to feel that my super saver tendencies may lead to later disappointment. The neighborhood is continuing to deteriorate and honestly we feel like we deserve a bit more out of life in terms of our surroundings. We earn a very good income and likely could afford a home in the $900K range. I feel it's time to move to a nicer neighborhood and purchase a home in the $400-$450K range. A few things to note, we have no kids to worry about, we plan to spend every red cent before we pass :)

We have approximately $220K in taxable, and $670K in retirement accounts. Currently we save about $80K per year so we feel we are on track to reach our savings goals of $2M with our asset allocation as follows:

Total US Bond Market Index 22%
Hi Yield Corporate Fund 8%
Short Term Inflation Protected 8%
Total US Stock Market Index 37%
Total International Index 19%
REIT Index 6%

Prior to the new home purchase idea, we thought of earlier retirement but have both decided we'd be willing to work to age 62 to enjoy a better home. I feel regardless of this purchase we will still be in very good shape at age 62 even if we were to save $40-50K per year instead of the $80K. That $40-50K is just a lowball estimate, I assume we will save more.

Our plan is to buy the new home without selling the other first. If we sell our existing home ( we may rent it) my mortgage guy said that we could put as low as 10% down and avoid PMI with a 1.4% adder to the loan. We obviously could put down enough to avoid even the adder. If we do sell the home, we do have the option to use the proceeds of the sale towards the mortgage balance, then get a new monthly payment amount without having to refinance. We will likely take out a 30 year term at 3.50% or so and pay it as if it were a 12-15 mortgage. We like the idea of having the flexibility with a lower payment.

So my question is this. Based on our ages, what should we do as far as the down payment and or with the proceeds of the sale of our home? If we were younger, I think its a no brainer to go with a low down payment and invest the rest. Being that we are older, I'm a bit on the fence. I'd like some input from the above 45 crowd please :)

Thanks

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Watty
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by Watty » Wed Aug 10, 2016 10:54 am

Keeping the old home as a rental should probably be taken off the table because;

1) It is in a declining neighborhood.

2) If you sold it now you would likely qualify for a homeowners capital gains tax exemption.

3) You would need to have a larger mortgage on your next house.

4) You would have about a quarter of your net worth tied up in that one property. With your new house about $700K would be in real estate in the same city. That is a diversification problem.
fmzip wrote:o my question is this. Based on our ages, what should we do as far as the down payment and or with the proceeds of the sale of our home? If we were younger, I think its a no brainer to go with a low down payment and invest the rest. Being that we are older, I'm a bit on the fence. I'd like some input from the above 45 crowd please
I retired last year just before I turned 59 and having a paid off home makes my retirement numbers work a lot better so I would suggest putting all the home equity into the new house and having it paid off by the time you want to retire.

Investing the money and getting a higher return will be harder than it sounds if you invest with an asset allocation of anywhere near the old saying "your age in bonds" since about half of your money will be invested in lower paying bond fund that are earning a lower interest rate.

You would also have a large sequence of returns risk. I have posted this example before;
If you do not pay it off then you will have more sequence of returns risk. For example in rough numbers if you just kept a $100K mortgage and also put $100K into a separate investing account which you also paid a $500 a month mortgage out of then;

a) If you get unlucky and get a modest 10% decline in the portfolio the first year then it would be down to $90K
b) You would also need to pay the $500 a month mortgage($6,000) so your portfolio would be down to $84K
c) To break even the next year you would need to gain back the $16K and another $6,000 for the next years mortgage payments which is $22K. That would take a 25.6% return on the remaining $84K just to break even.

Leemiller
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by Leemiller » Wed Aug 10, 2016 11:04 am

Leaving aside your age, why would you keep a home as a rental investment in a deteriorating neigborhood? I'd sell and use the money to pay down the new home to a 15 or 20 year fixed mortgage since you'll get a lower rate than with a 30 year mortgage.

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Toons
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by Toons » Wed Aug 10, 2016 11:17 am

Forget the Rental.,,,
The best laid plans of mice and men,,,,
then life gets in the way.
It is indeed short.
If you both want a new house.
Buy It and Enjoy :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

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jfn111
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by jfn111 » Wed Aug 10, 2016 11:18 am

I agree with selling the house and moving on. Being a landlord in a deteriorating neighborhood is not for the faint of heart. :shock:

joebh
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by joebh » Wed Aug 10, 2016 11:30 am

fmzip wrote:Based on our ages, what should we do as far as the down payment and or with the proceeds of the sale of our home? If we were younger, I think its a no brainer to go with a low down payment and invest the rest. Being that we are older, I'm a bit on the fence. I'd like some input from the above 45 crowd please :)
One of the over 60 crowd here.

Sell your existing home and purchase the new one.
Go with a low down payment and invest the rest.
Put 20% down, but not more, in order to avoid a PMI.

Life can be shorter than you expect. But it can also be longer, sometimes a lot longer.

adamthesmythe
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by adamthesmythe » Wed Aug 10, 2016 11:40 am

> The neighborhood is continuing to deteriorate

Excellent reason to move.

You have enough working years to pay off a modest additional mortgage so you can enter retirement with a paid-off home in a safe neighborhood.

> we could put as low as 10% down and avoid PMI with a 1.4% adder to the loan

Try to get the down payment to 20% to eliminate the PMI without an effective increase in the interest rate.

Renting the old house- in addition to dealing with renters in a declining area it will be your responsibility to arrange for maintenance. Not a very attractive prospect in my view.

bigred77
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by bigred77 » Wed Aug 10, 2016 11:44 am

Is the new home going to be your retirement home? Are you prioritizing features that will allow you to age in place?

SRenaeP
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by SRenaeP » Wed Aug 10, 2016 12:04 pm

Watty wrote:Keeping the old home as a rental should probably be taken off the table because;

1) It is in a declining neighborhood.

2) If you sold it now you would likely qualify for a homeowners capital gains tax exemption.

3) You would need to have a larger mortgage on your next house.

4) You would have about a quarter of your net worth tied up in that one property. With your new house about $700K would be in real estate in the same city. That is a diversification problem.
fmzip wrote:o my question is this. Based on our ages, what should we do as far as the down payment and or with the proceeds of the sale of our home? If we were younger, I think its a no brainer to go with a low down payment and invest the rest. Being that we are older, I'm a bit on the fence. I'd like some input from the above 45 crowd please
I retired last year just before I turned 59 and having a paid off home makes my retirement numbers work a lot better so I would suggest putting all the home equity into the new house and having it paid off by the time you want to retire.

Investing the money and getting a higher return will be harder than it sounds if you invest with an asset allocation of anywhere near the old saying "your age in bonds" since about half of your money will be invested in lower paying bond fund that are earning a lower interest rate.

You would also have a large sequence of returns risk. I have posted this example before;
If you do not pay it off then you will have more sequence of returns risk. For example in rough numbers if you just kept a $100K mortgage and also put $100K into a separate investing account which you also paid a $500 a month mortgage out of then;

a) If you get unlucky and get a modest 10% decline in the portfolio the first year then it would be down to $90K
b) You would also need to pay the $500 a month mortgage($6,000) so your portfolio would be down to $84K
c) To break even the next year you would need to gain back the $16K and another $6,000 for the next years mortgage payments which is $22K. That would take a 25.6% return on the remaining $84K just to break even.
+1

The only thing that gives me pause about the OP's plan is that he says they're *willing* to work until age 62. What if that doesn't come to pass? Will the financial cookie crumble if one or both of you are forced into early retirement?

-Steph

fmzip
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by fmzip » Wed Aug 10, 2016 12:12 pm

Thanks for the replies. As I posted, I can avoid PMI with a small 1.4% adder

If we were to rent it, it would be to family. The house would likely need no major repairs over the next decade as everything is nearly new which is why we though to maybe rent it to get some further value out of it instead of giving it away. We weren't planning to move and the yard and home are unbelievable. Good point on the deteriorating neighborhood. Maybe it would be best to sell, just thought was it would be a low maintenance property and very easy to rent. It would likely sell in days once listed as i can only ask so much for it and it has an awful lot to offer both inside and out

Here's our back yard to give you an idea of the surroundings:

Image
Image



I doubt our new home will be our retirement home as Connecticut is much too expensive. It is a large ranch, we certainly love it to be our 6 month a year home if we can afford it as we are not fond of the long New England winters. Unless the portfolio grows substantially more than our goal, it wouldn't be feasible unless our expenses were lower in other areas, highly doubtful. Property taxes on this $450K home we are considering would be nearly $11K a year. :shock: As they local saying goes, no one is moving to Connecticut and this is one of the reasons as to why. Same home or better in other areas of the US would be less than a 1/3 of the cost property tax wise.
Last edited by fmzip on Wed Aug 10, 2016 12:42 pm, edited 4 times in total.

fmzip
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by fmzip » Wed Aug 10, 2016 12:19 pm

SRenaeP wrote: +1

The only thing that gives me pause about the OP's plan is that he says they're *willing* to work until age 62. What if that doesn't come to pass? Will the financial cookie crumble if one or both of you are forced into early retirement?

-Steph
Well Steph, I am the breadwinner. If I die, she is covered. It will actually work out better for her if I do. ;) Her income has very little to do with the calculations.

I won't be ousted from my career, I am self employed. It is sales oriented, I am very healthy. If illness comes about, they best laid plans will ultimately change, then we move and adjust life accordingly. So unless I opt for a disability policy which would likely never pay out as it's a sales career, the cookie crumbles a bit but the bread in the freezer is still there! I think that's the point of my post, you can plan and plan. But you need to live as well :)

delamer
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by delamer » Wed Aug 10, 2016 12:39 pm

Another vote for selling the current home -- why would you want to double down on real estate in a place that no one is moving to (your words, not mine :) )?

I don't know what the standard advice is for people who are self-employed (and presumably with a variable income), but I agree with your choice of a 30-year mortgage in order to keep fixed expenses low. As you said, you can always pay extra if you are comfortable doing so.

fmzip
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by fmzip » Wed Aug 10, 2016 12:46 pm

delamer wrote:Another vote for selling the current home -- why would you want to double down on real estate in a place that no one is moving to (your words, not mine :) )?

I don't know what the standard advice is for people who are self-employed (and presumably with a variable income), but I agree with your choice of a 30-year mortgage in order to keep fixed expenses low. As you said, you can always pay extra if you are comfortable doing so.
Yes, the income is variable. It can likely rise and fall. This was part of the reason why we never moved either, I liked zero stress in regards to expenses. We spend and do pretty freely whatever we'd like, typically at no more than ever 60% of gross income. Even with this move, I feel it's still pretty conservative although I have to admit, it's a bit daunting to think of spending $450K on a home. But here in CT, $450K isn't a crazy amount by any means.

furnace
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by furnace » Wed Aug 10, 2016 12:54 pm

fmzip wrote:So here's where I am at. My wife and I live in our perfect home in a very low income neighborhood. As it was my grandmother's home, my dad made it affordable for me to buy 20 years ago which is why we live here. We never had kids to put through school and we made the home the way we wanted it. Nevertheless, the home has made us happy and served our needs. It's worth about 235K, we owe about 18K on it. We have zero debt other than the mortgage balance which is a 3.5 year heloc @ 3.63%

With turning 50 this year, my wife is 52 and had a breast cancer scare as well (very early stages thankfully), we are seeing that life can be shorter than we think. I'm starting to feel that my super saver tendencies may lead to later disappointment. The neighborhood is continuing to deteriorate and honestly we feel like we deserve a bit more out of life in terms of our surroundings. We earn a very good income and likely could afford a home in the $900K range. I feel it's time to move to a nicer neighborhood and purchase a home in the $400-$450K range. A few things to note, we have no kids to worry about, we plan to spend every red cent before we pass :)

We have approximately $220K in taxable, and $670K in retirement accounts. Currently we save about $80K per year so we feel we are on track to reach our savings goals of $2M with our asset allocation as follows:

Total US Bond Market Index 22%
Hi Yield Corporate Fund 8%
Short Term Inflation Protected 8%
Total US Stock Market Index 37%
Total International Index 19%
REIT Index 6%

Prior to the new home purchase idea, we thought of earlier retirement but have both decided we'd be willing to work to age 62 to enjoy a better home. I feel regardless of this purchase we will still be in very good shape at age 62 even if we were to save $40-50K per year instead of the $80K. That $40-50K is just a lowball estimate, I assume we will save more.

Our plan is to buy the new home without selling the other first. If we sell our existing home ( we may rent it) my mortgage guy said that we could put as low as 10% down and avoid PMI with a 1.4% adder to the loan. We obviously could put down enough to avoid even the adder. If we do sell the home, we do have the option to use the proceeds of the sale towards the mortgage balance, then get a new monthly payment amount without having to refinance. We will likely take out a 30 year term at 3.50% or so and pay it as if it were a 12-15 mortgage. We like the idea of having the flexibility with a lower payment.

So my question is this. Based on our ages, what should we do as far as the down payment and or with the proceeds of the sale of our home? If we were younger, I think its a no brainer to go with a low down payment and invest the rest. Being that we are older, I'm a bit on the fence. I'd like some input from the above 45 crowd please :)

Thanks

Why do you say your neighborhood is declining? How are the local public schools?

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BL
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by BL » Wed Aug 10, 2016 1:15 pm

You have a beautiful home! Are you sure you really want to leave it? Why not wait until you can buy your forever home? What ever pleases you, however. You don't have to worry about finances.

Yes, I would sell, probably before buying to get clean financing.

fmzip
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by fmzip » Wed Aug 10, 2016 1:23 pm

furnace wrote:
Why do you say your neighborhood is declining? How are the local public schools?
That's an interesting reply. I almost said "because I can see it". I've lived there for 20 years! :) There are wealthy sections in this town as well. We actually plan to stay in the same town as my town is right next door to several other affluent towns and the neighborhood we will be moving into is a small enclave of about 30 homes in an HOA environment.

This section where I live in however keeps getting worse and worse. As my home used to be my grandmother's, I've seen the decline for closer to 40 years. Some neighborhoods stay the same or get better, this one is going downhill badly. Homes are not taken care of, most are deteriorating pretty badly. My elderly neighbor is struggling with their home, I can only imagine what 5-10 more years will do it. It's actually a bit depressing driving through the neighborhood each and everyday and watching it decay further and further. There is a lack of income, it's apparent and an unfortunate situation that people cannot afford to make ends meet. In some regards, I feel like I'm inviting crime in with taking care of the property as well as we do. It's really time to go....


As far as the 184 school districts, with 184 being the lowest, it's at 169

fmzip
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by fmzip » Wed Aug 10, 2016 1:34 pm

BL wrote:You have a beautiful home! Are you sure you really want to leave it? Why not wait until you can buy your forever home? What ever pleases you, however. You don't have to worry about finances.

Yes, I would sell, probably before buying to get clean financing.
Thanks for the compliments. The plan was to wait, the cancer scare has made us rethink things. 10-12 years is a very long time. In investigating an additional mortgage, having a clean slate is irrelevant. I'm sure our credit history has a lot to do with it. From what I've been told, 20 year rates are the same as 30. 15 year rates are at 2.75 or so, 30 year is at 3.50. The payment difference is quite larger with the 15 year, i'd rather have the flexibility of the lower payment for the unforseen

Since we decided on where we wanted to live and there are very few homes and just one for sale being the largest and most expenses, I decided to be creative. I sent a letter to each homeowner in the development and explained that we were looking to buy in the area.I explained if by chance they had a desire to sell, we could be a quick close with not needing to sell our home and most importantly, eliminate the need estate agent fees.

We sent the letters out on Saturday and on Monday I got an email from one owner. He's actually is looking to move and loves the idea. As a well established attorney, he was already looking at ways to avoid listing it as his schedule is typically filled. We are going to see his home in a few days.

I also received a call from another homeowner on Monday as well. They are looking to relocate to Arizona next year. So now we have two more homes to choose from in this development. If in fact we are to meet an agreement, we could likely time the sale of our home to coincide with the purchase of the other property as both of these viable sellers don't plan/need to move anytime soon :)

SRenaeP
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by SRenaeP » Wed Aug 10, 2016 3:31 pm

fmzip wrote:
SRenaeP wrote: +1

The only thing that gives me pause about the OP's plan is that he says they're *willing* to work until age 62. What if that doesn't come to pass? Will the financial cookie crumble if one or both of you are forced into early retirement?

-Steph
Well Steph, I am the breadwinner. If I die, she is covered. It will actually work out better for her if I do. ;) Her income has very little to do with the calculations.

I won't be ousted from my career, I am self employed. It is sales oriented, I am very healthy. If illness comes about, they best laid plans will ultimately change, then we move and adjust life accordingly. So unless I opt for a disability policy which would likely never pay out as it's a sales career, the cookie crumbles a bit but the bread in the freezer is still there! I think that's the point of my post, you can plan and plan. But you need to live as well :)
In that case, go for it!

I only ask because I've seen people near retirement age move out of their close to paid off home to the dream home then experience unemployment or underemployment. In one case, the person ended up going into foreclosure and in the other case, the person is still in the newer home but is not able to maintain it and living check to check.

-Steph

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Re: Buying a new home at age 50 in a nicer neighborhood

Post by soboggled » Wed Aug 10, 2016 3:37 pm

A sound plan, except you should sell your current house - being a landlord is a pain, you probably won't get enough rent and it increases your financial risks/uncertainties for small potential returns.
I'd probably make a larger down payment than you planned, as it locks in your "return" at the mortgage rate - you can deduct the down payment from your fixed income allocation, since that is yielding around 2% while mortgages are at 3.5%.

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Re: Buying a new home at age 50 in a nicer neighborhood

Post by bloom2708 » Wed Aug 10, 2016 3:48 pm

I would vote to stay in the current home. Take 1 or 2 extra vacations per year. Buy a convertible. Remodel a room. All those are much less than buying a new house.

You would be setting yourself up to pay much higher taxes, more interest, more furnishings, more heating, more cooling, more maintenance/repairs.

At 50 can you ensure you want to keep working until 62 or 64? What if at 55 you are downsized?

You are winning the game..but the new house would be a step backwards in my opinion. Just an opinion. :o
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

detroitbabu
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by detroitbabu » Wed Aug 10, 2016 4:12 pm

I am going to bring up another point.

Considering
* You are 50 (assuming you have been working at least 25 years)
* You and your wife both are working
* Have no kids
* Can afford a $900K home with just your income and
* Can save $80K per year

your savings of ~$900K are lower than BH standards.

If I were in your situation, I would sell the current house and put the $200K down as a down payment for a $400-$500K home on a 10 year fixed rate mortgage.
I won't buy a home more expensive than that because I would not want to work until 62 to pay for that big house.

My $0.02

fmzip
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by fmzip » Wed Aug 10, 2016 4:57 pm

bloom2708 wrote:I would vote to stay in the current home. Take 1 or 2 extra vacations per year. Buy a convertible. Remodel a room. All those are much less than buying a new house.

You would be setting yourself up to pay much higher taxes, more interest, more furnishings, more heating, more cooling, more maintenance/repairs.

At 50 can you ensure you want to keep working until 62 or 64? What if at 55 you are downsized?

You are winning the game..but the new house would be a step backwards in my opinion. Just an opinion. :o
Thanks for the input.

Had a BMW convertible I bought new in 2001, sold it last year with only 80K miles on it. No rooms to remodel, they are all done. As far as vacations, my wife can't take more than her two weeks :)
Last edited by fmzip on Wed Aug 10, 2016 5:07 pm, edited 1 time in total.

fmzip
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by fmzip » Wed Aug 10, 2016 5:03 pm

detroitbabu wrote:I am going to bring up another point.

Considering
* You are 50 (assuming you have been working at least 25 years)
* You and your wife both are working
* Have no kids
* Can afford a $900K home with just your income and
* Can save $80K per year

your savings of ~$900K are lower than BH standards.

If I were in your situation, I would sell the current house and put the $200K down as a down payment for a $400-$500K home on a 10 year fixed rate mortgage.
I won't buy a home more expensive than that because I would not want to work until 62 to pay for that big house.

My $0.02
All good points.
Last edited by fmzip on Wed Aug 10, 2016 8:45 pm, edited 1 time in total.

fmzip
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by fmzip » Wed Aug 10, 2016 5:08 pm

fmzip wrote:
detroitbabu wrote:I am going to bring up another point.

Considering
* You are 50 (assuming you have been working at least 25 years)
* You and your wife both are working
* Have no kids
* Can afford a $900K home with just your income and
* Can save $80K per year

your savings of ~$900K are lower than BH standards.

If I were in your situation, I would sell the current house and put the $200K down as a down payment for a $400-$500K home on a 10 year fixed rate mortgage.
I won't buy a home more expensive than that because I would not want to work until 62 to pay for that big house.

My $0.02


All good points. The higher income started about 11 years ago. I have been working since I graduated high school. No college, all work. Before I became a bit more frugal, I was living it up with the new Benz every 3 years, making our home what it is today and free spending in general. I was waiting for someone to note that I was wasn't living up to boglehead standards ;) But I am not measuring myself to anyone's standards but my own. As only a high school grad, I wouldn't ever dreamed of having close to $900k saved. My motto, my life my choice. And yes, we are discussing a $450K home, no more than that! If we were to buy a $900k home, there wouldn't be $80k in annual savings anymore!

My job has become low stress and high paying, it will be very difficult to ultimately walk away when the time comes. I too was leaning toward putting the $200K down and paying the house off in 12 years but with the 30 year mortgage. In a commission only career, I'd rather have the flexibility of the 30 year mortgage. I guess my YTD return on investments had me thinking it would be better to not tie up all that money in a down payment after reading this:

http://financialmentor.com/financial-ad ... nvest/7478
Last edited by fmzip on Wed Aug 10, 2016 8:24 pm, edited 4 times in total.

Leemiller
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by Leemiller » Wed Aug 10, 2016 5:33 pm

My inlaws moved to a very nice home when they were around your age. They seem to really enjoy it. It was much more expensive and larger than the home they were living in. A nice townhouse or condo may be a good option if upkeep is an issue and you'd prefer to spend a couple of months a year somewhere warmer.

fmzip
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by fmzip » Wed Aug 10, 2016 6:38 pm

Leemiller wrote:My inlaws moved to a very nice home when they were around your age. They seem to really enjoy it. It was much more expensive and larger than the home they were living in. A nice townhouse or condo may be a good option if upkeep is an issue and you'd prefer to spend a couple of months a year somewhere warmer.
Maybe when we retire a one floor condo/villa will work.

This development we are looking to buy the house in is an HOA. It's perfect really, large 1 acre plus lot, they take car of grass, leaves and snow for $275 a month. I won't miss shoveling! I am sure we will eventually downsize to two smaller homes unless we can find an all year place that is close to paradise

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MikeWillRetire
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by MikeWillRetire » Wed Aug 10, 2016 7:01 pm

Your landscaping looks beautiful. My wife and I are in a very similar situation in a neighborhood that is not maturing well. My wife has done a great job with the landscaping, but I tease her by saying that all of her work just provides a gorgeous view for the people across the street who are the ones bringing down the neighborhood.

fmzip
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by fmzip » Wed Aug 10, 2016 7:23 pm

MikeWillRetire wrote:Your landscaping looks beautiful. My wife and I are in a very similar situation in a neighborhood that is not maturing well. My wife has done a great job with the landscaping, but I tease her by saying that all of her work just provides a gorgeous view for the people across the street who are the ones bringing down the neighborhood.
Thanks for the compliment.

I totally agree with your remark. The neighbor across the street stares over at our park from her porch for hours on end. I also live next door to a group of retired nuns. One of them tells me every year she keeps calling the town to come out and see our yard as it should be published. I do enjoy the beautiful yard so having a nicer property will just be added enjoyment. If I knew we were going to move 5 years ago, the new granite retaining wall in the front and back would have been left as is! Whoever buys this house is going to get a steal for sure.


Here are a few more:

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Ninnie
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by Ninnie » Wed Aug 10, 2016 8:13 pm

That gorgeous landscaping!! Those high taxes!! Don't move.

Start planning for your retirement home. Maybe even buy it early, and start enjoying it.

With only two weeks of vacation time, you may want to prioritize your wife leaving her job even if you stay at yours.

fmzip
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by fmzip » Wed Aug 10, 2016 8:21 pm

Ninnie wrote:That gorgeous landscaping!! Those high taxes!! Don't move.

Start planning for your retirement home. Maybe even buy it early, and start enjoying it.

With only two weeks of vacation time, you may want to prioritize your wife leaving her job even if you stay at yours.
Agreed with her job, if my business keeps growing as it has been, she can stay home and take care of the park ;)

curmudgeon
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by curmudgeon » Wed Aug 10, 2016 8:52 pm

The advantage of being frugal and saving well is that you have flexibility to choose some luxuries without having them take away your financial security. The key is to choose wisely and not overcommit yourself. We made a somewhat similar move in our mid-40s. I weighed the additional property taxes and interest costs, made consideration for income taxes, and we decided to go for it. We knew the effective costs while working, and gave some consideration to what things would look like in retirement (the property taxes don't get near as much offset in income tax deductions).

For us, I suspect that if we were to sell today we would come out about even financially vs having stayed in the old house. Greater appreciation, resetting the cap gains base, and the income tax offsets have approximately balanced the increased carrying costs. We considered this as one of the potential outcomes when we bought, but did not make plans based on it. Now, however, the house complicates early retirement planning. There is still a significant mortgage (we could pay it off, but there are tax consequences). The property taxes won't be such a tax writeoff. We've become rather attached to the house, so downsizing isn't necessarily an easy choice right now. No regrets, but new choices to make.

fmzip
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by fmzip » Wed Aug 10, 2016 9:19 pm

curmudgeon wrote: We've become rather attached to the house, so downsizing isn't necessarily an easy choice right now. No regrets, but new choices to make.
I can see that happening too. However, since we both hate winters, the attachment may be easier to let go. As I said to my wife, if we have to take a step backward, well that may not be so easy. Once you get a taste of something better, it's hard to go in the other direction. Hopefully if we are faced with taking a step backward we can feel a sense of happiness for what we had, not disappointment for what has passed.

naha66
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by naha66 » Wed Aug 10, 2016 10:54 pm

your savings of ~$900K are lower than BH standards.


I just love statements like these. :?

fmzip
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by fmzip » Thu Aug 11, 2016 7:04 am

naha66 wrote:your savings of ~$900K are lower than BH standards.


I just love statements like these. :?
I chuckled myself. Meh, merely $900K and nearly zero debt with just a high school education, shame on me ;)

fmzip
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by fmzip » Thu Aug 11, 2016 7:45 am

soboggled wrote: I'd probably make a larger down payment than you planned, as it locks in your "return" at the mortgage rate - you can deduct the down payment from your fixed income allocation, since that is yielding around 2% while mortgages are at 3.5%.
Interesting, anyone care to comment on this approach? My safe money is in VBMFX which is up 6.15% YTD

2011 7.56
2012 4.05
2013 -2.26
2014 5.76
2015 0.30

3YR 4.00
5YR 2.94
10YR 4.88
15YR 4.68

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Watty
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by Watty » Thu Aug 11, 2016 7:53 am

fmzip wrote:
naha66 wrote:your savings of ~$900K are lower than BH standards.


I just love statements like these. :?
I chuckled myself. Meh, just $900K and nearly zero debt, shame on me ;)

+1

I retired with less savings than that and I am doing just fine.

It helps that I live in the 80% of the country that has a medium to low cost of living and have a paid off house.

Here in the suburbs of Atlanta with $30K in retirement income, $35K in Social Security, and a paid off house you can have an above average lifestyle and pay almost no state or federal income taxes. Sure there will be some years with higher expenses and and the costs will go up if a nursing home is ever needed but we will likely use our home equity for that if we need to pay for long term care.

kjvmartin
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by kjvmartin » Thu Aug 11, 2016 8:41 am

A 235k home in a low income neighborhood? You'd have to have a pretty decent job (or two) to be able to afford to buy your house. Are things just starting to decline?

kjv

fmzip
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by fmzip » Thu Aug 11, 2016 9:04 am

kjvmartin wrote:A 235k home in a low income neighborhood? You'd have to have a pretty decent job (or two) to be able to afford to buy your house. Are things just starting to decline?

kjv
I guess I should redefine "low income". It's a neighborhood where people simply don't care or don't have the funds to take care of their property. Things are not just starting to decline, several homes are eyesores, junk all over the yard. Roofs on several homes scattered throughout a few blocks have had plastic tarps nailed on them for years. It's mish mash of some okay properties and some very, very bad ones. Let's say this, the very bad ones are what drives the home prices further down. My next door neighbors house is headed down this tragic road simply because they are elderly. This ultimately which brings in lower income and or first time home buyers.

My home is out of place due to the obvious reasons. The price tag of $235K will be the highest in the neighborhood if I am able to even get it. This certainly isn't the average home price.
Last edited by fmzip on Mon Aug 22, 2016 12:11 pm, edited 1 time in total.

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G12
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by G12 » Thu Aug 11, 2016 3:38 pm

fmzip wrote:
naha66 wrote:your savings of ~$900K are lower than BH standards.


I just love statements like these. :?
I chuckled myself. Meh, merely $900K and nearly zero debt with just a high school education, shame on me ;)
What are these specific elusive Boglehead standards? :-? I would say living by retired nuns would be much more desirable than meth-heads, yes? I'm kidding but that's what I was envisioning early in the thread. The yard looks awesome, guessing there are no big resident dogs? Mine ruin so many things in the yard I just went to low maintenance form of upkeep. You sound like a rational thinking person who errs on the side of avoiding significant financial stress and can make the decision that fits you and your spouse best. I can only imagine where my wife and I would come out on this scenario. :happy

fmzip
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by fmzip » Thu Aug 11, 2016 3:50 pm

G12 wrote:
fmzip wrote:
naha66 wrote:your savings of ~$900K are lower than BH standards.


I just love statements like these. :?
I chuckled myself. Meh, merely $900K and nearly zero debt with just a high school education, shame on me ;)
What are these specific elusive Boglehead standards? :-? I would say living by retired nuns would be much more desirable than meth-heads, yes? I'm kidding but that's what I was envisioning early in the thread. The yard looks awesome, guessing there are no big resident dogs? Mine ruin so many things in the yard I just went to low maintenance form of upkeep. You sound like a rational thinking person who errs on the side of avoiding significant financial stress and can make the decision that fits you and your spouse best. I can only imagine where my wife and I would come out on this scenario. :happy

Ah, the elusive Boglehead standards.....I can't tell, if I I'd then I'd have to publicly shame you :)

Yes, no resident dogs although the nuns let their little dogs pee on my grass. I bite my tongue so hopefully I'll get in to heaven, no questions asked :D

Headed to see house number one in a short while:

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Last edited by fmzip on Thu Aug 11, 2016 4:50 pm, edited 2 times in total.

student
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by student » Thu Aug 11, 2016 4:38 pm

G12 wrote:
fmzip wrote:
naha66 wrote:your savings of ~$900K are lower than BH standards.


I just love statements like these. :?
I chuckled myself. Meh, merely $900K and nearly zero debt with just a high school education, shame on me ;)
What are these specific elusive Boglehead standards? :-? I would say living by retired nuns would be much more desirable than meth-heads, yes? I'm kidding but that's what I was envisioning early in the thread. The yard looks awesome, guessing there are no big resident dogs? Mine ruin so many things in the yard I just went to low maintenance form of upkeep. You sound like a rational thinking person who errs on the side of avoiding significant financial stress and can make the decision that fits you and your spouse best. I can only imagine where my wife and I would come out on this scenario. :happy
Yes. It would be great if my neighbors are retired nuns. I imagine that they are quiet.

student
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by student » Thu Aug 11, 2016 4:41 pm

Your garden looks awesome. The picture of the house that you are going to see looks wonderful. I wish I can afford such a house.

fmzip
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by fmzip » Thu Aug 11, 2016 4:46 pm

student wrote:Your garden looks awesome. The picture of the house that you are going to see looks wonderful. I wish I can afford such a house.
Thank you. Here's the front of our home, I like the one we are looking at much better!

Image

fmzip
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by fmzip » Thu Aug 11, 2016 4:48 pm

student wrote: Yes. It would be great if my neighbors are retired nuns. I imagine that they are quiet.
Yes, very quiet! We live in a culdesac and there are only 4 homes, neighbors to my right are in there 80's, neighbors to the left are the nuns, I wish I could just take the entire lot and move it elsewhere
Last edited by fmzip on Thu Aug 11, 2016 4:56 pm, edited 1 time in total.

pshonore
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by pshonore » Thu Aug 11, 2016 4:54 pm

fmzip wrote:
furnace wrote:
Why do you say your neighborhood is declining? How are the local public schools?
As far as the 184 school districts, with 184 being the lowest, it's at 169
What does that rating mean? Is it $ spent per pupil? That's not really a good indicator.

Your property is outstanding by the way. I have to assume you're in a city (Hartford, Bridgeport, New Haven, Willimantic, New Britain, etc) or one of their suburbs. Yes, taxes are high in CT but so are salaries and services. You need to move a little further out in Eastern CT.

fmzip
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by fmzip » Thu Aug 11, 2016 5:00 pm

pshonore wrote:
fmzip wrote:
furnace wrote:
Why do you say your neighborhood is declining? How are the local public schools?
As far as the 184 school districts, with 184 being the lowest, it's at 169
What does that rating mean? Is it $ spent per pupil? That's not really a good indicator.

Your property is outstanding by the way. I have to assume you're in a city (Hartford, Bridgeport, New Haven, Willimantic, New Britain, etc) or one of their suburbs. Yes, taxes are high in CT but so are salaries and services. You need to move a little further out in Eastern CT.
Thanks!

Here's more info on the high school:

http://www.usnews.com/education/best-hi ... chool-4414

I live in Bloomfield, just north of Hartford. We are each 10 minutes to work, so moving to a lower cost area in CT simply adds hours to the workday. Plus we love West Hartford center which is just 10 minutes from the house

student
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by student » Thu Aug 11, 2016 7:30 pm

fmzip wrote:
student wrote:Your garden looks awesome. The picture of the house that you are going to see looks wonderful. I wish I can afford such a house.
Thank you. Here's the front of our home, I like the one we are looking at much better!

Image
It looks beautiful. It sits up on top on a mound so water runs away from the house.

kjvmartin
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by kjvmartin » Thu Aug 11, 2016 9:54 pm

Totally subjective and completely personal opinion, but you asked.

I think the shine of the new house will wear off quick and you'll be tired of the extra years you have to work. From what I hear, progressing into ones 50s and 60s working can be very trying. A lot of folks I know are unprepared for retirement and working into their "golden years" and they sound a loud warning to my generation to SAVE SAVE SAVE because you won't want to work at this age either. I guess this will vary a lot depending on the stress of the job.

Otherwise, both of those houses seem nice enough to me :)

kjv

fmzip
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by fmzip » Thu Aug 11, 2016 10:18 pm

I agree the novelty may wear off but the surroundings I doubt will. It pretty picturesque in this development.

The outlay for the upgrade over a 10 year period for the bigger mortgage and property taxes translate to about $150K. When I look at how much we save, it doesn't seem like all that much to enjoy a finer lifestyle. We could always cut back on our dining out which is typically $200-$300 per week

Granted I'd rather not work but I do know we like the finer things in life so why not enjoy them while you are working and younger. Knowing my conservative tendencies, I can see me not wanting to spend when I am no longer working!

fmzip
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Re: Buying a new home at age 50 in a nicer neighborhood

Post by fmzip » Thu Aug 18, 2016 8:08 pm

These past few days have been challenging.

We are all over the place with this purchase. We see how little we can get for our home and how we need to spend 2X more to get what we'd really like.

Now we are questioning if it will really be that fulfilling. Will we regret not doing it? Are we willing to give up anything to have this house? Are we really willing to work longer??

We've gone full circle soooooooooooo many times on this topic I am losing count. :? :? :? :?

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