Financial Situation: My wife and I are both working, have no outstanding debts. Our only monthly recurring expense is our living expenses and the rent we are currently paying - overall we lead an average lifestyle. I did some basic math and it looks like we will be able to make the monthly mortgage payments with some minor adjustments in our lifestyle (nothing significant though). For the sake of this discussion, I'd like to assume some numbers:
- House Cost: $1 million
Monthly payments we can afford after 401k pre-tax, 401k after-tax and Roth IRA maximization: $5000/month (this excludes the variable income such as annual bonuses)
Downpayment we can make: 21%
Monthly Rent: $2,200 for a 850 sqft 1 bedroom
Potential APR: 4.0% - 4.5% fixed 30 year
Monthly Expenses: Roughly $1,500 - $2,000
Expecting to start a family soon
I have always read the philosophy: Money today is worth more than money tomorrow. However, I also read conflicting advice that it is beneficial in paying the mortgage off earlier than the 30 year time period. Therefore, in my mind, there are a few strategies I'd like to get some opinion on:
- #1. Pay as slowly as you can, Save the rest: In this strategy, I'll take the mortgage for 30 years, repay as little as possible (which is around $4000). Whatever bonus money we are going to get, I will start investing it in index funds (80/20 stock/bond split) and call it a day.
#2. Pay as aggressvely as you can: In this strategy, I'll take te mortgage for 15 years, repay as much as I can and potentially even refinance if possible to finish the loan repayment in 10 years. For this, I'd have to exhaust all the bonus money and forgo all investing.
My personal goal: Maximize my wealth + Prepare for recession (if and when it happens). To maximize my wealth, I a bit hesistant in purchasing a house but the happiness of my spouse is more important to me so I'd like to discount the money I am putting into the house and stop looking at it but still be prepared.
Any advice on how to best approach this situation?