Will buying a house jeopardize financial security?

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Topic Author
hslngrw
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Joined: Sun Mar 24, 2019 3:38 pm

Will buying a house jeopardize financial security?

Post by hslngrw » Sun Mar 24, 2019 4:06 pm

Hi all,

This is mainly targeted towards those living in coastal high COL markets
Our situation:

Early 40s
Combined Income: HHI of 450k/yr (only 300k of it is guaranteed, rest dependent on stock grants + bonus)
Cash Reserves: 215k in high interest bank (Ally @ 2.1 APY)
Stocks: 90k in stocks with DRIP
Combined Stock grants: 45k in vested stock, 440k in unvested stock
Combined 401Ks: 390k (we max out)
Other investments: 150k in REITs
Residence: Town House w/ 600k remaining on mortgage (estimating we could sell for ~ 1M to 1.1M)

As you can imagine, the federal + SALT bite is steep.

We would like to buy a SFH which tend to run around 1.5M for a 4bed/2ba 2000sf home. The sale of the current townhouse would cover the downpayment for the SFH. PITI would be about 7k / month. My worry is the mortgage + taxes would eliminate the ability to continue to build investments. Would this be jeopardizing financial security? How do people who pull the trigger on a SFH balance the trade-off between a home and the desire for continued financial growth?
Last edited by hslngrw on Mon Mar 25, 2019 9:44 am, edited 1 time in total.

mega317
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Re: Will buying a house jeopardize financial security?

Post by mega317 » Mon Mar 25, 2019 12:10 am

hslngrw wrote:
Sun Mar 24, 2019 4:06 pm
the mortgage + taxes would eliminate the ability to continue to build investments. Would this be jeopardizing financial security?
Of course. Unless you already have "enough" which it doesn't sound like.

HEDGEFUNDIE
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Re: Will buying a house jeopardize financial security?

Post by HEDGEFUNDIE » Mon Mar 25, 2019 12:17 am

Why would “the mortgage + taxes eliminate the ability to continue to build investments”?

A $1.2M mortgage will cost you around $85k in PITI per year.

Let’s be conservative and say you only bring home $400k per year. Taxes take out $125k, $85k goes to the aforementioned mortgage, you are still left with $190k at the end of the day (and again, this is being conservative with your variable income). That should be plenty of money for living and saving.

Topic Author
hslngrw
Posts: 5
Joined: Sun Mar 24, 2019 3:38 pm

Re: Will buying a house jeopardize financial security?

Post by hslngrw » Mon Mar 25, 2019 9:43 am

Hedgefundie: Your numbers are a bit off with regards to take home pay. We are in California and get stung pretty badly by property tax + income tax.

Net take home income after maxing out 401k + another 2% to IRA is only $210k/yr. (I don't like to include stock grants in income as sometimes we like to just hold on to them)

Mortgage + Property tax would be ~ $110k/yr which only leaves $100k for living + saving.
Day care + tuition for 2 kiddos eats up a 48k of that.

I really miss that SALT deduction, it's just crushing the middle class.

I think reading in a different post you have similar HHI but are able to swing a $2M mortgage. Would you mind sharing the numbers on how you pull it off? We do have 2 other condos that are nearly paid off we could sell, but was counting on them to help with retirement income.

Thanks!

vu8
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Location: Columbus, Ohio

Re: Will buying a house jeopardize financial security?

Post by vu8 » Mon Mar 25, 2019 9:48 am

I say with that kind of money you're earning, just get a 10 year fixed mortgage, and pay that off as soon as you can, and you're Golden. But you shall find a property that is comfortable, quality, well-built enough that you can live there for at least 20-30 years without yearning to move out.

chevca
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Re: Will buying a house jeopardize financial security?

Post by chevca » Mon Mar 25, 2019 10:11 am

hslngrw wrote:
Sun Mar 24, 2019 4:06 pm
Combined Income: HHI of 450k/yr (only 300k of it is guaranteed, rest dependent on stock grants + bonus)

Cash Reserves: 215k in high interest bank (Ally @ 2.1 APY)

Residence: Town House w/ 600k remaining on mortgage (estimating we could sell for ~ 1M to 1.1M)

We would like to buy a SFH which tend to run around 1.5M for a 4bed/2ba 2000sf home. The sale of the current townhouse would cover the downpayment for the SFH. PITI would be about 7k / month. My worry is the mortgage + taxes would eliminate the ability to continue to build investments. Would this be jeopardizing financial security? How do people who pull the trigger on a SFH balance the trade-off between a home and the desire for continued financial growth?
I would just break it down to this. Why so much in cash? If you take the townhouse sale proceeds and say $100k of the cash, let's say that wold be $500k down. Then, can you afford a $1M mortgage on a guaranteed $300k salary? I don't know that I would count the non-guaranteed income. You probably afford it, but it seems like it would be pushing it to me.

What I cut out here, is that you have around $1M in investment accounts. That could make things a little more comfortable knowing that, IMO.

WhiteMaxima
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Re: Will buying a house jeopardize financial security?

Post by WhiteMaxima » Mon Mar 25, 2019 10:29 am

depends. if you over buying house than you need and financial situation, then it is. If you are buying in a good location (job, school, etc) and within your means, you will gain from house appreciation.

JGoneRiding
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Re: Will buying a house jeopardize financial security?

Post by JGoneRiding » Mon Mar 25, 2019 10:43 am

hslngrw wrote:
Mon Mar 25, 2019 9:43 am

Mortgage + Property tax would be ~ $110k/yr which only leaves $100k for living + saving.
Day care + tuition for 2 kiddos eats up a 48k of that.

I really miss that SALT deduction, it's just crushing the middle class.


Thanks!
Lol I am sorry housing is insane for what you want but on no metric does a hhi of 400k plus a year qualify you as "middle class"
I believe Obama declared anything over 250k "wealthy" and the reality is middle class is a lot lower then that. (If defined as the middle 50%

SoonerD
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Re: Will buying a house jeopardize financial security?

Post by SoonerD » Mon Mar 25, 2019 10:45 am

hslngrw wrote:
Mon Mar 25, 2019 9:43 am
Hedgefundie: Your numbers are a bit off with regards to take home pay. We are in California and get stung pretty badly by property tax + income tax.

Net take home income after maxing out 401k + another 2% to IRA is only $210k/yr. (I don't like to include stock grants in income as sometimes we like to just hold on to them)

Mortgage + Property tax would be ~ $110k/yr which only leaves $100k for living + saving. in OP you wrote PITI is $84,000. Now it’s $110,000 (before adding insurance cost)? Which is it?
Day care + tuition for 2 kiddos eats up a 48k of that.

I really miss that SALT deduction, it's just crushing the middle class. Are you basing this on an article or maybe from middle class family / friends; at $450,000 income you’re not going to get away with singing the middle class blues. Regardless the middle class are not being crushed by a large upper bound for SALT deduction.

If I were in similar shoes I would look for a home that I can pay off in 15 years and still meet my investment goals. I’d be willing to lower my investment target knowing I can turbo charge it once home is paid off.

I would look for home where schools are good thereby dropping the child tuition expenses.




I think reading in a different post you have similar HHI but are able to swing a $2M mortgage. Would you mind sharing the numbers on how you pull it off? We do have 2 other condos that are nearly paid off we could sell, but was counting on them to help with retirement income.



Thanks!

bloom2708
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Location: Fargo, ND

Re: Will buying a house jeopardize financial security?

Post by bloom2708 » Mon Mar 25, 2019 10:51 am

Certainly a house can jeopardize your financial security.

Spending too much on the house requires you to earn high salaries for a very long time that is not guaranteed (at all).

You have a heavy concentration in a single stock. You have a $600k mortgage and $150k of REIT on top of that, which means your wealth is concentrated in a single stock a real estate.

I would get out of the REIT. The Total US stock market index has the market weight of REIT investments.

I would make a plan to sell the stock the day it hits your account or whenever allowed to tell. Diversifying into Total US and Total International and your bond investments.

Your jobs, health care, benefits are already concentrated to that company.

You can certainly afford a big mortgage on $400k income. With taxes and savings and a high tax state, that income doesn't stretch as far as one might think. It is true that you can be "poor" at any income level if you spend too much.

I would think 25% to 30% bonds is a reasonable number now that you are in the early 40s. Staying Age - 15ish seems prudent after a long bull market.

Do what you are going to do. Rules go out the door in HCOL areas. Can you do things to improve your concentration/diversification? Certainly. Do you want to? Up to you. Good luck with the decision!
"People want confirmation, not advice" Unknown | "We are here to provoke thoughtfulness, not agree with you" Unknown | Four words. Whole food, plant based. Bing it.

Admiral
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Re: Will buying a house jeopardize financial security?

Post by Admiral » Mon Mar 25, 2019 10:53 am

hslngrw wrote:
Sun Mar 24, 2019 4:06 pm
snipped

How do people who pull the trigger on a SFH balance the trade-off between a home and the desire for continued financial growth?
They don't buy $1.5m homes, that's how!

You appear to already own a home. And you have a ton of equity. Is it much too small or something? Can you add more space/another floor? Why are you just now (in your 40s) looking to trade up?

You seem to have plenty saved, so you might (conceivably) only save a small amount each year for retirement (passing up on a VERY valuable tax deduction at your income, which would be a mistake) in order to buy this home.

But you're going to need a very big pile if you want to continue to live a lifestyle based on your current income when you retire.

I would stay in the townhouse for a few more years, save a lot more, and then cash out the stock options and get a very low mortgage, or pay cash. $7k a month for housing is just...ridiculous.

EDIT TO ADD: My rule of thumb is that housing (PITI) should be no more than 25% of AFTER TAX income. And by after tax, I also mean after savings. So, essentially, what lands in your checking account. Now, I realize that in SF/NY people might pay double that or more. But that doesn't mean they should. And certainly if one is worried about saving, they shouldn't.

HEDGEFUNDIE
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Re: Will buying a house jeopardize financial security?

Post by HEDGEFUNDIE » Mon Mar 25, 2019 11:45 am

Admiral wrote:
Mon Mar 25, 2019 10:53 am
EDIT TO ADD: My rule of thumb is that housing (PITI) should be no more than 25% of AFTER TAX income. And by after tax, I also mean after savings. So, essentially, what lands in your checking account. Now, I realize that in SF/NY people might pay double that or more. But that doesn't mean they should. And certainly if one is worried about saving, they shouldn't.
This is kind of a ridiculous rule of thumb.

I spend $7k/month on housing. I also save $200k / year. But by your metric my house is unaffordable because it is 33% of my after-tax, after-savings income.

KlangFool
Posts: 14113
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Re: Will buying a house jeopardize financial security?

Post by KlangFool » Mon Mar 25, 2019 11:57 am

OP,

You are "House Poor" asset wise now. And, you are looking into buying even more house. So, why do you think this is a good idea? If it is not a good idea, why are you doing this?

KlangFool

HEDGEFUNDIE
Posts: 3628
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Re: Will buying a house jeopardize financial security?

Post by HEDGEFUNDIE » Mon Mar 25, 2019 12:00 pm

hslngrw wrote:
Mon Mar 25, 2019 9:43 am
Hedgefundie: Your numbers are a bit off with regards to take home pay. We are in California and get stung pretty badly by property tax + income tax.

Net take home income after maxing out 401k + another 2% to IRA is only $210k/yr. (I don't like to include stock grants in income as sometimes we like to just hold on to them)

Mortgage + Property tax would be ~ $110k/yr which only leaves $100k for living + saving.
Day care + tuition for 2 kiddos eats up a 48k of that.

I really miss that SALT deduction, it's just crushing the middle class.

I think reading in a different post you have similar HHI but are able to swing a $2M mortgage. Would you mind sharing the numbers on how you pull it off? We do have 2 other condos that are nearly paid off we could sell, but was counting on them to help with retirement income.

Thanks!
You are doing some unnecessary mental accounting that is obscuring your full financial picture. 401k counts as savings. IRA counts as savings. Stock grants, if you don't sell them and spend them, also counts as savings (although Bogleheads would frown upon holding them).

Let's review the math on taxes:

$400k income
- $38k maxed out 401k for two
- $12k employer 401k match (this is a guess)
- $5k dependent care FSA
- $35k itemized deductions ($10k SALT + $25k interest deduction on $750k max principal @ 3% interest)
= $310k taxable income
Federal taxes due: $63k
- $4k child tax credit
Final Federal taxes: $59k
Federal payroll taxes: $21k
California income taxes: $27k (California income tax still allows for full deduction of your entire mortgage interest and your entire property tax bill)
California payroll taxes: $2k

= Total income taxes: $109k

Even better than I thought.

GT99
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Re: Will buying a house jeopardize financial security?

Post by GT99 » Mon Mar 25, 2019 12:16 pm

JGoneRiding wrote:
Mon Mar 25, 2019 10:43 am
hslngrw wrote:
Mon Mar 25, 2019 9:43 am

Mortgage + Property tax would be ~ $110k/yr which only leaves $100k for living + saving.
Day care + tuition for 2 kiddos eats up a 48k of that.

I really miss that SALT deduction, it's just crushing the middle class.


Thanks!
Lol I am sorry housing is insane for what you want but on no metric does a hhi of 400k plus a year qualify you as "middle class"
I believe Obama declared anything over 250k "wealthy" and the reality is middle class is a lot lower then that. (If defined as the middle 50%
Glad I'm not the only one who did a double-take at that. That's more than double what could be considered a reasonable upper bound of middle class in a HCOL area (and more than quadruple the upper bound in most of the US).

LiterallyIronic
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Re: Will buying a house jeopardize financial security?

Post by LiterallyIronic » Mon Mar 25, 2019 12:24 pm

HEDGEFUNDIE wrote:
Mon Mar 25, 2019 11:45 am
Admiral wrote:
Mon Mar 25, 2019 10:53 am
EDIT TO ADD: My rule of thumb is that housing (PITI) should be no more than 25% of AFTER TAX income. And by after tax, I also mean after savings. So, essentially, what lands in your checking account. Now, I realize that in SF/NY people might pay double that or more. But that doesn't mean they should. And certainly if one is worried about saving, they shouldn't.
This is kind of a ridiculous rule of thumb.

I spend $7k/month on housing. I also save $200k / year. But by your metric my house is unaffordable because it is 33% of my after-tax, after-savings income.
Even I'm pushing it on that rule of thumb.
Gross Income: $6,250
Take home after 401k, health insurance, taxes: $4,200
Take home after Roth IRAs: $3,200
PITI: $825
$825 / $3,200 = 25.8%.

That being said, I'm strongly looking into recasting to get my PITI down closer to $700 because it does feel too tight. Maybe that rule of thumb isn't so bad after all.

smitcat
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Re: Will buying a house jeopardize financial security?

Post by smitcat » Mon Mar 25, 2019 12:30 pm

LiterallyIronic wrote:
Mon Mar 25, 2019 12:24 pm
HEDGEFUNDIE wrote:
Mon Mar 25, 2019 11:45 am
Admiral wrote:
Mon Mar 25, 2019 10:53 am
EDIT TO ADD: My rule of thumb is that housing (PITI) should be no more than 25% of AFTER TAX income. And by after tax, I also mean after savings. So, essentially, what lands in your checking account. Now, I realize that in SF/NY people might pay double that or more. But that doesn't mean they should. And certainly if one is worried about saving, they shouldn't.
This is kind of a ridiculous rule of thumb.

I spend $7k/month on housing. I also save $200k / year. But by your metric my house is unaffordable because it is 33% of my after-tax, after-savings income.
Even I'm pushing it on that rule of thumb.
Gross Income: $6,250
Take home after 401k, health insurance, taxes: $4,200
Take home after Roth IRAs: $3,200
PITI: $825
$825 / $3,200 = 25.8%.

That being said, I'm strongly looking into recasting to get my PITI down closer to $700 because it does feel too tight. Maybe that rule of thumb isn't so bad after all.
Agreed - that rule of thumb would not work for us either. After taxes and savings there is not enough % left to have a rule such as that.

Grt2bOutdoors
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Re: Will buying a house jeopardize financial security?

Post by Grt2bOutdoors » Mon Mar 25, 2019 12:31 pm

hslngrw wrote:
Mon Mar 25, 2019 9:43 am

I really miss that SALT deduction, it's just crushing the middle class.

I think reading in a different post you have similar HHI but are able to swing a $2M mortgage. Would you mind sharing the numbers on how you pull it off? We do have 2 other condos that are nearly paid off we could sell, but was counting on them to help with retirement income.

Thanks!
Your income puts you in the upper middle class even in a HCOL such as California. If you are relying on a tax deductible to be able to afford something then you are clearly looking to buy too much home! Can you find a cheaper home, everyone in California can not be living in $2mm homes and have two rental condos on the side.
Last edited by Grt2bOutdoors on Mon Mar 25, 2019 12:31 pm, edited 1 time in total.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Admiral
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Re: Will buying a house jeopardize financial security?

Post by Admiral » Mon Mar 25, 2019 12:31 pm

HEDGEFUNDIE wrote:
Mon Mar 25, 2019 11:45 am
Admiral wrote:
Mon Mar 25, 2019 10:53 am
EDIT TO ADD: My rule of thumb is that housing (PITI) should be no more than 25% of AFTER TAX income. And by after tax, I also mean after savings. So, essentially, what lands in your checking account. Now, I realize that in SF/NY people might pay double that or more. But that doesn't mean they should. And certainly if one is worried about saving, they shouldn't.
This is kind of a ridiculous rule of thumb.

I spend $7k/month on housing. I also save $200k / year. But by your metric my house is unaffordable because it is 33% of my after-tax, after-savings income.
It may be for someone who makes a salary that allows 200k of savings per year. It’s not for the other 99%.

smitcat
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Re: Will buying a house jeopardize financial security?

Post by smitcat » Mon Mar 25, 2019 12:39 pm

Admiral wrote:
Mon Mar 25, 2019 12:31 pm
HEDGEFUNDIE wrote:
Mon Mar 25, 2019 11:45 am
Admiral wrote:
Mon Mar 25, 2019 10:53 am
EDIT TO ADD: My rule of thumb is that housing (PITI) should be no more than 25% of AFTER TAX income. And by after tax, I also mean after savings. So, essentially, what lands in your checking account. Now, I realize that in SF/NY people might pay double that or more. But that doesn't mean they should. And certainly if one is worried about saving, they shouldn't.
This is kind of a ridiculous rule of thumb.

I spend $7k/month on housing. I also save $200k / year. But by your metric my house is unaffordable because it is 33% of my after-tax, after-savings income.
It may be for someone who makes a salary that allows 200k of savings per year. It’s not for the other 99%.
OK, understood. So what % of taxes on total income and what % of savings on total income does it work for?

stan1
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Re: Will buying a house jeopardize financial security?

Post by stan1 » Mon Mar 25, 2019 12:51 pm

$300K annual income with a $1M loan although not ideal is doable and probably necessary in a HCOL area. I'm sure you've looked at what you could get for $1M and have ruled those neighborhoods out as not meeting your needs due to commute time or schools or distance from family. Just make sure the $1.5M house isn't a fixer-upper with knob and tube wiring, lead pipes, or a bad foundation needing another $500K of work to live in it with a freeway or railroad in the back yard or an airport flight path above. Live with the existing kitchen without doing a $150K+ remodel.

Personal opinion (for what its worth, others will have a different opinion): Would I buy a house right now in coastal CA? No. Prices are softening in my area in part due to buyer angst about SALT deductions. Sellers are putting trashed houses on the market at very high prices. Sellers who wanted to sell at the peak have already sold. If people start losing jobs it will get much worse. Feel free to call me a market timer but I'd rent a few more years (I would not have written that two years ago). As for SALT deductions make sure you factor in the increased child tax credits if you have children. DINKs and SINKs face a harder hit than families.

HEDGEFUNDIE
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Re: Will buying a house jeopardize financial security?

Post by HEDGEFUNDIE » Mon Mar 25, 2019 12:55 pm

Admiral wrote:
Mon Mar 25, 2019 12:31 pm
HEDGEFUNDIE wrote:
Mon Mar 25, 2019 11:45 am
Admiral wrote:
Mon Mar 25, 2019 10:53 am
EDIT TO ADD: My rule of thumb is that housing (PITI) should be no more than 25% of AFTER TAX income. And by after tax, I also mean after savings. So, essentially, what lands in your checking account. Now, I realize that in SF/NY people might pay double that or more. But that doesn't mean they should. And certainly if one is worried about saving, they shouldn't.
This is kind of a ridiculous rule of thumb.

I spend $7k/month on housing. I also save $200k / year. But by your metric my house is unaffordable because it is 33% of my after-tax, after-savings income.
It may be for someone who makes a salary that allows 200k of savings per year. It’s not for the other 99%.
The OP makes very close to what I make. He is by no means in the 99%.

Admiral
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Re: Will buying a house jeopardize financial security?

Post by Admiral » Mon Mar 25, 2019 1:21 pm

HEDGEFUNDIE wrote:
Mon Mar 25, 2019 12:55 pm
Admiral wrote:
Mon Mar 25, 2019 12:31 pm
HEDGEFUNDIE wrote:
Mon Mar 25, 2019 11:45 am
Admiral wrote:
Mon Mar 25, 2019 10:53 am
EDIT TO ADD: My rule of thumb is that housing (PITI) should be no more than 25% of AFTER TAX income. And by after tax, I also mean after savings. So, essentially, what lands in your checking account. Now, I realize that in SF/NY people might pay double that or more. But that doesn't mean they should. And certainly if one is worried about saving, they shouldn't.
This is kind of a ridiculous rule of thumb.

I spend $7k/month on housing. I also save $200k / year. But by your metric my house is unaffordable because it is 33% of my after-tax, after-savings income.
It may be for someone who makes a salary that allows 200k of savings per year. It’s not for the other 99%.
The OP makes very close to what I make. He is by no means in the 99%.
He is in the 1%, as are you.
Savings: $200k
Housing: $84,000
Presumably you are paying some taxes, so let's add $50,000
Presumably you also eat and do other things required to live: $10,000

So we're now at $344,000 gone. Are you suggesting that your income, which is over $400,000, is not in the 1%?

Well, guess what? $430,600 in HH income is the 1%.

https://dqydj.com/who-are-the-one-perce ... ed-states/

The "normal" rules of expenses vs income do not apply to someone who is able to save 200k per year. Why? Because they are millionaires in 4 years (with some growth) so who cares if they spend 7k per month on housing. I think it's silly, but that's your choice and it's not going to impact your savings rate or your lifestyle. If you lose your job...well, you've got 200k per year to use to pay your mortgage til you find another. Your experience is not relevant to 99% of households in this country.

I'm talking about non-HNW individuals and what, in my view, is advisable to spend on housing. Most experts say no more than 30%. I say less.

My wife and I and I have incomes that are about even. If one of us loses our job, we don't lose our house. People who spend 40% or more of their after tax income on housing are typically not in that position (you, of course, excepted).

Admiral
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Re: Will buying a house jeopardize financial security?

Post by Admiral » Mon Mar 25, 2019 1:25 pm

smitcat wrote:
Mon Mar 25, 2019 12:39 pm
Admiral wrote:
Mon Mar 25, 2019 12:31 pm
HEDGEFUNDIE wrote:
Mon Mar 25, 2019 11:45 am
Admiral wrote:
Mon Mar 25, 2019 10:53 am
EDIT TO ADD: My rule of thumb is that housing (PITI) should be no more than 25% of AFTER TAX income. And by after tax, I also mean after savings. So, essentially, what lands in your checking account. Now, I realize that in SF/NY people might pay double that or more. But that doesn't mean they should. And certainly if one is worried about saving, they shouldn't.
This is kind of a ridiculous rule of thumb.

I spend $7k/month on housing. I also save $200k / year. But by your metric my house is unaffordable because it is 33% of my after-tax, after-savings income.
It may be for someone who makes a salary that allows 200k of savings per year. It’s not for the other 99%.
OK, understood. So what % of taxes on total income and what % of savings on total income does it work for?
Not sure what you're asking here smit, see my response above. The normal rules do not apply to HH making mid six figures (assuming they are saving adequately). I'm speaking of middle class/upper middle class earners. The rich can spend more on EVERYTHING because (assuming they are diligent savers) they save more as well.

DonIce
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Re: Will buying a house jeopardize financial security?

Post by DonIce » Mon Mar 25, 2019 1:26 pm

hslngrw wrote:
Mon Mar 25, 2019 9:43 am
Combined Income: HHI of 450k/yr (only 300k of it is guaranteed, rest dependent on stock grants + bonus)

...

I really miss that SALT deduction, it's just crushing the middle class.
Satire thread?

trustquestioner
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Re: Will buying a house jeopardize financial security?

Post by trustquestioner » Mon Mar 25, 2019 1:35 pm

“Middle class.” My god.

smitcat
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Re: Will buying a house jeopardize financial security?

Post by smitcat » Mon Mar 25, 2019 1:50 pm

Admiral wrote:
Mon Mar 25, 2019 1:25 pm
smitcat wrote:
Mon Mar 25, 2019 12:39 pm
Admiral wrote:
Mon Mar 25, 2019 12:31 pm
HEDGEFUNDIE wrote:
Mon Mar 25, 2019 11:45 am
Admiral wrote:
Mon Mar 25, 2019 10:53 am
EDIT TO ADD: My rule of thumb is that housing (PITI) should be no more than 25% of AFTER TAX income. And by after tax, I also mean after savings. So, essentially, what lands in your checking account. Now, I realize that in SF/NY people might pay double that or more. But that doesn't mean they should. And certainly if one is worried about saving, they shouldn't.
This is kind of a ridiculous rule of thumb.

I spend $7k/month on housing. I also save $200k / year. But by your metric my house is unaffordable because it is 33% of my after-tax, after-savings income.
It may be for someone who makes a salary that allows 200k of savings per year. It’s not for the other 99%.
OK, understood. So what % of taxes on total income and what % of savings on total income does it work for?
Not sure what you're asking here smit, see my response above. The normal rules do not apply to HH making mid six figures (assuming they are saving adequately). I'm speaking of middle class/upper middle class earners. The rich can spend more on EVERYTHING because (assuming they are diligent savers) they save more as well.
I am asking what your rule boils down to in % if total income since it does not work as a % of after tax and savings income.

Admiral
Posts: 2463
Joined: Mon Oct 27, 2014 12:35 pm

Re: Will buying a house jeopardize financial security?

Post by Admiral » Mon Mar 25, 2019 2:03 pm

smitcat wrote:
Mon Mar 25, 2019 1:50 pm
Admiral wrote:
Mon Mar 25, 2019 1:25 pm
smitcat wrote:
Mon Mar 25, 2019 12:39 pm
Admiral wrote:
Mon Mar 25, 2019 12:31 pm
HEDGEFUNDIE wrote:
Mon Mar 25, 2019 11:45 am


This is kind of a ridiculous rule of thumb.

I spend $7k/month on housing. I also save $200k / year. But by your metric my house is unaffordable because it is 33% of my after-tax, after-savings income.
It may be for someone who makes a salary that allows 200k of savings per year. It’s not for the other 99%.
OK, understood. So what % of taxes on total income and what % of savings on total income does it work for?
Not sure what you're asking here smit, see my response above. The normal rules do not apply to HH making mid six figures (assuming they are saving adequately). I'm speaking of middle class/upper middle class earners. The rich can spend more on EVERYTHING because (assuming they are diligent savers) they save more as well.
I am asking what your rule boils down to in % if total income since it does not work as a % of after tax and savings income.
Why does it not work? It works for me. The % is too difficult to calculate from total income because taxes and savings rates are vastly different.

What matters at the end of the day is how much you are spending out-of-pocket for housing. It should be after tax (as a percentage) because that means you've a) already paid your taxes and b) already saved for retirement.

Let's say I gross 10k per month, 120k per year. Let's say 25% goes to taxes (prob a little high) and 15% to retirement. I'm left with $72,000. 25% of that would be PITI of $1500. That sounds about right for a HH making 120k.

Now, my PITI is $2700/mo. However, my HHI is 230k, so it's less than 25% of my takehome. However, some of that is a function of having put down a large amount of money, and some is a function of a very low interest rate.

I do not think that 25% of after tax/savings income is in any way too low. After all, I need to add on nearly $800/month in utils. Housing adds up!

smitcat
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Re: Will buying a house jeopardize financial security?

Post by smitcat » Mon Mar 25, 2019 2:09 pm

"Let's say I gross 10k per month, 120k per year. Let's say 25% goes to taxes (prob a little high) and 15% to retirement. I'm left with $72,000. 25% of that would be PITI of $1500. That sounds about right for a HH making 120k."

OK , that's understandable now.
I just don't see how a 15% rate for housing (18/120) works for much of the 99% as you posted above.

Admiral
Posts: 2463
Joined: Mon Oct 27, 2014 12:35 pm

Re: Will buying a house jeopardize financial security?

Post by Admiral » Mon Mar 25, 2019 2:11 pm

smitcat wrote:
Mon Mar 25, 2019 2:09 pm
"Let's say I gross 10k per month, 120k per year. Let's say 25% goes to taxes (prob a little high) and 15% to retirement. I'm left with $72,000. 25% of that would be PITI of $1500. That sounds about right for a HH making 120k."

OK , that's understandable now.
I just don't see how a 15% rate for housing (18/120) works for much of the 99% as you posted above.
I did not post 15%. I posted 25% of after tax income. I re-checked all of my posts.

smitcat
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Joined: Mon Nov 07, 2016 10:51 am

Re: Will buying a house jeopardize financial security?

Post by smitcat » Mon Mar 25, 2019 2:15 pm

Admiral wrote:
Mon Mar 25, 2019 2:11 pm
smitcat wrote:
Mon Mar 25, 2019 2:09 pm
"Let's say I gross 10k per month, 120k per year. Let's say 25% goes to taxes (prob a little high) and 15% to retirement. I'm left with $72,000. 25% of that would be PITI of $1500. That sounds about right for a HH making 120k."

OK , that's understandable now.
I just don't see how a 15% rate for housing (18/120) works for much of the 99% as you posted above.
I did not post 15%. I posted 25% of after tax income. I re-checked all of my posts.
15% of gross income is what your example calculates to:
PITI = 1500/mo
PITI = $18K per year
$18K per year on a total income of 120K is 15%.

Admiral
Posts: 2463
Joined: Mon Oct 27, 2014 12:35 pm

Re: Will buying a house jeopardize financial security?

Post by Admiral » Mon Mar 25, 2019 2:19 pm

smitcat wrote:
Mon Mar 25, 2019 2:15 pm
Admiral wrote:
Mon Mar 25, 2019 2:11 pm
smitcat wrote:
Mon Mar 25, 2019 2:09 pm
"Let's say I gross 10k per month, 120k per year. Let's say 25% goes to taxes (prob a little high) and 15% to retirement. I'm left with $72,000. 25% of that would be PITI of $1500. That sounds about right for a HH making 120k."

OK , that's understandable now.
I just don't see how a 15% rate for housing (18/120) works for much of the 99% as you posted above.
I did not post 15%. I posted 25% of after tax income. I re-checked all of my posts.
15% of gross income is what your example calculates to:
PITI = 1500/mo
PITI = $18K per year
$18K per year on a total income of 120K is 15%.
I don't see how that number has any relevance to real life, though. If you plan to pay taxes and save for retirement it's what comes after that that's material. Sure, you could save zero and have a bigger mortgage, too.

smitcat
Posts: 4286
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Re: Will buying a house jeopardize financial security?

Post by smitcat » Mon Mar 25, 2019 2:24 pm

Admiral wrote:
Mon Mar 25, 2019 2:19 pm
smitcat wrote:
Mon Mar 25, 2019 2:15 pm
Admiral wrote:
Mon Mar 25, 2019 2:11 pm
smitcat wrote:
Mon Mar 25, 2019 2:09 pm
"Let's say I gross 10k per month, 120k per year. Let's say 25% goes to taxes (prob a little high) and 15% to retirement. I'm left with $72,000. 25% of that would be PITI of $1500. That sounds about right for a HH making 120k."

OK , that's understandable now.
I just don't see how a 15% rate for housing (18/120) works for much of the 99% as you posted above.
I did not post 15%. I posted 25% of after tax income. I re-checked all of my posts.
15% of gross income is what your example calculates to:
PITI = 1500/mo
PITI = $18K per year
$18K per year on a total income of 120K is 15%.
I don't see how that number has any relevance to real life, though. If you plan to pay taxes and save for retirement it's what comes after that that's material. Sure, you could save zero and have a bigger mortgage, too.
All I am saying is that 15% is not enough for many of your 99% of folks in suburbs to get a home. Just like some posters above noted and why they allow more than twice that for mortgages.
The formulae may work for you perfectly but it is not universal.

Admiral
Posts: 2463
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Re: Will buying a house jeopardize financial security?

Post by Admiral » Mon Mar 25, 2019 2:29 pm

smitcat wrote:
Mon Mar 25, 2019 2:24 pm
Admiral wrote:
Mon Mar 25, 2019 2:19 pm
smitcat wrote:
Mon Mar 25, 2019 2:15 pm
Admiral wrote:
Mon Mar 25, 2019 2:11 pm
smitcat wrote:
Mon Mar 25, 2019 2:09 pm
"Let's say I gross 10k per month, 120k per year. Let's say 25% goes to taxes (prob a little high) and 15% to retirement. I'm left with $72,000. 25% of that would be PITI of $1500. That sounds about right for a HH making 120k."

OK , that's understandable now.
I just don't see how a 15% rate for housing (18/120) works for much of the 99% as you posted above.
I did not post 15%. I posted 25% of after tax income. I re-checked all of my posts.
15% of gross income is what your example calculates to:
PITI = 1500/mo
PITI = $18K per year
$18K per year on a total income of 120K is 15%.
I don't see how that number has any relevance to real life, though. If you plan to pay taxes and save for retirement it's what comes after that that's material. Sure, you could save zero and have a bigger mortgage, too.
All I am saying is that 15% is not enough for many of your 99% of folks in suburbs to get a home. Just like some posters above noted and why they allow more than twice that for mortgages.
The formulae may work for you perfectly but it is not universal.
Nothing is universal. I said it's my rule of thumb!

One thing you're not calculating is: down payment. One of the reasons why it does (or should) work is that it requires one to have a low mortgage payment, which means a) a very cheap house relative to income (not that likely, but possible); or b) a sizable down payment. Mine was 40%. I realize this is not common. But it makes all the difference in making housing affordable, in enforces savings, and it frees up other money (cashflow) that can be saved for retirement.

I didn't say it was a free lunch.

megabad
Posts: 2487
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Re: Will buying a house jeopardize financial security?

Post by megabad » Mon Mar 25, 2019 2:47 pm

hslngrw wrote:
Sun Mar 24, 2019 4:06 pm
We would like to buy a SFH which tend to run around 1.5M for a 4bed/2ba 2000sf home. The sale of the current townhouse would cover the downpayment for the SFH. PITI would be about 7k / month. My worry is the mortgage + taxes would eliminate the ability to continue to build investments. Would this be jeopardizing financial security? How do people who pull the trigger on a SFH balance the trade-off between a home and the desire for continued financial growth?
It is my opinion that it would not jeopardize your financial security if your expenses are reasonable. It is also my opinion that the home purchase will not eliminate your ability to invest. My quick calculations are slightly different than HEDGEFUNDIEs with respect to taxes but it is clear that you have likely in excess of $150k each year for living expenses AFTER taxes, 401k contributions and house PITI.

The way people in your situation balance the "trade-off" between home and investment growth is to consider their entire compensation and/or to contain expenses. Discounting your stock grants to zero seems odd to me. In order to increase your financial security, you would likely want to be exiting these regularly and investing in broadly diversified portfolio. I think that is the key to not jeopardizing your financial security.

I think you are wise to not count on the stock grants for spending purposes. By planning this way, it ensure that you can exit the stock grants every year and amass a large investment portfolio on top of your 401ks/IRAs.

smitcat
Posts: 4286
Joined: Mon Nov 07, 2016 10:51 am

Re: Will buying a house jeopardize financial security?

Post by smitcat » Mon Mar 25, 2019 2:53 pm

Admiral wrote:
Mon Mar 25, 2019 2:29 pm
smitcat wrote:
Mon Mar 25, 2019 2:24 pm
Admiral wrote:
Mon Mar 25, 2019 2:19 pm
smitcat wrote:
Mon Mar 25, 2019 2:15 pm
Admiral wrote:
Mon Mar 25, 2019 2:11 pm


I did not post 15%. I posted 25% of after tax income. I re-checked all of my posts.
15% of gross income is what your example calculates to:
PITI = 1500/mo
PITI = $18K per year
$18K per year on a total income of 120K is 15%.
I don't see how that number has any relevance to real life, though. If you plan to pay taxes and save for retirement it's what comes after that that's material. Sure, you could save zero and have a bigger mortgage, too.
All I am saying is that 15% is not enough for many of your 99% of folks in suburbs to get a home. Just like some posters above noted and why they allow more than twice that for mortgages.
The formulae may work for you perfectly but it is not universal.
Nothing is universal. I said it's my rule of thumb!

One thing you're not calculating is: down payment. One of the reasons why it does (or should) work is that it requires one to have a low mortgage payment, which means a) a very cheap house relative to income (not that likely, but possible); or b) a sizable down payment. Mine was 40%. I realize this is not common. But it makes all the difference in making housing affordable, in enforces savings, and it frees up other money (cashflow) that can be saved for retirement.

I didn't say it was a free lunch.
"Mine was 40%. I realize this is not common. But it makes all the difference in making housing affordable, in enforces savings, and it frees up other money (cashflow) that can be saved for retirement."

Yes - but taking a large amount of funds and using it for a down payment on a home that would free up a bunch of cash flow to then allow you to save it back up. An option is to just take a larger mortgage at that low % and leave the savings for retirement which will leave you less required to save in the future.

HEDGEFUNDIE
Posts: 3628
Joined: Sun Oct 22, 2017 2:06 pm

Re: Will buying a house jeopardize financial security?

Post by HEDGEFUNDIE » Mon Mar 25, 2019 3:14 pm

megabad wrote:
Mon Mar 25, 2019 2:47 pm
hslngrw wrote:
Sun Mar 24, 2019 4:06 pm
We would like to buy a SFH which tend to run around 1.5M for a 4bed/2ba 2000sf home. The sale of the current townhouse would cover the downpayment for the SFH. PITI would be about 7k / month. My worry is the mortgage + taxes would eliminate the ability to continue to build investments. Would this be jeopardizing financial security? How do people who pull the trigger on a SFH balance the trade-off between a home and the desire for continued financial growth?
It is my opinion that it would not jeopardize your financial security if your expenses are reasonable. It is also my opinion that the home purchase will not eliminate your ability to invest. My quick calculations are slightly different than HEDGEFUNDIEs with respect to taxes but it is clear that you have likely in excess of $150k each year for living expenses AFTER taxes, 401k contributions and house PITI.
Bingo

Admiral
Posts: 2463
Joined: Mon Oct 27, 2014 12:35 pm

Re: Will buying a house jeopardize financial security?

Post by Admiral » Mon Mar 25, 2019 3:58 pm

smitcat wrote:
Mon Mar 25, 2019 2:53 pm
Admiral wrote:
Mon Mar 25, 2019 2:29 pm
smitcat wrote:
Mon Mar 25, 2019 2:24 pm
Admiral wrote:
Mon Mar 25, 2019 2:19 pm
smitcat wrote:
Mon Mar 25, 2019 2:15 pm


15% of gross income is what your example calculates to:
PITI = 1500/mo
PITI = $18K per year
$18K per year on a total income of 120K is 15%.
I don't see how that number has any relevance to real life, though. If you plan to pay taxes and save for retirement it's what comes after that that's material. Sure, you could save zero and have a bigger mortgage, too.
All I am saying is that 15% is not enough for many of your 99% of folks in suburbs to get a home. Just like some posters above noted and why they allow more than twice that for mortgages.
The formulae may work for you perfectly but it is not universal.
Nothing is universal. I said it's my rule of thumb!

One thing you're not calculating is: down payment. One of the reasons why it does (or should) work is that it requires one to have a low mortgage payment, which means a) a very cheap house relative to income (not that likely, but possible); or b) a sizable down payment. Mine was 40%. I realize this is not common. But it makes all the difference in making housing affordable, in enforces savings, and it frees up other money (cashflow) that can be saved for retirement.

I didn't say it was a free lunch.
"Mine was 40%. I realize this is not common. But it makes all the difference in making housing affordable, in enforces savings, and it frees up other money (cashflow) that can be saved for retirement."

Yes - but taking a large amount of funds and using it for a down payment on a home that would free up a bunch of cash flow to then allow you to save it back up. An option is to just take a larger mortgage at that low % and leave the savings for retirement which will leave you less required to save in the future.
Ah but those were after tax dollars. The downpayment allows cashflow to support saving pre-tax dollars. Big difference (I get 100% match, as well).

The OP's question was "Will buying a house jeopardize financial security?" My response was "stay in your current home for a few years, where you have lots of equity, save as much as you can, then use that plus stock sales on a new home." Everything else is just numbers on a spreadsheet. Some people are comfortable paying $7000 a month (and let's add in $1000/mo for utils at least, likely more in CA). I would not be comfortable with that payment at the OP's income. Many people buy more house they can/should afford. But I realize there are extenuating circumstances in most cases. I just hope for the OP's case that employment remains steady and the money keeps rolling in to service the debt.

Dottie57
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Location: Earth Northern Hemisphere

Re: Will buying a house jeopardize financial security?

Post by Dottie57 » Mon Mar 25, 2019 3:59 pm

GT99 wrote:
Mon Mar 25, 2019 12:16 pm
JGoneRiding wrote:
Mon Mar 25, 2019 10:43 am
hslngrw wrote:
Mon Mar 25, 2019 9:43 am

Mortgage + Property tax would be ~ $110k/yr which only leaves $100k for living + saving.
Day care + tuition for 2 kiddos eats up a 48k of that.

I really miss that SALT deduction, it's just crushing the middle class.


Thanks!
Lol I am sorry housing is insane for what you want but on no metric does a hhi of 400k plus a year qualify you as "middle class"
I believe Obama declared anything over 250k "wealthy" and the reality is middle class is a lot lower then that. (If defined as the middle 50%
Glad I'm not the only one who did a double-take at that. That's more than double what could be considered a reasonable upper bound of middle class in a HCOL area (and more than quadruple the upper bound in most of the US).
Hehe. That would put me as poor with income of 90-100k!

jibantik
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Re: Will buying a house jeopardize financial security?

Post by jibantik » Mon Mar 25, 2019 5:34 pm

trustquestioner wrote:
Mon Mar 25, 2019 1:35 pm
“Middle class.” My god.
LOL welcome to bogleheads, where someone with a HHI of 450k, over a million in stock and cash, 2 nearly paid off condos, and a townhome with 400k equity is somehow middle class :oops:

22twain
Posts: 2105
Joined: Thu May 10, 2012 5:42 pm

Re: Will buying a house jeopardize financial security?

Post by 22twain » Mon Mar 25, 2019 5:45 pm

GT99 wrote:
Mon Mar 25, 2019 12:16 pm
JGoneRiding wrote:
Mon Mar 25, 2019 10:43 am
on no metric does a hhi of 400k plus a year qualify you as "middle class"
Glad I'm not the only one who did a double-take at that. That's more than double what could be considered a reasonable upper bound of middle class in a HCOL area (and more than quadruple the upper bound in most of the US).
I think this was beaten to death recently in another thread which ended up being locked. :wink:

(same income, in fact!)
My investing princiPLEs do not include absolutely preserving princiPAL.

mega317
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Re: Will buying a house jeopardize financial security?

Post by mega317 » Mon Mar 25, 2019 5:54 pm

Perhaps we can get back to the OPs question which was not how many people make more and less money than her/him.

OP can you confirm or refute some of the estimates that others have posted regarding your balance sheet? Is my reading of your OP correct that with this new house you would no longer be saving?

Topic Author
hslngrw
Posts: 5
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Re: Will buying a house jeopardize financial security?

Post by hslngrw » Mon Mar 25, 2019 6:54 pm

Sorry, there might have been a bit of error on my part.

The PITI is $85k per year on 1.5M (not the 120 as I miss quoted later)

With regards to the balance sheet, we try to save $3000 per month in the event of an emergency or job loss. The rest we have been putting into a mix of stocks and real estate investments.

There are other expenses (529 college plans, Mega backdoor ROTH, and utilities which I didn’t itemize). Buying a larger home would require either stopping investing OR adding to the emergency savings.

Just curious if people in a similar situation feel the trade off of bigger house in a better school district is worth the trade off of not being able to save and invest as fast.

Thanks to all for the insightful comments so far. I’m leaning towards waiting for another year or two of vest and seeing if home prices have decreased.

HEDGEFUNDIE
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Re: Will buying a house jeopardize financial security?

Post by HEDGEFUNDIE » Mon Mar 25, 2019 6:59 pm

hslngrw wrote:
Mon Mar 25, 2019 6:54 pm

There are other expenses (529 college plans, Mega backdoor ROTH, and utilities which I didn’t itemize). Buying a larger home would require either stopping investing OR adding to the emergency savings.
Once again, you are confusing expenses with savings.

529 counts as savings. Mega Backdoor Roth counts as savings.

And contrary to Admiral's comment above, I highly doubt your utilities are $1000/month. Mine are only $350/month.

I think you need to sit down and build a full income statement. All sources of income minus taxes, minus (actual) spending, which leaves you with (actual) savings. I suspect you will find that you have plenty of room even after buying the house.

Rondo
Posts: 48
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Re: Will buying a house jeopardize financial security?

Post by Rondo » Mon Mar 25, 2019 7:14 pm

Looking at your savings and investments, the numbers seem low for your income level. Or have you recently began making more income?

majiaknight
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Re: Will buying a house jeopardize financial security?

Post by majiaknight » Mon Mar 25, 2019 7:16 pm

You didn't mention the job security of you and spouse. If you're concerned about financial security, then you might aim to have one single income to cover all monthly expenses including PITI.

You didn't indicate why you want to switch to SFH. In the CA Bay Area where I live, $1.5M SFH doesn't buy you enough upgrades compared to a $1.1M Townhouse. If the move would save you quite some daily commute time or the private school tuition, then these should be counted into the calculation. Several of my friends upgraded to bigger SFH ($1.8-$2.7M) in good school district from a starter Townhouse ($1.1-$1.3M, private school is the only option) when they had the 2nd kid.

Slacker
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Re: Will buying a house jeopardize financial security?

Post by Slacker » Mon Mar 25, 2019 7:35 pm

Admiral wrote:
Mon Mar 25, 2019 10:53 am

EDIT TO ADD: My rule of thumb is that housing (PITI) should be no more than 25% of AFTER TAX income. And by after tax, I also mean after savings. So, essentially, what lands in your checking account. Now, I realize that in SF/NY people might pay double that or more. But that doesn't mean they should. And certainly if one is worried about saving, they shouldn't.
It seems a bit odd to say 25% of take home after savings.

So, if I make $100K after taxes and after 401K contribution I'd be okay to spend $25k per year on housing so long as I don't save any more of my take home pay? I have to spend the other $75k on whatever miscellaneous costs come up? Why would it not be okay to save an additional $50K out of the $100K, spend $25K on housing and $25K on other expenses (this would amount to housing being 50% of the take home pay after tax and after savings)?

Slacker
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Re: Will buying a house jeopardize financial security?

Post by Slacker » Mon Mar 25, 2019 7:38 pm

OP, are you comfortable in your current home? Is there a real need to "upgrade"? If worried about continuing to save, why not stay in your current home and if appreciation happens for the SFH, it should happen for your townhome also meaning that you won't be left behind due to appreciation and can upgrade at a later time if you still feel it necessary once you feel personally more secure in your family's savings and networth level.

dknightd
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Re: Will buying a house jeopardize financial security?

Post by dknightd » Mon Mar 25, 2019 8:01 pm

hslngrw wrote:
Mon Mar 25, 2019 9:43 am
We do have 2 other condos that are nearly paid off we could sell, but was counting on them to help with retirement income.
Plus the one you live in. You seem to be highly invested in HCOL real estate. This could work out really well, or it could be a disaster waiting to happen. I would be nervous having most of my assets tied to property values in one location. Perhaps sell two condos to fund the house? Just so your net investment in real estate does not increase. It is really up to you. You might win, or you might loose. It is impossible to predict . . .

Admiral
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Joined: Mon Oct 27, 2014 12:35 pm

Re: Will buying a house jeopardize financial security?

Post by Admiral » Tue Mar 26, 2019 7:15 am

Slacker wrote:
Mon Mar 25, 2019 7:35 pm
Admiral wrote:
Mon Mar 25, 2019 10:53 am

EDIT TO ADD: My rule of thumb is that housing (PITI) should be no more than 25% of AFTER TAX income. And by after tax, I also mean after savings. So, essentially, what lands in your checking account. Now, I realize that in SF/NY people might pay double that or more. But that doesn't mean they should. And certainly if one is worried about saving, they shouldn't.
It seems a bit odd to say 25% of take home after savings.

So, if I make $100K after taxes and after 401K contribution I'd be okay to spend $25k per year on housing so long as I don't save any more of my take home pay? I have to spend the other $75k on whatever miscellaneous costs come up? Why would it not be okay to save an additional $50K out of the $100K, spend $25K on housing and $25K on other expenses (this would amount to housing being 50% of the take home pay after tax and after savings)?
Who says you can't save more? If you want to, go ahead and do that. But if you're taking home 100k AFTER taxes and savings you are making more than 97% of the US population, so you don't need to be as conservative/careful as the 97%.
EDIT TO ADD: I was referring to pretax savings as coming off the top, and presumably/hopefully at that income that amounts to $19,000. If you want to save more after tax, that brings FI that much closer. 25% of $8333/moth is roughly $2100. Add in utils (water, gas, electric, cable, suburban costs like landscaping) and you’re at $3000 per month. That leaves you with $5333/mo for other expenses. That strikes me as a stress free financial picture.

But again that person is high income and could afford a housing cost of 40% because they are already high savers. That’s not the case for most people.
Last edited by Admiral on Tue Mar 26, 2019 7:34 am, edited 1 time in total.

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