Can I afford 650k house?

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TarHeel2002
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Can I afford 650k house?

Post by TarHeel2002 »

41 y.o. married 3 kids (10, 8, 2)

1.2 million investments / retirement
145k 529 funds

Annual income 250-275k

Currently saving 60-70k per year for retirement plus 18k year for college

Equity in current house about 300k

Current house payment is very low..$577 month. Entertaining buying this new home for added space and more desirable location…but generally we are happy where we are at. Property taxes significantly higher too at this new location as it’s in the city limits. Extra 10-12k per year in property taxes.

Not sure if it’s worth rocking the boat over this one. We don’t love the new house we’re looking at..but it does have some advantages. It just popped up on the market so we had to go look at it
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rocket354
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Re: Can I afford 650k house?

Post by rocket354 »

Yes, you can afford it.

Only you can answer whether you should buy it. It will be considerably more expensive than your current place, not just in mortgage (P&I), but taxes, as you noted, and insurance, and maintenance and repairs, and, likely, utilities. All those additional costs have to come from somewhere. So your retirement and/or college savings amounts will likely take a hit, or another large expense of yours will (or all of the above).

Is having to work a few extra years, and/or having a less lavish retirement, and/or having the kids take out student loans, worth it? Especially since it sounds like you're perfectly ok where you're at?

Only you can answer that. Everyone values these things differently.
Grt2bOutdoors
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Re: Can I afford 650k house?

Post by Grt2bOutdoors »

Look at your spending and savings today. Can you come up with an additional $10-12k while continuing with your savings rate? Are you okay with adding $6k per year to 529 plan? Bigger house - bigger maintenance expenses.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
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riverant
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Re: Can I afford 650k house?

Post by riverant »

Sure you can. As with many, you can afford most anything but not everything. You seem to be perfectly happy where you are, not sure why you’d entertain spending so much more for a house you’re just “meh” about.
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TarHeel2002
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Re: Can I afford 650k house?

Post by TarHeel2002 »

Thank you for the replies. Our gut was telling us not to do this but it felt good to at least explore the option and see the new house. We are pretty darn happy in our current home. Really appreciate the feedback …it definitely helps. :sharebeer
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Nate79
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Re: Can I afford 650k house?

Post by Nate79 »

Could you afford the mortgage and expenses? Yes, easily. The question of should you is complicated. From the personal side is that a house you want to live in even knowing it will cost you a lot of money? From the financial side what are your goals and how do you plan to reach them? For example if you want to retire by 20XX and you need to save XX per year at a market return of YY% how many extra years would you need to work to now reach the goal considering the much higher expense of the new house?
Olemiss540
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Re: Can I afford 650k house?

Post by Olemiss540 »

Very easy yes. Unless you have a goal of FI in the next 5 years.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.
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leeks
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Re: Can I afford 650k house?

Post by leeks »

TarHeel2002 wrote: Sun Jun 13, 2021 2:16 pm We don’t love the new house we’re looking at..but it does have some advantages.
Yes you can afford a more expensive house. But this one doesn't sound like the one you should get.

Take your time and wait until one you do love is on the market (or one you see the potential to remodel into something you love). Maybe next year will offer greater supply if you find nothing loveable this year. Or maybe you can put an addition on the house you have.
neverpanic
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Re: Can I afford 650k house?

Post by neverpanic »

You can afford it.

You mentioned "more desirable location"? Does the school district play into your decision at all?
I am not a financial professional or guru. I'm a schmuck who got lucky 10 times. Such is the life of the trader.
onourway
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Re: Can I afford 650k house?

Post by onourway »

Similar ages, kids, incomes, etc. We made the decision last year to buy a house in the $500k range, but high taxes, lots of maintenance, after nearly two decades in a small place that we also loved. So far we are not regretting the decision. This was a choice to spend a bit more now while the kids are of an age that we will all appreciate it rather than letting us retire a bit earlier and/or a bit wealthier. On the other hand we have a bit more saved than you and had been looking on and off for the better part of a decade and found THE house. With interest rates so low, we made the decision to make a 20% down payment and give our savings a boost with the proceeds from the sale of our previous home. The increased liquidity has really improved our ability to sleep well at night, despite the comparatively large mortgage and maintenance costs.
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JonnyDVM
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Re: Can I afford 650k house?

Post by JonnyDVM »

Yes, but it sounds like you don’t want it and want us to tell you no.

Well I’m not telling you no. You can easily afford it. I definitely wouldn’t make such a life altering decision without actually liking the house though. So if you don’t like it, don’t buy it.
I’d trade it all for a little more | -C Montgomery Burns
anoop
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Re: Can I afford 650k house?

Post by anoop »

TarHeel2002 wrote: Sun Jun 13, 2021 2:16 pm Not sure if it’s worth rocking the boat over this one. We don’t love the new house we’re looking at..but it does have some advantages. It just popped up on the market so we had to go look at it
This is the issue, not affordability. Trust your gut. It seems like your gut isn't too excited about it.
renue74
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Re: Can I afford 650k house?

Post by renue74 »

I bought a $200K house in 2002 and lived in it for 18 years. Through some personal/marriage things that happened, we ended up moving/upgrading to a $700K house earlier this year.

I've never been a "house" or "car" person and the house feels like I'm house sitting for somebody else. It's a mansion compared to my old house....but slowly, I've learned to like it.

As others have said, you have to trust your gut. Personally, I'm still not in love with my new house....but everybody else I know loves its, including my wife. It is an asset and I'm told my realtor that it's gone up in value $150K in 6 months....so now I'm trying to convince my wife to move again.....but no such luck.

Think about it really hard. It's not always better to move.
Topic Author
TarHeel2002
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Re: Can I afford 650k house?

Post by TarHeel2002 »

neverpanic wrote: Sun Jun 13, 2021 7:53 pm You can afford it.

You mentioned "more desirable location"? Does the school district play into your decision at all?
No …school districts are the same..so no difference there.
makingmistakes
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Re: Can I afford 650k house?

Post by makingmistakes »

TJat wrote: Sun Jun 13, 2021 2:31 pm Sure you can. As with many, you can afford most anything but not everything. You seem to be perfectly happy where you are, not sure why you’d entertain spending so much more for a house you’re just “meh” about.
Right answer! 😄

If you loved the house, then maybe. Don’t love the house, no way.
Outer Marker
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Re: Can I afford 650k house?

Post by Outer Marker »

TarHeel2002 wrote: Sun Jun 13, 2021 2:16 pm Extra 10-12k per year in property taxes.
Really? That seems excessive. I live in a very high tax county and my total property taxes on a $1.2M house are around $10k. It's hard to believe your incremental tax moving from a 400 ish house to a 650 one would be that much more. If true, that would be a deal killer for me, but I'd investigate it more carefully.

That said, I haven't regretted any of my housing purchases. I look at it primarily as a consumption item - which I enjoy every day. Though, quite frankly, as "investments" they have done very well.
EddyB
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Re: Can I afford 650k house?

Post by EddyB »

Outer Marker wrote: Mon Jun 14, 2021 7:16 am
TarHeel2002 wrote: Sun Jun 13, 2021 2:16 pm Extra 10-12k per year in property taxes.
Really? That seems excessive. I live in a very high tax county and my total property taxes on a $1.2M house are around $10k. It's hard to believe your incremental tax moving from a 400 ish house to a 650 one would be that much more. If true, that would be a deal killer for me, but I'd investigate it more carefully.

That said, I haven't regretted any of my housing purchases. I look at it primarily as a consumption item - which I enjoy every day. Though, quite frankly, as "investments" they have done very well.
One more reason not to regret your housing purchase: Your tax rate appears to be below average. “Nationwide, the effective property tax rate is 1.1% of the average home value.” https://www.usatoday.com/story/money/20 ... 111375916/

But the incremental jump for the OP seems like a real negative, if accurate.
ImUrHuckleberry
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Re: Can I afford 650k house?

Post by ImUrHuckleberry »

Outer Marker wrote: Mon Jun 14, 2021 7:16 am
TarHeel2002 wrote: Sun Jun 13, 2021 2:16 pm Extra 10-12k per year in property taxes.
Really? That seems excessive. I live in a very high tax county and my total property taxes on a $1.2M house are around $10k. It's hard to believe your incremental tax moving from a 400 ish house to a 650 one would be that much more. If true, that would be a deal killer for me, but I'd investigate it more carefully.

That said, I haven't regretted any of my housing purchases. I look at it primarily as a consumption item - which I enjoy every day. Though, quite frankly, as "investments" they have done very well.
Try NH. I pay ~ $6000 on a $250k house, and still pay MA state income tax on top of it.
jharkin
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Re: Can I afford 650k house?

Post by jharkin »

Outer Marker wrote: Mon Jun 14, 2021 7:16 am

Really? That seems excessive. I live in a very high tax county and my total property taxes on a $1.2M house are around $10k. It's hard to believe your incremental tax moving from a 400 ish house to a 650 one would be that much more. If true, that would be a deal killer for me, but I'd investigate it more carefully.
Your taxes sound LOW to me. My house would probably sell for 900k tomorrow and has a tax value of around 650 and I pay 11-12k a year in property tax. A 1.2M in my neighborhood would be a 20k tax bill. In a really high tax like NJ it would be even worse.

Look at the OPs current house payment, its only $600!! not surprising at all to have a big tax jump on such a big increase in value.


FWIW I agree with the concensus they can easily afford it.
Topic Author
TarHeel2002
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Re: Can I afford 650k house?

Post by TarHeel2002 »

Our property taxes are pretty low here. We are outside the city limits in a township and we also purchased this property for about 190k 14 years ago. We’ve put about 160k into the house over the years and the property is now probably worth about 450-500k. It’s lakefront and has appreciated some as well. Property taxes here haven’t kept pace with the home value increases. My property taxes are about $2900.

If we purchase this other house the current taxes are about $8400 but that’s based on an SEV of 192k. The taxes would be reassessed on a new SEV of 325k. So I take $8400 x (325/192) and come up with about $14,200 for annual taxes. Our city seems high when compared to other places ..not sure why. My guess is that my tax bill would’ve jumped from $2900 to $14,200 overnight. Definitely a deal killer now that I look at it. Thank you
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JonnyDVM
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Re: Can I afford 650k house?

Post by JonnyDVM »

Waaaaaaait. Is this something your spouse really wants but you’re cool on ?
I’d trade it all for a little more | -C Montgomery Burns
Topic Author
TarHeel2002
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Re: Can I afford 650k house?

Post by TarHeel2002 »

Nah …she isn’t too keen on it either really. We were both kinda “meh” about the house but it’s in a desirable location and does have some nice features that our current home doesn’t have.
Katietsu
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Re: Can I afford 650k house?

Post by Katietsu »

TarHeel2002 wrote: Mon Jun 14, 2021 1:47 pm Nah …she isn’t too keen on it either really. We were both kinda “meh” about the house but it’s in a desirable location and does have some nice features that our current home doesn’t have.
Sounds like you are caught up in all the focus on real estate and FOMO right now. If I were you, I would feel grateful that I could stay out of the feeding frenzy of today's real estate market.
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riverant
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Re: Can I afford 650k house?

Post by riverant »

TarHeel2002 wrote: Mon Jun 14, 2021 12:39 pm Our property taxes are pretty low here. We are outside the city limits in a township and we also purchased this property for about 190k 14 years ago. We’ve put about 160k into the house over the years and the property is now probably worth about 450-500k. It’s lakefront and has appreciated some as well. Property taxes here haven’t kept pace with the home value increases. My property taxes are about $2900.

If we purchase this other house the current taxes are about $8400 but that’s based on an SEV of 192k. The taxes would be reassessed on a new SEV of 325k. So I take $8400 x (325/192) and come up with about $14,200 for annual taxes. Our city seems high when compared to other places ..not sure why. My guess is that my tax bill would’ve jumped from $2900 to $14,200 overnight. Definitely a deal killer now that I look at it. Thank you
A lakehouse in a low tax area??? Let me know if you’re selling :)
iamlucky13
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Re: Can I afford 650k house?

Post by iamlucky13 »

TarHeel2002 wrote: Sun Jun 13, 2021 2:16 pm Not sure if it’s worth rocking the boat over this one. We don’t love the new house we’re looking at..but it does have some advantages. It just popped up on the market so we had to go look at it
If you're not very interested in the specific home, but are interested in a new place at some point, focus more on determining what you want your budget to be for now than on a specific house. Than casually watch and see what kind of options come up over the long term.

It looks to me like affording it should be fairly easy, unless your long term financial plan really depends on your current ~30% savings rate or some of the other expenses that weren't mentioned, but if you're happy with your current place, and feeling ambivalent about the advantages you see in the new place, then don't force it.
esqu1re
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Re: Can I afford 650k house?

Post by esqu1re »

Why not buy the house you really want? (You can afford an even pricier home--no need to settle)
esqu1re
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Re: Can I afford 650k house?

Post by esqu1re »

Why not buy the house you really want? (You can afford an even pricier home--no need to settle)
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