sanity check

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Topic Author
dirtylizard
Posts: 17
Joined: Sun Feb 04, 2018 4:41 pm

sanity check

Post by dirtylizard » Wed May 15, 2019 10:43 am

I have a tech job in Bay Area and it was a real stretch to buy a house last year. Wife is SAHM, two kids. We're behind the curve in savings, need to pump away $$ for retirement. I do have a 200sqft studio on my property that can be rented for $1500/mo and wife wants to work part time.

TC: $350-370 depending on RSUs. $160k in 401k, $300k in index fund.
Monthly net: ~$14K (after 401k, healthcare, etc)
Home value: 1.2M
mortgage: $940k balance, 7/1ARM, 3.77%

Questions:
1. is now a good time to refinance for 15-20 year fixed?
2. obviously renting the studio is a good idea, anyone have any pointers on legal liabilities if we do? I'm looking for a lawyer locally to discuss this as well.
3. I've had a crazy month- got laid off, got $150k severance, then got new job with longer commute at slightly better salary. The severance is paying off some debt and then going into index fund or cash savings. I'm interested in getting my monthly mortgage payments down- mortgage is currently $4500/mo. I could sell $300k of investments and have $350k to pay down mortgage to get balance down to $550k and have nothing left in investments but I would be eligible to take full advantage of the mortgage interest deduction. Good idea or no?

Thanks, very much appreciate any wisdom.

FoolMeOnce
Posts: 595
Joined: Mon Apr 24, 2017 11:16 am

Re: sanity check

Post by FoolMeOnce » Wed May 15, 2019 10:52 am

To be clear, after 401k max, healthcare, and bay area housing, (alone with whatever else you included in "etc."), you are clearing $9,500/month? If you are feeling pinched, you should look at your other spending for reductions.

Hard to know $460k savings is "behind" without your ages.

stoptothink
Posts: 5451
Joined: Fri Dec 31, 2010 9:53 am

Re: sanity check

Post by stoptothink » Wed May 15, 2019 10:55 am

dirtylizard wrote:
Wed May 15, 2019 10:43 am
I have a tech job in Bay Area and it was a real stretch to buy a house last year. Wife is SAHM, two kids. We're behind the curve in savings, need to pump away $$ for retirement. I do have a 200sqft studio on my property that can be rented for $1500/mo and wife wants to work part time.

TC: $350-370 depending on RSUs. $160k in 401k, $300k in index fund.
Monthly net: ~$14K (after 401k, healthcare, etc)
Home value: 1.2M
mortgage: $940k balance, 7/1ARM, 3.77%

Questions:
1. is now a good time to refinance for 15-20 year fixed?
2. obviously renting the studio is a good idea, anyone have any pointers on legal liabilities if we do? I'm looking for a lawyer locally to discuss this as well.
3. I've had a crazy month- got laid off, got $150k severance, then got new job with longer commute at slightly better salary. The severance is paying off some debt and then going into index fund or cash savings. I'm interested in getting my monthly mortgage payments down- mortgage is currently $4500/mo. I could sell $300k of investments and have $350k to pay down mortgage to get balance down to $550k and have nothing left in investments but I would be eligible to take full advantage of the mortgage interest deduction. Good idea or no?

Thanks, very much appreciate any wisdom.
With highly irregular income and working in a volatile industry, the absolute lasting thing I'd do is sell my only liquid assets to dump them into the mortgage.That looks like a decent ARM rate, I'd sit on it for the next 6yrs until it resets and reevaluate.

Topic Author
dirtylizard
Posts: 17
Joined: Sun Feb 04, 2018 4:41 pm

Re: sanity check

Post by dirtylizard » Wed May 15, 2019 11:12 am

more info:

We're early 40s. I work at blue-chip fortune 100 companies that are stable.
I think my monthly net is above $11k ($~5500 per paycheck after tax, healthcare, and 401k max).
Mortgage is $4500, so that's $6500 per month after mortgage payment. I have not started the new job yet and basing this off my previous employer statement. I am making $10k/yr more at new employer so this is fuzzy.

stoptothink
Posts: 5451
Joined: Fri Dec 31, 2010 9:53 am

Re: sanity check

Post by stoptothink » Wed May 15, 2019 11:15 am

dirtylizard wrote:
Wed May 15, 2019 11:12 am
more info:

We're early 40s. I work at blue-chip fortune 100 companies that are stable.
I think my monthly net is above $11k ($~5500 per paycheck after tax, healthcare, and 401k max).
Mortgage is $4500, so that's $6500 per month after mortgage payment. I have not started the new job yet and basing this off my previous employer statement. I am making $10k/yr more at new employer so this is fuzzy.
That makes paying down the mortgage look even worse.

Topic Author
dirtylizard
Posts: 17
Joined: Sun Feb 04, 2018 4:41 pm

Re: sanity check

Post by dirtylizard » Wed May 15, 2019 11:25 am

stoptothink wrote:
Wed May 15, 2019 11:15 am
dirtylizard wrote:
Wed May 15, 2019 11:12 am
more info:

We're early 40s. I work at blue-chip fortune 100 companies that are stable.
I think my monthly net is above $11k ($~5500 per paycheck after tax, healthcare, and 401k max).
Mortgage is $4500, so that's $6500 per month after mortgage payment. I have not started the new job yet and basing this off my previous employer statement. I am making $10k/yr more at new employer so this is fuzzy.
That makes paying down the mortgage look even worse.
Yeah, I think the only reason to do this is if we decide to move out of bay in a few years, feel very confident in rising house prices and possible declining stock market, and can use this as an investment vehicle.

PDX_Traveler
Posts: 39
Joined: Mon Nov 14, 2016 2:18 am

Re: sanity check

Post by PDX_Traveler » Wed May 15, 2019 12:00 pm

dirtylizard wrote:
Wed May 15, 2019 11:25 am
stoptothink wrote:
Wed May 15, 2019 11:15 am
dirtylizard wrote:
Wed May 15, 2019 11:12 am
more info:

We're early 40s. I work at blue-chip fortune 100 companies that are stable.
I think my monthly net is above $11k ($~5500 per paycheck after tax, healthcare, and 401k max).
Mortgage is $4500, so that's $6500 per month after mortgage payment. I have not started the new job yet and basing this off my previous employer statement. I am making $10k/yr more at new employer so this is fuzzy.
That makes paying down the mortgage look even worse.
Yeah, I think the only reason to do this is if we decide to move out of bay in a few years, feel very confident in rising house prices and possible declining stock market, and can use this as an investment vehicle.
?? If you're only in the house for the near term, and if you are confident in rising prices over that term, what advantage do you get from paying down the mortgage? You could instead look at a diversified portfolio in the liquid assets I would think.

Topic Author
dirtylizard
Posts: 17
Joined: Sun Feb 04, 2018 4:41 pm

Re: sanity check

Post by dirtylizard » Wed May 15, 2019 12:12 pm

PDX_Traveler wrote:
Wed May 15, 2019 12:00 pm
dirtylizard wrote:
Wed May 15, 2019 11:25 am
stoptothink wrote:
Wed May 15, 2019 11:15 am
dirtylizard wrote:
Wed May 15, 2019 11:12 am
more info:

We're early 40s. I work at blue-chip fortune 100 companies that are stable.
I think my monthly net is above $11k ($~5500 per paycheck after tax, healthcare, and 401k max).
Mortgage is $4500, so that's $6500 per month after mortgage payment. I have not started the new job yet and basing this off my previous employer statement. I am making $10k/yr more at new employer so this is fuzzy.
That makes paying down the mortgage look even worse.
Yeah, I think the only reason to do this is if we decide to move out of bay in a few years, feel very confident in rising house prices and possible declining stock market, and can use this as an investment vehicle.
?? If you're only in the house for the near term, and if you are confident in rising prices over that term, what advantage do you get from paying down the mortgage? You could instead look at a diversified portfolio in the liquid assets I would think.
We're thinking of this as a long term home. But also know that the retrace may drive us crazy especially if a job change happens, at which point it might make sense to move.

rj342
Posts: 89
Joined: Tue Apr 30, 2019 12:21 pm

Re: sanity check

Post by rj342 » Wed May 15, 2019 1:43 pm

IMO you would gain a lot by moving to Austin, Nashville, Raleigh Durham, Boulder etc.

Topic Author
dirtylizard
Posts: 17
Joined: Sun Feb 04, 2018 4:41 pm

Re: sanity check

Post by dirtylizard » Wed May 15, 2019 3:40 pm

rj342 wrote:
Wed May 15, 2019 1:43 pm
IMO you would gain a lot by moving to Austin, Nashville, Raleigh Durham, Boulder etc.
My career/network is in Bay Area. I hear Austin commute is now brutal and housing keeps rising. Boulder has been $$ for a while now. Nashville is super interesting as well as Chattanooga.

It's possible I can work out a relocation to lower COL state with my new company in a year which I will explore.

rj342
Posts: 89
Joined: Tue Apr 30, 2019 12:21 pm

Re: sanity check

Post by rj342 » Wed May 15, 2019 3:46 pm

dirtylizard wrote:
Wed May 15, 2019 3:40 pm
rj342 wrote:
Wed May 15, 2019 1:43 pm
IMO you would gain a lot by moving to Austin, Nashville, Raleigh Durham, Boulder etc.
My career/network is in Bay Area. I hear Austin commute is now brutal and housing keeps rising. Boulder has been $$ for a while now. Nashville is super interesting as well as Chattanooga.

It's possible I can work out a relocation to lower COL state with my new company in a year which I will explore.
Nashville tech is booming on all fronts it appears. Big, big presence in healthcare SW space. Franklin are on the south side is apparently where you want to be. Don't know about tech in Chattanooga, but area is freaking beautiful.

Hunstville Alabama is overlooked for tech - -its not just NASA and military tech.
Also constant hiring in FL panhandle, Pensacole to Fort Walton area, of course thats a lot of govt contract related stuff.

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