Can we afford this $725,000 house?

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Firemenot
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Re: Can we afford this $725,000 house?

Post by Firemenot »

Firemenot wrote: Sat Nov 21, 2020 10:29 am
AZAttorney11 wrote: Sat Nov 21, 2020 10:28 am
gch wrote: Sat Nov 21, 2020 10:07 am
Firemenot wrote: Sat Nov 21, 2020 9:50 am Not sure how helpful the feedback in the aggregate has been to OP. Seems split between “of course you can afford” versus “no way.”
OP could have a 1MM income and 10MM net worth and there would be some people that would say they couldn’t afford it, or their net worth is too low compared to income so they should save more for a few years before they buy something in that range.

In the end, the math is very simple. The OP can afford this house. Certainly there are always some risks that have been mentioned ITT such as job loss, more kids, wanting to retire earlier, etc. But as of today they certainly can afford the house with little problem.
This. This board is beyond overly conservative when it comes to "Can I afford this home" type of questions. It's borderline comical.

I also think many don’t realize how costly entry point housing is in high cost of living areas are. The typical ratios just don’t work and haven’t for decades basically. And in places like CA with property tax increase protection it can often make sense to get in sooner than later.
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Tamarind
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Re: Can we afford this $725,000 house?

Post by Tamarind »

abracadabra11 wrote: Sat Nov 21, 2020 10:25 am
Tamarind wrote: Sat Nov 21, 2020 9:03 am Wife and I make just a smidge more than OP, early 30s, DINK. Absolutely no way would I ever spend that much on a house on our income.

We are doing the move vs reno math right now and our move budget is capped at 400k. More than that would not let me sleep well.
I likely would have agreed with this sentiment before having kids. Considerations change dramatically when you have children that are transitioning to school age. The reality is that OP can easily afford this home and savings will take a hit until daycare costs drop off, but it's a reasonable tradeoff.
We do intend to have a child in the near future, and I selected our home in a medium COL in part for its excellent school districts. But something has to give, and in our case it was the size of the house (<1400 sq ft). We'll likely go the reno route and spiff up the finishes, but it's not getting any bigger. Kids can share bedrooms and everyone can share bathrooms until they go off to college. You become accustomed to what you grow up with.
LFKB
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Re: Can we afford this $725,000 house?

Post by LFKB »

neverpanic wrote: Fri Nov 20, 2020 2:31 pm
Glockenspiel wrote: Fri Nov 20, 2020 2:09 pm We're 36 with kids aged 5 and 2.
Combined income = $190k per year
Net worth = $1.15 M
Current Home Value = $460k
Current mortgage balance = $132k
Current Home equity = $318k
Investments (401k, HSA, Taxable Brokerage) = $710k
Cash accounts ~ $150k

We're looking at buying a new house for about $725k in a better neighborhood in a midwestern suburb with better schools, quieter street, larger yard, a house that works better for us, and closer commute. We'd take a maximum mortgage amount of about $500k to stay under the jumbo mortgage limit. We're currently paying about $25k per year in daycare costs, which will greatly decrease once they both start public schools. I've calculated that our home payment (PITI) would go from about $2295/month up to about $2,900/month.

Can we afford it, yes or no?
With $318,000 equity, yes, you can afford it.

Buy the house, enjoy your life.
This

Many people on here will tell you not to do it. It would seem you can afford it and it will make you happy, so go for it. You likely understand the added costs and impact to savings, and the additional payment is far less than the child care costs that will roll off.

I was discouraged from buying an expensive house by many on here about 5 years ago. I bought it and it has since appreciated by about $1.2M in value.
O2sats
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Re: Can we afford this $725,000 house?

Post by O2sats »

AZAttorney11 wrote: Sat Nov 21, 2020 10:28 am
gch wrote: Sat Nov 21, 2020 10:07 am
Firemenot wrote: Sat Nov 21, 2020 9:50 am Not sure how helpful the feedback in the aggregate has been to OP. Seems split between “of course you can afford” versus “no way.”
OP could have a 1MM income and 10MM net worth and there would be some people that would say they couldn’t afford it, or their net worth is too low compared to income so they should save more for a few years before they buy something in that range.

In the end, the math is very simple. The OP can afford this house. Certainly there are always some risks that have been mentioned ITT such as job loss, more kids, wanting to retire earlier, etc. But as of today they certainly can afford the house with little problem.
This. This board is beyond overly conservative when it comes to "Can I afford this home" type of questions. It's borderline comical.
Agree, despite already having 2 kids there are posters warning of incurring high costs of fertility treatments and adoption :oops:
William104
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Re: Can we afford this $725,000 house?

Post by William104 »

I’m around the same age, same net worth, close to same kids age. You can easily afford this. If I would have gone with the ultra conservative approach of the board when we bought our home my net worth would be 400k less than it is now. We are trying to find a larger home now but have essentially been priced out of the market now. To get a larger home in the ideal neighborhoods we want to be in will cost 1.2m or more so we have decided to upgrade things and stay put.

Pull the trigger and enjoy
FoolMeOnce
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Re: Can we afford this $725,000 house?

Post by FoolMeOnce »

Yes, you can. But I would get the mortgage closet to $400 than $500, especially since you already seen a bit nervous about this. With all that cash and home equity, easily doable.
stoptothink
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Re: Can we afford this $725,000 house?

Post by stoptothink »

Firemenot wrote: Sat Nov 21, 2020 10:29 am
AZAttorney11 wrote: Sat Nov 21, 2020 10:28 am
gch wrote: Sat Nov 21, 2020 10:07 am
Firemenot wrote: Sat Nov 21, 2020 9:50 am Not sure how helpful the feedback in the aggregate has been to OP. Seems split between “of course you can afford” versus “no way.”
OP could have a 1MM income and 10MM net worth and there would be some people that would say they couldn’t afford it, or their net worth is too low compared to income so they should save more for a few years before they buy something in that range.

In the end, the math is very simple. The OP can afford this house. Certainly there are always some risks that have been mentioned ITT such as job loss, more kids, wanting to retire earlier, etc. But as of today they certainly can afford the house with little problem.
This. This board is beyond overly conservative when it comes to "Can I afford this home" type of questions. It's borderline comical.

I also think many dint realize how costly entry point housing is in high cost of living areas are. The typical ratios just don’t work and haven’t for decades basically.
Certainly true, but it's irrelevant in OP's case as they live in a midwestern suburb. This clearly is no "entry level" home.
srt7
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Re: Can we afford this $725,000 house?

Post by srt7 »

Yes, you can afford it especially considering the mileage you will get out of all those years of kids growing up in a good environment.

You did not mention if both your incomes are stable. I ask to know if it can be managed in one income. We have always thought of it that way and it has worked out well for us so throwing it out there.

Also, consider the increase in property taxes, HOA etc. as you are moving to a nicer hood.
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UpsetRaptor
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Re: Can we afford this $725,000 house?

Post by UpsetRaptor »

Some Bogleheads are overly conservative.

Yes, you can certainly afford it. Back of the envelope, with current interest rates, if you simply rolled the current home equity into the new house, your PITI would be very close to, and may actually go down, from your current level. So you could actually make the move and retain your current $50K+ savings rate. I'm not saying you should do exactly that, as I certainly don't blame you for preferring a higher mortgage and more liquidity/investments. Just pointing out that mathematically, it's certainly affordable for you.

This is also a why-you-save-money type of purchase - A nice house in a nice school district for a family to grow up in, make memories, keep the spouse happy, and give the kids a good education. At some point money needs to have a purpose beyond just watching the #s go up.

Congratulations on being in your position.
chipperd
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Re: Can we afford this $725,000 house?

Post by chipperd »

Yes, you can definitely afford this home.
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cowbman
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Re: Can we afford this $725,000 house?

Post by cowbman »

neverpanic wrote: Fri Nov 20, 2020 2:31 pm
Glockenspiel wrote: Fri Nov 20, 2020 2:09 pm We're 36 with kids aged 5 and 2.
Combined income = $190k per year
Net worth = $1.15 M
Current Home Value = $460k
Current mortgage balance = $132k
Current Home equity = $318k
Investments (401k, HSA, Taxable Brokerage) = $710k
Cash accounts ~ $150k

We're looking at buying a new house for about $725k in a better neighborhood in a midwestern suburb with better schools, quieter street, larger yard, a house that works better for us, and closer commute. We'd take a maximum mortgage amount of about $500k to stay under the jumbo mortgage limit. We're currently paying about $25k per year in daycare costs, which will greatly decrease once they both start public schools. I've calculated that our home payment (PITI) would go from about $2295/month up to about $2,900/month.

Can we afford it, yes or no?
With $318,000 equity, yes, you can afford it.

Buy the house, enjoy your life.
+1
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Devil's Advocate
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Re: Can we afford this $725,000 house?

Post by Devil's Advocate »

cowbman wrote: Sat Nov 21, 2020 1:59 pm
neverpanic wrote: Fri Nov 20, 2020 2:31 pm
Glockenspiel wrote: Fri Nov 20, 2020 2:09 pm We're 36 with kids aged 5 and 2.
Combined income = $190k per year
Net worth = $1.15 M
Current Home Value = $460k
Current mortgage balance = $132k
Current Home equity = $318k
Investments (401k, HSA, Taxable Brokerage) = $710k
Cash accounts ~ $150k

We're looking at buying a new house for about $725k in a better neighborhood in a midwestern suburb with better schools, quieter street, larger yard, a house that works better for us, and closer commute. We'd take a maximum mortgage amount of about $500k to stay under the jumbo mortgage limit. We're currently paying about $25k per year in daycare costs, which will greatly decrease once they both start public schools. I've calculated that our home payment (PITI) would go from about $2295/month up to about $2,900/month.

Can we afford it, yes or no?
With $318,000 equity, yes, you can afford it.

Buy the house, enjoy your life.
+1
+1

DA
EnjoyIt
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Re: Can we afford this $725,000 house?

Post by EnjoyIt »

AZAttorney11 wrote: Sat Nov 21, 2020 10:28 am
gch wrote: Sat Nov 21, 2020 10:07 am
Firemenot wrote: Sat Nov 21, 2020 9:50 am Not sure how helpful the feedback in the aggregate has been to OP. Seems split between “of course you can afford” versus “no way.”
OP could have a 1MM income and 10MM net worth and there would be some people that would say they couldn’t afford it, or their net worth is too low compared to income so they should save more for a few years before they buy something in that range.

In the end, the math is very simple. The OP can afford this house. Certainly there are always some risks that have been mentioned ITT such as job loss, more kids, wanting to retire earlier, etc. But as of today they certainly can afford the house with little problem.
This. This board is beyond overly conservative when it comes to "Can I afford this home" type of questions. It's borderline comical.
Here is the thing, many of us here value financial independence a lot. It is more important than living in a big fancy house which is why so many here discourage spending at the limits for housing. This is the plan my wife and I followed that allowed us financial independence in our early 40s and working part time because we enjoy it. Our free time and independence is far more valuable to us than an expensive home. It really all depends on priorities. Us personally would not want to be enslaved full time to our employers. We have long weekends every week plus many 1-2 week vacations. We spend tons of time with our kids and teach them on top of school. That direct solo attention is sure to pay off dividends compared to a full classroom no matter how good the public school is.
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sergeant
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Re: Can we afford this $725,000 house?

Post by sergeant »

Yes, you can afford it. Enjoy. I also agree with your decision to use some of the equity for furniture and other things needed for your new home.
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bi0hazard
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Re: Can we afford this $725,000 house?

Post by bi0hazard »

EnjoyIt wrote: Sat Nov 21, 2020 2:21 pm
AZAttorney11 wrote: Sat Nov 21, 2020 10:28 am
gch wrote: Sat Nov 21, 2020 10:07 am
Firemenot wrote: Sat Nov 21, 2020 9:50 am Not sure how helpful the feedback in the aggregate has been to OP. Seems split between “of course you can afford” versus “no way.”
OP could have a 1MM income and 10MM net worth and there would be some people that would say they couldn’t afford it, or their net worth is too low compared to income so they should save more for a few years before they buy something in that range.

In the end, the math is very simple. The OP can afford this house. Certainly there are always some risks that have been mentioned ITT such as job loss, more kids, wanting to retire earlier, etc. But as of today they certainly can afford the house with little problem.
This. This board is beyond overly conservative when it comes to "Can I afford this home" type of questions. It's borderline comical.
Here is the thing, many of us here value financial independence a lot. It is more important than living in a big fancy house which is why so many here discourage spending at the limits for housing. This is the plan my wife and I followed that allowed us financial independence in our early 40s and working part time because we enjoy it. Our free time and independence is far more valuable to us than an expensive home. It really all depends on priorities. Us personally would not want to be enslaved full time to our employers.
THIS exactly. In my humble opinion, if you have to ask “can I afford a very expensive house with a low salary”, it usually means you can, but probably shouldn’t.
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geerhardusvos
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Re: Can we afford this $725,000 house?

Post by geerhardusvos »

Glockenspiel wrote: Fri Nov 20, 2020 2:09 pm We're 36 with kids aged 5 and 2.
Combined income = $190k per year
Net worth = $1.15 M
Current Home Value = $460k
Current mortgage balance = $132k
Current Home equity = $318k
Investments (401k, HSA, Taxable Brokerage) = $710k
Cash accounts ~ $150k

We're looking at buying a new house for about $725k in a better neighborhood in a midwestern suburb with better schools, quieter street, larger yard, a house that works better for us, and closer commute. We'd take a maximum mortgage amount of about $500k to stay under the jumbo mortgage limit. We're currently paying about $25k per year in daycare costs, which will greatly decrease once they both start public schools. I've calculated that our home payment (PITI) would go from about $2295/month up to about $2,900/month.

Can we afford it, yes or no?
I am a little younger, and have the same net worth, and I personally wouldn’t do it. But especially if you’re planning to continue working, then you should be fine. We have almost $1M invested and no debt, and I don’t think I would want to have so much of my net worth in a house, but long-term you should be OK. However, you will be better off financially if you do not buy this house. My vote is no, especially since the income is combined.

How much do you spend per year? Will one of you stop working at some point?

When considering buying:
Check this out for starters
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hbdad
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Re: Can we afford this $725,000 house?

Post by hbdad »

You can easily afford the house. I had almost same situation as you 2 1/2 years ago. Have two kids. Wife SAHM. Income was about 150k year. Live in VHCOL area (socal). Sold our condo and netted about 350k. With PITI and HOA was paying about 2k a month for condo. Bought house nearby for 790k. It’s a starter home in my area, but has enough space for two kids (1450sq ft.) Put 316k from sale on condo down on house. Paid off an extra 20k in the first two years and refinanced three times. Original rate was 4.25. Now it’s 2.5. As of now, I pay about 500 a month more than I did for my condo and my income has gone up to about 170k. I’m sure many on this site would have told me not to buy. But the reality is, renting a comparable home in my area would cost me 1-2k more a month than I currently pay in PITI. With my income and mortgage, I can still save 38k for retirement, save 7200 a year for college, pay for math tutoring, and go on nice vacations. Hawaii last year, two national park trips this year. Disney cruise next year.
Last edited by hbdad on Sat Nov 21, 2020 3:51 pm, edited 1 time in total.
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geerhardusvos
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Re: Can we afford this $725,000 house?

Post by geerhardusvos »

hbdad wrote: Sat Nov 21, 2020 3:44 pm You can easily afford the house. I had almost same situation as you 2 1/2 years ago. Have two kids. Wife SAHM. Income was about 150k year. Live in VHCOL area (socal). Sold our condo and netted about 350k. With PITI and HOA was paying about 2k a month for condo. Bought house nearby for 790k. It’s a starter home in my area, but has enough space for two kids (1450sq ft.) Put 316k from sale on condo down on house. Paid off an extra 20k in the first two years and refinanced three times. Original rate was 4.25. Now it’s 2.5. As of now, I pay about 500 a month more than I did for my condo and my income has gone up to about 170k. I’m sure many on this site would have told me not to buy. But the reality is, renting a comparable home in my area would cost me 1-2k more a month than I currently pay in PITI. With my income and mortgage, I can still save 38k for retirement, save 7200 a year for college, pay for math tutoring, and go on nice vacations. Hawaii last year, two national park trips this year. Disney cruise next year.
So Cal and a mid western suburbs are quite different markets... and your one income can support your situation; the original poster needs both spouses to work to make this feasible.

If OP is staying for 20+ years it should be fine. Just depends on how long they want to work, how stable their work is, and what their goals are.
Last edited by geerhardusvos on Sat Nov 21, 2020 4:43 pm, edited 1 time in total.
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mancich
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Re: Can we afford this $725,000 house?

Post by mancich »

Yes, you can afford it. Bonus points if you’re very confident in your job security.
TropikThunder
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Re: Can we afford this $725,000 house?

Post by TropikThunder »

Glockenspiel wrote: Fri Nov 20, 2020 2:09 pm Combined income = $190k per year
Net worth = $1.15 M
bi0hazard wrote: Sat Nov 21, 2020 2:37 pm THIS exactly. In my humble opinion, if you have to ask “can I afford a very expensive house with a low salary”, it usually means you can, but probably shouldn’t.
Good lord, where do you live that $190k is "a low salary"?
angelescrest
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Re: Can we afford this $725,000 house?

Post by angelescrest »

LFKB wrote: Sat Nov 21, 2020 10:53 am
neverpanic wrote: Fri Nov 20, 2020 2:31 pm
Glockenspiel wrote: Fri Nov 20, 2020 2:09 pm We're 36 with kids aged 5 and 2.
Combined income = $190k per year
Net worth = $1.15 M
Current Home Value = $460k
Current mortgage balance = $132k
Current Home equity = $318k
Investments (401k, HSA, Taxable Brokerage) = $710k
Cash accounts ~ $150k

We're looking at buying a new house for about $725k in a better neighborhood in a midwestern suburb with better schools, quieter street, larger yard, a house that works better for us, and closer commute. We'd take a maximum mortgage amount of about $500k to stay under the jumbo mortgage limit. We're currently paying about $25k per year in daycare costs, which will greatly decrease once they both start public schools. I've calculated that our home payment (PITI) would go from about $2295/month up to about $2,900/month.

Can we afford it, yes or no?
With $318,000 equity, yes, you can afford it.

Buy the house, enjoy your life.
This

Many people on here will tell you not to do it. It would seem you can afford it and it will make you happy, so go for it. You likely understand the added costs and impact to savings, and the additional payment is far less than the child care costs that will roll off.

I was discouraged from buying an expensive house by many on here about 5 years ago. I bought it and it has since appreciated by about $1.2M in value.
I agree with your first point in that they can do it, but the latter point is immaterial. Nobody knows what their home prices will look like in the future. One might have also bought $500,000 of TSLA or Zoom a year or two ago and benefitted from it, but that doesn’t mean it was a wise choice at the time.

I’d be curious where the Midwest location is, whether Chicago or some other expensive urban area. If not, it would seem there could be good schools in neighborhoods where home prices aren’t quite that high.

Also some posts assume that those living in a neighborhood with home prices that high are rich or are a high income family, and we don’t know if that’s true. Many people bought homes some years ago only to see significant appreciation, even if they are very much middle income. Their kids’ playmates aren’t guaranteed to be spoiled or entitled.
oldfort
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Re: Can we afford this $725,000 house?

Post by oldfort »

AZAttorney11 wrote: Sat Nov 21, 2020 10:28 am
gch wrote: Sat Nov 21, 2020 10:07 am
Firemenot wrote: Sat Nov 21, 2020 9:50 am Not sure how helpful the feedback in the aggregate has been to OP. Seems split between “of course you can afford” versus “no way.”
OP could have a 1MM income and 10MM net worth and there would be some people that would say they couldn’t afford it, or their net worth is too low compared to income so they should save more for a few years before they buy something in that range.

In the end, the math is very simple. The OP can afford this house. Certainly there are always some risks that have been mentioned ITT such as job loss, more kids, wanting to retire earlier, etc. But as of today they certainly can afford the house with little problem.
This. This board is beyond overly conservative when it comes to "Can I afford this home" type of questions. It's borderline comical.
Most of the time, the OP already knows if they can afford it when they start a thread. It's not hard to create a budget and see how much is available for housing costs. I assume well paid professionals are capable of putting numbers into Excel themselves. The OP's real question is not so much can they but should they?
HMSVictory
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Re: Can we afford this $725,000 house?

Post by HMSVictory »

Yes you can afford this house. Here is the bottom line if you are not willing to use a large part of your cash and perhaps some of your after tax investments to do this....... then don't. That means you would rather have those liquid assets more than the larger home. You should be aiming to pay this new house off very, very quickly. I'd say 5-6 years max. So if it was me I would this:

Buy the house - add $100k in cash to your existing $318k of equity and put at least $418k down on the new house. I would consider doing more based on what you have in taxable (any bonds at all?). If you put $418k down you finance $307k on a 15 year note and pay it off super fast.

I can see your future and its in the new house with it paid off in your early 40s and THEN you can super charge your investing will all available cash flows.
Stay the course!
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Re: Can we afford this $725,000 house?

Post by geerhardusvos »

HMSVictory wrote: Sat Nov 21, 2020 7:34 pm I can see your future and its in the new house with it paid off in your early 40s and THEN you can super charge your investing will all available cash flows.
This summarizes one of the biggest mistakes many people make. People over buy on housing early, instead of investing aggressively early. While it doesn’t always end detrimentally, it is usually not the optimal financial course.
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Firemenot
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Re: Can we afford this $725,000 house?

Post by Firemenot »

geerhardusvos wrote: Sat Nov 21, 2020 7:49 pm
HMSVictory wrote: Sat Nov 21, 2020 7:34 pm I can see your future and its in the new house with it paid off in your early 40s and THEN you can super charge your investing will all available cash flows.
This summarizes one of the biggest mistakes many people make. People over buy on housing early, instead of investing aggressively early. While it doesn’t always end detrimentally, it is usually not the optimal financial course.
But they already have a NW over 1 million in their mid-30s!
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Eagle33
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Re: Can we afford this $725,000 house?

Post by Eagle33 »

Firemenot wrote: Sat Nov 21, 2020 7:51 pm
geerhardusvos wrote: Sat Nov 21, 2020 7:49 pm
HMSVictory wrote: Sat Nov 21, 2020 7:34 pm I can see your future and its in the new house with it paid off in your early 40s and THEN you can super charge your investing will all available cash flows.
This summarizes one of the biggest mistakes many people make. People over buy on housing early, instead of investing aggressively early. While it doesn’t always end detrimentally, it is usually not the optimal financial course.
But they already have a NW over 1 million in their mid-30s!
$710k in investments
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roth evangelist
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Re: Can we afford this $725,000 house?

Post by roth evangelist »

The numbers clearly work for OP and it sounds like it's a lifestyle choice they want. Regardless of what YOU would do the logic is sound.
KyleAAA
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Re: Can we afford this $725,000 house?

Post by KyleAAA »

Of course you can afford it. You could afford a significantly more expensive house with absolutely no financial strain whatsoever. Mortgage rates are under 3%. Those 2x or 3x income rules of thumb work fine when rates are 7% they do not apply at 3%. Nor at 4%.. I would go so far as to say most people telling you that couldn't afford this just plain can't do math.
Firemenot
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Re: Can we afford this $725,000 house?

Post by Firemenot »

Eagle33 wrote: Sat Nov 21, 2020 10:29 pm
Firemenot wrote: Sat Nov 21, 2020 7:51 pm
geerhardusvos wrote: Sat Nov 21, 2020 7:49 pm
HMSVictory wrote: Sat Nov 21, 2020 7:34 pm I can see your future and its in the new house with it paid off in your early 40s and THEN you can super charge your investing will all available cash flows.
This summarizes one of the biggest mistakes many people make. People over buy on housing early, instead of investing aggressively early. While it doesn’t always end detrimentally, it is usually not the optimal financial course.
But they already have a NW over 1 million in their mid-30s!
$710k in investments
They could never invest another dollar and be fine. 2 real doubles on their investments prior to retirement gives almost 3 million.
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Re: Can we afford this $725,000 house?

Post by LadyGeek »

I removed an off-topic post discussing neighborhood culture.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
hudson
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Re: Can we afford this $725,000 house?

Post by hudson »

geerhardusvos wrote: Sat Nov 21, 2020 7:49 pm
HMSVictory wrote: Sat Nov 21, 2020 7:34 pm I can see your future and its in the new house with it paid off in your early 40s and THEN you can super charge your investing will all available cash flows.
This summarizes one of the biggest mistakes many people make. People over buy on housing early, instead of investing aggressively early. While it doesn’t always end detrimentally, it is usually not the optimal financial course.
I agree.
Sure the OP can pull it off. Given those numbers, I would go for delayed gratification and go frugal for a while longer.
I wouldn't go for the "big house" until college educations and retirement were mostly funded.
Firemenot
Posts: 138
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Re: Can we afford this $725,000 house?

Post by Firemenot »

hudson wrote: Sun Nov 22, 2020 8:56 am
geerhardusvos wrote: Sat Nov 21, 2020 7:49 pm
HMSVictory wrote: Sat Nov 21, 2020 7:34 pm I can see your future and its in the new house with it paid off in your early 40s and THEN you can super charge your investing will all available cash flows.
This summarizes one of the biggest mistakes many people make. People over buy on housing early, instead of investing aggressively early. While it doesn’t always end detrimentally, it is usually not the optimal financial course.
I agree.
Sure the OP can pull it off. Given those numbers, I would go for delayed gratification and go frugal for a while longer.
I wouldn't go for the "big house" until college educations and retirement were mostly funded.
By then kids would most likely be about to leave the house and it would be pointless to do. My brother is still in his starter house after 20 years with his kids now both in high school. He thinks it was a mistake not to have moved to a larger house sooner. Now he’s kind of stuck.
stoptothink
Posts: 8463
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Re: Can we afford this $725,000 house?

Post by stoptothink »

Firemenot wrote: Sun Nov 22, 2020 9:05 am
hudson wrote: Sun Nov 22, 2020 8:56 am
geerhardusvos wrote: Sat Nov 21, 2020 7:49 pm
HMSVictory wrote: Sat Nov 21, 2020 7:34 pm I can see your future and its in the new house with it paid off in your early 40s and THEN you can super charge your investing will all available cash flows.
This summarizes one of the biggest mistakes many people make. People over buy on housing early, instead of investing aggressively early. While it doesn’t always end detrimentally, it is usually not the optimal financial course.
I agree.
Sure the OP can pull it off. Given those numbers, I would go for delayed gratification and go frugal for a while longer.
I wouldn't go for the "big house" until college educations and retirement were mostly funded.
By then kids would most likely be about to leave the house and it would be pointless to do. My brother is still in his starter house after 20 years with his kids now both in high school. He thinks it was a mistake not to have moved to a larger house sooner. Now he’s kind of stuck.
He regrets not spending more on a larger house, even though it sounds like it worked out fine and he probably is wealthier now because of it? Did he miss out on some experience because his home wasn't large enough?

Maybe I'm just different, but if a house meets your needs, I'm not sure how else it can improve your quality of life other than to serve as wealth signaling.
hudson
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Re: Can we afford this $725,000 house?

Post by hudson »

Firemenot wrote: Sun Nov 22, 2020 9:05 am
hudson wrote: Sun Nov 22, 2020 8:56 am
geerhardusvos wrote: Sat Nov 21, 2020 7:49 pm
HMSVictory wrote: Sat Nov 21, 2020 7:34 pm I can see your future and its in the new house with it paid off in your early 40s and THEN you can super charge your investing will all available cash flows.
This summarizes one of the biggest mistakes many people make. People over buy on housing early, instead of investing aggressively early. While it doesn’t always end detrimentally, it is usually not the optimal financial course.
I agree.
Sure the OP can pull it off. Given those numbers, I would go for delayed gratification and go frugal for a while longer.
I wouldn't go for the "big house" until college educations and retirement were mostly funded.
By then kids would most likely be about to leave the house and it would be pointless to do. My brother is still in his starter house after 20 years with his kids now both in high school. He thinks it was a mistake not to have moved to a larger house sooner. Now he’s kind of stuck.
Firemenot,
Good point! These discussion are brainstorms! You get all sides.
Neither your brother or me are house poor. Moving is a major pain anyway. :)
Carguy85
Posts: 244
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Re: Can we afford this $725,000 house?

Post by Carguy85 »

I’m about your age, in the Midwest, and 2 kids...a little older. I can’t imagine where you are talking about other than the Chicago area. Otherwise that seems like a top of the heep neighborhood McMansion (you didn’t mention acreage). At times I regret moving from a low-mid 250s home (upper middle class around here) into our much more expensive custom built home. No doubt it would be extremely hard to sell (I think) for what we have in it. We love our home, on an excellent slice of acreage out in the country, fits our “needs” well and it’s now paid off but are we any better off or is life any easier with it than where we were previously ....not really. The extra spent on this property over our previous home will likely be a several million in opportunity cost over the next several decades...o well can’t take it with us..nor is it money we would benefit from. More room for more stuff that doesn’t really make us any happier than we ever were before. Combined income of $190k is great but NO WAY could I feel comfortable spending $725 on a home with that...especially combined. Of course you can “afford” it according to a bank. Of course hind site is 20-20 and I wasn’t thinking much about investing 5 years ago but did have a bigger shovel. Ironically I think of these things now and am in a much better position financially than when we built. Don’t be like everyone else buying stuff that they think they can afford because a bank or car dealership etc. says they can. Try to avoid the slowly warming pot of water that’s lifestyle creep.
Last edited by Carguy85 on Sun Nov 22, 2020 9:58 am, edited 1 time in total.
Firemenot
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Re: Can we afford this $725,000 house?

Post by Firemenot »

Carguy85 wrote: Sun Nov 22, 2020 9:30 am I’m about your age, in the Midwest, and 2 kids...a little older. I can’t imagine where you are talking about other than the Chicago area. Otherwise that seems like a top of the heep neighborhood McMansion (you didn’t mention acreage). At times I regret moving from a low-mid 250s home (upper middle class around here) into our much more expensive custom built home. No doubt it would be extremely hard to sell (I think) for what we have in it. We love our home, on an excellent slice of acreage out in the country, fits our “needs” well and it’s now paid off but are we any better off or is life any easier with it than where we were previously ....not really. The extra spent on this property over our previous home will likely be a few million in opportunity cost over the next several decades. More room for more stuff that doesn’t really make us any happier than we ever were before. Combined income of $190k is great but NO WAY could I feel comfortable spending $725 on a home with that...especially combined. Of course you can “afford” it according to a bank. Of course hind site is 20-20 and I wasn’t thinking much about investing 5 years ago but did have a bigger shovel. Ironically I think of these things now and am in a much better position financially than when we built. Don’t be like everyone else buying stuff that they think they can afford because a bank or car dealership etc. says they can. Try to avoid the slowly warming pot of water that’s lifestyle creep.
It’s possible OP is in the Twin Cities. My brother has been looking at houses there for awhile and hasn’t bought because 725K doesn’t buy you much in a really good school district. Mostly just a house built within last 10-15 years that doesn’t desperately need remodeling.
Carguy85
Posts: 244
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Re: Can we afford this $725,000 house?

Post by Carguy85 »

Crazy... I always thought that if cost of living is high, it better be a place with great year round weather, great schools, and nice people.
Firemenot
Posts: 138
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Re: Can we afford this $725,000 house?

Post by Firemenot »

Carguy85 wrote: Sun Nov 22, 2020 9:58 am Crazy... I always thought that if cost of living is high, it better be a place with great year round weather, great schools, and nice people.
Demand has been exceeding supply there for some time. Not enough construction happening. And construction labor costs are relatively high.

And my take is if you’re going to live in one of the highest tax states, better to do it in one with good weather. :)
Last edited by Firemenot on Sun Nov 22, 2020 10:04 am, edited 1 time in total.
MathIsMyWayr
Posts: 2493
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Location: CA

Re: Can we afford this $725,000 house?

Post by MathIsMyWayr »

hudson wrote: Sun Nov 22, 2020 9:24 am
Firemenot wrote: Sun Nov 22, 2020 9:05 am
hudson wrote: Sun Nov 22, 2020 8:56 am
geerhardusvos wrote: Sat Nov 21, 2020 7:49 pm
HMSVictory wrote: Sat Nov 21, 2020 7:34 pm I can see your future and its in the new house with it paid off in your early 40s and THEN you can super charge your investing will all available cash flows.
This summarizes one of the biggest mistakes many people make. People over buy on housing early, instead of investing aggressively early. While it doesn’t always end detrimentally, it is usually not the optimal financial course.
I agree.
Sure the OP can pull it off. Given those numbers, I would go for delayed gratification and go frugal for a while longer.
I wouldn't go for the "big house" until college educations and retirement were mostly funded.
By then kids would most likely be about to leave the house and it would be pointless to do. My brother is still in his starter house after 20 years with his kids now both in high school. He thinks it was a mistake not to have moved to a larger house sooner. Now he’s kind of stuck.
Firemenot,
Good point! These discussion are brainstorms! You get all sides.
Neither your brother or me are house poor. Moving is a major pain anyway. :)
I have bought 2 houses including the current residence. Each time, I soon regretted under-buying. Life is like a train. You cannot stop it until ducks are in a row. Life is not for those who are timid.
MathIsMyWayr
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Location: CA

Re: Can we afford this $725,000 house?

Post by MathIsMyWayr »

Firemenot wrote: Sun Nov 22, 2020 10:02 am
Carguy85 wrote: Sun Nov 22, 2020 9:58 am Crazy... I always thought that if cost of living is high, it better be a place with great year round weather, great schools, and nice people.
Demand has been exceeding supply there for some time. Not enough construction happening. And construction labor costs are relatively high.

And my take is if you’re going to live in one of the highest tax states, better to do it in one with good weather. :)
Does NYC or Boston have a great year around weather? :wink:

"The economy, stupid"
Firemenot
Posts: 138
Joined: Wed Apr 01, 2020 8:48 pm

Re: Can we afford this $725,000 house?

Post by Firemenot »

MathIsMyWayr wrote: Sun Nov 22, 2020 10:03 am
hudson wrote: Sun Nov 22, 2020 9:24 am
Firemenot wrote: Sun Nov 22, 2020 9:05 am
hudson wrote: Sun Nov 22, 2020 8:56 am
geerhardusvos wrote: Sat Nov 21, 2020 7:49 pm

This summarizes one of the biggest mistakes many people make. People over buy on housing early, instead of investing aggressively early. While it doesn’t always end detrimentally, it is usually not the optimal financial course.
I agree.
Sure the OP can pull it off. Given those numbers, I would go for delayed gratification and go frugal for a while longer.
I wouldn't go for the "big house" until college educations and retirement were mostly funded.
By then kids would most likely be about to leave the house and it would be pointless to do. My brother is still in his starter house after 20 years with his kids now both in high school. He thinks it was a mistake not to have moved to a larger house sooner. Now he’s kind of stuck.
Firemenot,
Good point! These discussion are brainstorms! You get all sides.
Neither your brother or me are house poor. Moving is a major pain anyway. :)
I have bought 2 houses including the current residence. Each time, I soon regretted under-buying. Life is like a train. You cannot stop it until ducks are in a row. Life is not for those who are timid.
I think it’s generally best to bypass starter houses. Transactions costs are too high. Better to buy a plausible “permanent” house.
Carguy85
Posts: 244
Joined: Thu Mar 19, 2020 6:26 pm

Re: Can we afford this $725,000 house?

Post by Carguy85 »

MathIsMyWayr wrote: Sun Nov 22, 2020 10:12 am
Firemenot wrote: Sun Nov 22, 2020 10:02 am
Carguy85 wrote: Sun Nov 22, 2020 9:58 am Crazy... I always thought that if cost of living is high, it better be a place with great year round weather, great schools, and nice people.
Demand has been exceeding supply there for some time. Not enough construction happening. And construction labor costs are relatively high.

And my take is if you’re going to live in one of the highest tax states, better to do it in one with good weather. :)
Does NYC or Boston have a great year around weather? :wink:

"The economy, stupid"

LOL!! My momma said if I don’t have anything nice to say I shouldn’t say it at all!
MathIsMyWayr
Posts: 2493
Joined: Mon Mar 27, 2017 10:47 pm
Location: CA

Re: Can we afford this $725,000 house?

Post by MathIsMyWayr »

Carguy85 wrote: Sun Nov 22, 2020 10:14 am
MathIsMyWayr wrote: Sun Nov 22, 2020 10:12 am
Firemenot wrote: Sun Nov 22, 2020 10:02 am
Carguy85 wrote: Sun Nov 22, 2020 9:58 am Crazy... I always thought that if cost of living is high, it better be a place with great year round weather, great schools, and nice people.
Demand has been exceeding supply there for some time. Not enough construction happening. And construction labor costs are relatively high.

And my take is if you’re going to live in one of the highest tax states, better to do it in one with good weather. :)
Does NYC or Boston have a great year around weather? :wink:

"The economy, stupid"

LOL!! My momma said if I don’t have anything nice to say I shouldn’t say it at all!
It is the 2nd time on this board. :wink:
https://en.wikipedia.org/wiki/It%27s_th ... my,_stupid

Life is more than money.
User avatar
geerhardusvos
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Re: Can we afford this $725,000 house?

Post by geerhardusvos »

Firemenot wrote: Sun Nov 22, 2020 10:02 am
Carguy85 wrote: Sun Nov 22, 2020 9:58 am Crazy... I always thought that if cost of living is high, it better be a place with great year round weather, great schools, and nice people.
Demand has been exceeding supply there for some time. Not enough construction happening. And construction labor costs are relatively high.

And my take is if you’re going to live in one of the highest tax states, better to do it in one with good weather. :)
Sounds like a terrible time to buy, and even more reason to stay put.
VTSAX and chill
Tingting1013
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Re: Can we afford this $725,000 house?

Post by Tingting1013 »

Carguy85 wrote: Sun Nov 22, 2020 9:30 am I’m about your age, in the Midwest, and 2 kids...a little older. I can’t imagine where you are talking about other than the Chicago area. Otherwise that seems like a top of the heep neighborhood McMansion (you didn’t mention acreage).
You must have missed this thread

viewtopic.php?f=2&t=321236
Carguy85
Posts: 244
Joined: Thu Mar 19, 2020 6:26 pm

Re: Can we afford this $725,000 house?

Post by Carguy85 »

Tingting1013 wrote: Sun Nov 22, 2020 11:18 am
Carguy85 wrote: Sun Nov 22, 2020 9:30 am I’m about your age, in the Midwest, and 2 kids...a little older. I can’t imagine where you are talking about other than the Chicago area. Otherwise that seems like a top of the heep neighborhood McMansion (you didn’t mention acreage).
You must have missed this thread

viewtopic.php?f=2&t=321236

I did indeed miss it.
mr_brightside
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Joined: Sat Oct 17, 2020 3:23 pm

Re: Can we afford this $725,000 house?

Post by mr_brightside »

FoolMeOnce wrote: Sat Nov 21, 2020 11:37 am Yes, you can. But I would get the mortgage closet to $400 than $500, especially since you already seen a bit nervous about this. With all that cash and home equity, easily doable.

i agree with this provided you have relatively 'comfortable' job security (i realize in this day and age that's a bit of an oxymoron)

fwiw my household income is about 2/3s yours and my rent is higher than your projected new mortgage... (my net worth though is higher)

we sleep well at night in an excellent school district

------------------------------------------------
remember Enron?? I do
Admiral
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Re: Can we afford this $725,000 house?

Post by Admiral »

OP:

How is your income divided? 190k combined might mean $95k + $95, or it might mean $150k + 40k. If it's the latter, and the high earner loses a job, you're in trouble with that mortgage. This would affect my decision.

Because you have plenty of equity, I would put down as much as possible so you would A) be able to carry the mortgage in the case of a job loss and B) max out all retirement accounts for the foreseeable future.
Firemenot
Posts: 138
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Re: Can we afford this $725,000 house?

Post by Firemenot »

geerhardusvos wrote: Sun Nov 22, 2020 10:49 am
Firemenot wrote: Sun Nov 22, 2020 10:02 am
Carguy85 wrote: Sun Nov 22, 2020 9:58 am Crazy... I always thought that if cost of living is high, it better be a place with great year round weather, great schools, and nice people.
Demand has been exceeding supply there for some time. Not enough construction happening. And construction labor costs are relatively high.

And my take is if you’re going to live in one of the highest tax states, better to do it in one with good weather. :)
Sounds like a terrible time to buy, and even more reason to stay put.
Hard to say. We haven’t built enough housing in years and Millennials are entering prime homebuying years. housing Could have legs.
Carguy85
Posts: 244
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Re: Can we afford this $725,000 house?

Post by Carguy85 »

I’ll pretend that some day we may break even....o well, shelter is a cost of living.
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