TheHungarianCPAPFS
CPA, CFP, IAR,Life Agent here to advise
- Joined
- Jan 14, 2020
- Messages
- 15
- Reaction score
- 4
QUESTION:
Family of 5, HCOL, currently renting in the not very good school district, ready to settle down in the good school district. It’s a very old district, where an outdated 4 bedroom 3000 sq ft house built in 1929 would run 750k minimum. As a result, looking at houses closer to the 1.3-1.5M.
Full partner, fully bought in. Current income fluctuates between 500-600. Spouse doesn’t work, but probably will when kids are older (would add another 50ish)
Cash on hand: 550k
529 over 150k per kid
Student loans are paid off. Cars paid off. No debt of any kind.
Running the numbers, it looks like this house would be doable while still meeting other financial goals and putting away for kids. But I’m having terrible anxiety about being strapped with an unbearable load should my future income decline. Not to mention if I’m underestimating the upkeep and maintenance.
Seems like my only alternatives are private school (which cumulatively isn’t all that much cheaper than a house and doesn’t end with owning a house) or moving (not really a viable option.
Would I insane for buying a house like this?
ANSWER:
Radinomics:
I would consider buying the newer house but after the following are in order:
1) You have at least 12 months of your general overhead, including tuitiom, mortgage, property taxes saved, so you dont have to worry about not being able to continue living.
2) Have another $250K for a total of $750K of down payment for a $1.5M house, so that all of your mortgage payments are deductible. By not paying interest to the banks but to yourself, especially without a tax deduction, over the life of the loan (30 years) will save you 2x of the principal you put down as additional down payment. So on a $250K down payment, you will save an additional $500K of interest at 4% rate, buy paying yourself.
3) The maintenance cost, utility cost and other hidden costs of an older home dramatically more expensive than the cost of a newer, more modern, better designed more efficient newer homes.
4) While under the new 2018 tax law, you can use up to $10K/year for high school tuition expenses, that extra out of pocket saving definitely will not offset the cost of an older home as stated above.
Hope this helps.
Family of 5, HCOL, currently renting in the not very good school district, ready to settle down in the good school district. It’s a very old district, where an outdated 4 bedroom 3000 sq ft house built in 1929 would run 750k minimum. As a result, looking at houses closer to the 1.3-1.5M.
Full partner, fully bought in. Current income fluctuates between 500-600. Spouse doesn’t work, but probably will when kids are older (would add another 50ish)
Cash on hand: 550k
529 over 150k per kid
Student loans are paid off. Cars paid off. No debt of any kind.
Running the numbers, it looks like this house would be doable while still meeting other financial goals and putting away for kids. But I’m having terrible anxiety about being strapped with an unbearable load should my future income decline. Not to mention if I’m underestimating the upkeep and maintenance.
Seems like my only alternatives are private school (which cumulatively isn’t all that much cheaper than a house and doesn’t end with owning a house) or moving (not really a viable option.
Would I insane for buying a house like this?
ANSWER:
Radinomics:
I would consider buying the newer house but after the following are in order:
1) You have at least 12 months of your general overhead, including tuitiom, mortgage, property taxes saved, so you dont have to worry about not being able to continue living.
2) Have another $250K for a total of $750K of down payment for a $1.5M house, so that all of your mortgage payments are deductible. By not paying interest to the banks but to yourself, especially without a tax deduction, over the life of the loan (30 years) will save you 2x of the principal you put down as additional down payment. So on a $250K down payment, you will save an additional $500K of interest at 4% rate, buy paying yourself.
3) The maintenance cost, utility cost and other hidden costs of an older home dramatically more expensive than the cost of a newer, more modern, better designed more efficient newer homes.
4) While under the new 2018 tax law, you can use up to $10K/year for high school tuition expenses, that extra out of pocket saving definitely will not offset the cost of an older home as stated above.
Hope this helps.
