Did we buy too much house?

[honeysalt]

Infrequent poster who has been lurking since the MSN days. 

Partner and I just bought a house for around 600k.  Median home price in our city is 400k - our neighborhood median is 650k. My desired budget was 300k - partner's was 900k.    We compromised in the middle and got a great place in our dream neighborhood at the end of last year.  Very happy with the house and area, but experiencing a lot of anxiety about purchasing such an expensive house. First time home buyer, so buying into this market didn't help matters.

Here is the breakdown -

Monthly take home:

17k net (pretty even split between me and partner)

Retirement:

450k (me)

300k (partner)

Taxable:

70k (me)

90k (partner)

Savings:

35K (me)

20K (partner)

Other:

400k Rental Property (partner)

Debt:

0 (me)

100K (partner - (mortgage on rental)

We put down 25% and have split all costs.  Our mortgage payment is $2,300 and interest is 2.75% on a 30 year.  We are both early 40's and are putting a little extra towards the monthly payment and plan on making a triple payment every January (we did this year). 

Please help me with the hamster running on an endless wheel in my head. Did we buy too much house or am I letting my bag lady fears get the best of me? 

[nidena]

What's the rate on the rental?  I feel like that would be the place to focus the extra payments but I'm not super well versed on investment properties.

swordguy *is* well versed in rental cashflow stuff though.  (I hope I'm remember the right person.  lol)

[pooks]

Doesn't look like you bought too much house.  Hopefully you will be there a long time and really enjoy it.  Wish I had stretched and bought something I loved the first time. 

[minnesotapaintlady]

13% of net?

Not even close to too much house.

[honeysalt]

Jan 13, 2022 19:46:56 GMT -5 nidena said:

What's the rate on the rental?  I feel like that would be the place to focus the extra payments but I'm not super well versed on investment properties.

swordguy *is* well versed in rental cashflow stuff though.  (I hope I'm remember the right person.  lol)

Thank you, Nidena  Rate on rental is around 3.5% - appreciate the rationale.

However, we have separate finances.  Partner is taking in $1400/month on the rental.  Mortgage is less than $900.  Partner isn't currently adding extra rental payments to principal with profits - keeping them in his business account for expenses. 

[honeysalt]

Jan 13, 2022 19:54:06 GMT -5 pooks said:

Doesn't look like you bought too much house.  Hopefully you will be there a long time and really enjoy it.  Wish I had stretched and bought something I loved the first time. 

Thank you, Pooks.  Really enjoy it every day, just don't believe I can afford to live here yet.  Bought a 1 story with the idea that this could be a "forever" house.  Calculating selling costs has been one of the things that calms me - to your point about buying something you love the first time.   

[Tiny]

a rule of thumb is that you should NOT spend more than 28% of your MONTHLY GROSS income on your housing.
I've seen this done where the 28% is JUST the PITI, but that frightens me - just because you can afford the mortgage doesn't mean you can afford the house (the utilities, landscaping services, any monthly/yearly services the house requires, and/or HOA fees). I like to think that rule of thumb  actually includes your mortgage, property taxes, insurance, and monthly utilities, lawn service, pool service, any sort of service that keeps your home in good repair (yearly chimney sweeping? salt for the water softner? furnance check? yearly re-sealing of your deck or driveway, you get the idea,  AND a little bit extra (1% of the value of your house- that you put on the side for the eventual new roof or hvac or other big expense)  -- is 28% or less of your monthly gross income.

That said... YOUR monthly NET income is 17K - 28% of that is $4760.00.... This is less than if you used GROSS monthly income.

Your PITI is 2300 so by the traditional 28% rule you aren't even close to having too much house.

By my modified 28% rule of thumb: 

Is your house costing you an additional $2460 a month to keep up? lawn service, pool service, cleaning lady, utilities, any yearly expenses. gutters cleaned? furnace check? chimney sweep? empty the septic tank, I have no idea of what other kinds of recurring expenses you might have.

And then add in 1% to 3% of the value of your house that you should be setting on the side for a future new roof, new HVAC, some other big expense.

If you add all that up (and use a monthly amount)  and add it to your mortgage payment and if it is 28% or less than your monthly GROSS income  -- then you do not have too much house.

[Knee Deep in Water Chloe]

So, if you're at about $200k/year annually, and you bought a $600k, then you are at a purchase price of 3x your annual salary. 
For me, that works. 

[Ryan]

That's pretty low as a % of your income. Even if one of you lost your job, it's still fine.

I wouldn't bother making extra pymts, I'd put it in the market.

[minnesotapaintlady]

Jan 13, 2022 22:16:03 GMT -5 Knee Deep in Water Chloe said:

So, if you're at about $200k/year annually, and you bought a $600k, then you are at a purchase price of 3x your annual salary. 
For me, that works. 

200K NET.  She didn't give gross numbers, so probably closer to just 2X annual salary.

[honeysalt]

Jan 13, 2022 20:17:20 GMT -5 minnesotapaintlady said:

13% of net?

Not even close to too much house.

Thank you!  Really helpful - I Hadn't calculated the mortgage as a % of income.  Starting to understand why my partner doesn't understand the anxiety.  

[honeysalt]

Jan 13, 2022 21:44:39 GMT -5 Tiny said:

a rule of thumb is that you should NOT spend more than 28% of your MONTHLY GROSS income on your housing.
I've seen this done where the 28% is JUST the PITI, but that frightens me - just because you can afford the mortgage doesn't mean you can afford the house (the utilities, landscaping services, any monthly/yearly services the house requires, and/or HOA fees). I like to think that rule of thumb  actually includes your mortgage, property taxes, insurance, and monthly utilities, lawn service, pool service, any sort of service that keeps your home in good repair (yearly chimney sweeping? salt for the water softner? furnance check? yearly re-sealing of your deck or driveway, you get the idea,  AND a little bit extra (1% of the value of your house- that you put on the side for the eventual new roof or hvac or other big expense)  -- is 28% or less of your monthly gross income.

That said... YOUR monthly NET income is 17K - 28% of that is $4760.00.... This is less than if you used GROSS monthly income.

Your PITI is 2300 so by the traditional 28% rule you aren't even close to having too much house.

By my modified 28% rule of thumb: 

Is your house costing you an additional $2460 a month to keep up? lawn service, pool service, cleaning lady, utilities, any yearly expenses. gutters cleaned? furnace check? chimney sweep? empty the septic tank, I have no idea of what other kinds of recurring expenses you might have.

And then add in 1% to 3% of the value of your house that you should be setting on the side for a future new roof, new HVAC, some other big expense.

If you add all that up (and use a monthly amount)  and add it to your mortgage payment and if it is 28% or less than your monthly GROSS income  -- then you do not have too much house.

It costs an additional 1k per month on average for utilities and services.  It is an older house - dream neighborhood doesn't have new ones.  Completely remodeled, but HVAC is original and will need to be replaced.  Just replaced all of the pool equipment since it was original and repairs didn't make sense. 

Great point about maintenance cost.  That is part of what is making me nervous, but it is doable if we plan for it.  I'll get to work on setting aside 3% of the value of the home since it is older. 

[Cookies Galore]

I think you're fine and the numbers line up. First home purchase is almost always a big mind fuck because it really is a big purchase and it's okay to have a freak out. Hell, I called my dad crying when I saw our loan number on paper, even though husband and I purchased well under what we could easily afford.

Honestly, when I clicked on the thread I was expecting a story about buying a 3,000 sq ft house for two people. Because that's literally too much house, lol.

[honeysalt]

Jan 14, 2022 0:40:03 GMT -5 Ryan said:

That's pretty low as a % of your income. Even if one of you lost your job, it's still fine.

I wouldn't bother making extra pymts, I'd put it in the market.

Should have included this in the OP, but this was a big motivating factor.   I really didn't want either of us to feel overwhelmed with pressure if one of us lost our jobs. 

Partner says the same thing about the market.  Logically, you are both probably right.  Emotionally, the idea of owing on a mortgage until I'm 70 makes me a little queasy.

[honeysalt]

Jan 14, 2022 11:16:01 GMT -5 Cookies Galore said:

I think you're fine and the numbers line up. First home purchase is almost always a big mind fuck because it really is a big purchase and it's okay to have a freak out. Hell, I called my dad crying when I saw our loan number on paper, even though husband and I purchased well under what we could easily afford.

Honestly, when I clicked on the thread I was expecting a story about buying a 3,000 sq ft house for two people. Because that's literally too much house, lol.

This!  I've never had debt before.  Lucky enough to have gone to college when tuition was 4k per year.  Had family support, scholarships, worked and became an RA. 

Going from owing 0 to owing almost 500k has freaked me out.  I also had a lot more in savings before the down payment, appliances, furniture, pool equipment, etc....

We have 2,000 sq ft.  Completely agree on the 3k square footage.  That was another reason I didn't want to go up to 900k.  They were all huge for 2 people who don't even entertain.  The only thing we could find at 300k were condos/townhomes.  We actually put in offers on a couple, but got beat out by cash buyers.  Part of me is happy about this - we were living in an apartment before and were completely done with multifamily living. 

[Cookies Galore]

Jan 14, 2022 11:14:19 GMT -5 honeysalt said:

Jan 13, 2022 21:44:39 GMT -5 Tiny said:

a rule of thumb is that you should NOT spend more than 28% of your MONTHLY GROSS income on your housing.
I've seen this done where the 28% is JUST the PITI, but that frightens me - just because you can afford the mortgage doesn't mean you can afford the house (the utilities, landscaping services, any monthly/yearly services the house requires, and/or HOA fees). I like to think that rule of thumb  actually includes your mortgage, property taxes, insurance, and monthly utilities, lawn service, pool service, any sort of service that keeps your home in good repair (yearly chimney sweeping? salt for the water softner? furnance check? yearly re-sealing of your deck or driveway, you get the idea,  AND a little bit extra (1% of the value of your house- that you put on the side for the eventual new roof or hvac or other big expense)  -- is 28% or less of your monthly gross income.

That said... YOUR monthly NET income is 17K - 28% of that is $4760.00.... This is less than if you used GROSS monthly income.

Your PITI is 2300 so by the traditional 28% rule you aren't even close to having too much house.

By my modified 28% rule of thumb: 

Is your house costing you an additional $2460 a month to keep up? lawn service, pool service, cleaning lady, utilities, any yearly expenses. gutters cleaned? furnace check? chimney sweep? empty the septic tank, I have no idea of what other kinds of recurring expenses you might have.

And then add in 1% to 3% of the value of your house that you should be setting on the side for a future new roof, new HVAC, some other big expense.

If you add all that up (and use a monthly amount)  and add it to your mortgage payment and if it is 28% or less than your monthly GROSS income  -- then you do not have too much house.

It costs an additional 1k per month on average for utilities and services.  It is an older house - dream neighborhood doesn't have new ones.  Completely remodeled, but HVAC is original and will need to be replaced.  Just replaced all of the pool equipment since it was original and repairs didn't make sense. 

Great point about maintenance cost.  That is part of what is making me nervous, but it is doable if we plan for it.  I'll get to work on setting aside 3% of the value of the home since it is older. 

If you plan for it and know you have the money for repairs/replacements, you will hit a point where you eye doesn't get twitchy.
Our house is 110 years old. In the 5.5 years we've owned it, we've redone the HVAC, replaced original cast iron plumbing, replaced old galvanized pipes, installed an internal French drain, along with other needed things along the way. I still love the hell out of this house.

[honeysalt]

Jan 14, 2022 11:29:48 GMT -5 Cookies Galore said:

Jan 14, 2022 11:14:19 GMT -5 honeysalt said:

It costs an additional 1k per month on average for utilities and services.  It is an older house - dream neighborhood doesn't have new ones.  Completely remodeled, but HVAC is original and will need to be replaced.  Just replaced all of the pool equipment since it was original and repairs didn't make sense. 

Great point about maintenance cost.  That is part of what is making me nervous, but it is doable if we plan for it.  I'll get to work on setting aside 3% of the value of the home since it is older. 

If you plan for it and know you have the money for repairs/replacements, you will hit a point where you eye doesn't get twitchy.
Our house is 110 years old. In the 5.5 years we've owned it, we've redone the HVAC, replaced original cast iron plumbing, replaced old galvanized pipes, installed an internal French drain, along with other needed things along the way. I still love the hell out of this house.

This is so important.  I was talking to a co-worker who sold some property when it was up, but nowhere near what he would get today.  He said that he had no regrets because he couldn't time the market, but the ultimate house question (if you can afford it) is do you want to live there?  He didn't.  Glad you love your home.  I love mine too.

[resolution]

I think that 3x your annual income is a good measure of whether you can easily afford a house, and this looks to be well under that amount. I am glad you found something you love! Eventually the sticker shock should wear off and you will be comfortable again.

We bought a larger house about a year ago and I am starting to get used to the higher payment. I still get sticker shock from the heat bill though, since it went down in the summer and now suddenly its up again.

[Deleted]

Jan 14, 2022 11:16:01 GMT -5 Cookies Galore said:

I think you're fine and the numbers line up. First home purchase is almost always a big mind fuck because it really is a big purchase and it's okay to have a freak out. 

This.  I bought my first house with a friend in 1979- the mortgage was $75,000!   I remember freaking out when we found out that the 2 recently-filled 500-gallon oil tanks (it was a duplex) meant that we had to pony up the cost of all that oil at the closing to reimburse the sellers.  At the time we had a government-guaranteed mortgage and $75K was the max we could borrow.  We had to borrow the oil money from family. I had a bad migraine the day after the closing.

It sounds like the numbers work out- enjoy your house.  It gets better with time.

[minnesotapaintlady]

Jan 14, 2022 11:17:14 GMT -5 honeysalt said:

Jan 14, 2022 0:40:03 GMT -5 Ryan said:

That's pretty low as a % of your income. Even if one of you lost your job, it's still fine.

I wouldn't bother making extra pymts, I'd put it in the market.

Should have included this in the OP, but this was a big motivating factor.   I really didn't want either of us to feel overwhelmed with pressure if one of us lost our jobs. 

Partner says the same thing about the market.  Logically, you are both probably right.  Emotionally, the idea of owing on a mortgage until I'm 70 makes me a little queasy.

You probably won't have it until you're 70.  You'll either pay it off early or sell/refinance long before then.

[honeysalt]

Jan 14, 2022 12:04:21 GMT -5 minnesotapaintlady said:

Jan 14, 2022 11:17:14 GMT -5 honeysalt said:

Should have included this in the OP, but this was a big motivating factor.   I really didn't want either of us to feel overwhelmed with pressure if one of us lost our jobs. 

Partner says the same thing about the market.  Logically, you are both probably right.  Emotionally, the idea of owing on a mortgage until I'm 70 makes me a little queasy.

You probably won't have it until you're 70.  You'll either pay it off early or sell/refinance long before then.

If we keep up our extra payment plan we'll shave off 9 years, 3 months an 107k of interest.  I know it isn't what Phil would do, and might hurt my net worth some, but the peace of mind is worth it to me. 

[NoNamePerson]

Did we buy too much house is a common question after all the papers have been signed.  I bet everyone here, myself included, has had that "oh my" moment. Take a deep breath and let it out slowly and all will be fine. My words of wisdom for the day for what it's worth  

[Deleted]

Jan 14, 2022 11:17:14 GMT -5 honeysalt said:

Partner says the same thing about the market. Logically, you are both probably right. Emotionally, the idea of owing on a mortgage until I'm 70 makes me a little queasy.

You may change your mind- I'm almost 69 and I still have a mortgage- balance is now $61,000. I could pay it off tomorrow but it's at 3%, so why bother?

At some point you might want to refinance to a 15-year mortgage although interest rates will probably go nowhere but up from here. My last 3 mortgages (current, plus original on previous house plus refi) are/were all 15-year.

And another anecdote about how freaked out I was after that first closing, with small dollar amounts: partner kept telling me he could "write myself a check for the XYZ bank" where he had his checking account- basically and overdraft loan- and "the minimum payment is $50". Finally, with the bad news that we had to come up with $2,000 for the oil in the tanks, I told him to do it. I knew that $50/month wouldn't pay the principal given the interest rate but calculated an amount that was comfortable- I think $75/month, that would have paid it off in 3 years.
First bank statement came after the closing. They wanted $120. Minimum payment was $50 or 6% of the loan- whichever was higher. That was a huge crisis for me. That was when we ended up borrowing the $2K from relatives to pay off the bank. They write it up as a second mortgage but I didn't care. I take debts seriously and we did pay it off.

[honeysalt]

Jan 14, 2022 13:21:33 GMT -5 @athena53 said:

Jan 14, 2022 11:17:14 GMT -5 honeysalt said:

Partner says the same thing about the market. Logically, you are both probably right. Emotionally, the idea of owing on a mortgage until I'm 70 makes me a little queasy.

You may change your mind- I'm almost 69 and I still have a mortgage- balance is now $61,000. I could pay it off tomorrow but it's at 3%, so why bother?

At some point you might want to refinance to a 15-year mortgage although interest rates will probably go nowhere but up from here. My last 3 mortgages (current, plus original on previous house plus refi) are/were all 15-year.

And another anecdote about how freaked out I was after that first closing, with small dollar amounts: partner kept telling me he could "write myself a check for the XYZ bank" where he had his checking account- basically and overdraft loan- and "the minimum payment is $50". Finally, with the bad news that we had to come up with $2,000 for the oil in the tanks, I told him to do it. I knew that $50/month wouldn't pay the principal given the interest rate but calculated an amount that was comfortable- I think $75/month, that would have paid it off in 3 years.
First bank statement came after the closing. They wanted $120. Minimum payment was $50 or 6% of the loan- whichever was higher. That was a huge crisis for me. That was when we ended up borrowing the $2K from relatives to pay off the bank. They write it up as a second mortgage but I didn't care. I take debts seriously and we did pay it off.

True. I'm open to changing my mind, and we got 2.75%, so less than inflation.  It will also be easier to stomach later in the loan when the majority of payment goes to principal rather than interest.  

Your point about the unexpected costs hits home.  So many things have come up.  Washer and dryer were listed in the sale, but our agent made a mistake.  She offered to pay, but she was excellent overall and everyone makes mistakes.  Then the mother board went out on the dishwasher.  Pool equipment broke.  We replaced it all.  Furniture.  We went from a 2br apartment to a house with a living room and sitting room.  Partner has expensive taste while I had spent less than 5k on furniture in my life.  However, since he compromised with me on price, I've compromised on furniture, etc.  The good news is that the cash drain seems to have subsided.  Going to start saving for an HVAC replacement though!

[Cookies Galore]

Jan 14, 2022 12:35:57 GMT -5 NoNamePerson said:

Did we buy too much house is a common question after all the papers have been signed.  I bet everyone here, myself included, has had that "oh my" moment. Take a deep breath and let it out slowly and all will be fine. My words of wisdom for the day for what it's worth  

Exactly. If you didn't cry on public transportation about it, did you really buy a house? 🤣

[nidena]

Jan 14, 2022 13:45:15 GMT -5 honeysalt said:

Jan 14, 2022 13:21:33 GMT -5 @athena53 said:

You may change your mind- I'm almost 69 and I still have a mortgage- balance is now $61,000. I could pay it off tomorrow but it's at 3%, so why bother?

At some point you might want to refinance to a 15-year mortgage although interest rates will probably go nowhere but up from here. My last 3 mortgages (current, plus original on previous house plus refi) are/were all 15-year.

And another anecdote about how freaked out I was after that first closing, with small dollar amounts: partner kept telling me he could "write myself a check for the XYZ bank" where he had his checking account- basically and overdraft loan- and "the minimum payment is $50". Finally, with the bad news that we had to come up with $2,000 for the oil in the tanks, I told him to do it. I knew that $50/month wouldn't pay the principal given the interest rate but calculated an amount that was comfortable- I think $75/month, that would have paid it off in 3 years.
First bank statement came after the closing. They wanted $120. Minimum payment was $50 or 6% of the loan- whichever was higher. That was a huge crisis for me. That was when we ended up borrowing the $2K from relatives to pay off the bank. They write it up as a second mortgage but I didn't care. I take debts seriously and we did pay it off.

True. I'm open to changing my mind, and we got 2.75%, so less than inflation.  It will also be easier to stomach later in the loan when the majority of payment goes to principal rather than interest.  

Your point about the unexpected costs hits home.  So many things have come up.  Washer and dryer were listed in the sale, but our agent made a mistake.  She offered to pay, but she was excellent overall and everyone makes mistakes.  Then the mother board went out on the dishwasher.  Pool equipment broke.  We replaced it all.  Furniture.  We went from a 2br apartment to a house with a living room and sitting room.  Partner has expensive taste while I had spent less than 5k on furniture in my life.  However, since he compromised with me on price, I've compromised on furniture, etc.  The good news is that the cash drain seems to have subsided.  Going to start saving for an HVAC replacement though!

I bought my house in July 2020.  It still has NO furniture in the living room.  I'm going to be replacing the flooring this year.  I'll get furniture AFTER that.  I didn't see the point in moving stuff more than necessary.

I share this to say: don't be in a hurry to get things just so that you're space is filled (doesn't sound like YOU would do that but your partner, on the other hand...lol).  Take your time and find pieces that you absolutely LOVE, LOVE, LOVE.

[Deleted]

Jan 14, 2022 14:31:09 GMT -5 nidena said:

I bought my house in July 2020.  It still has NO furniture in the living room. I'm going to be replacing the flooring this year. I'll get furniture AFTER that. I didn't see the point in moving stuff more than necessary.

I share this to say: don't be in a hurry to get things just so that you're space is filled (doesn't sound like YOU would do that but your partner, on the other hand...lol). Take your time and find pieces that you absolutely LOVE, LOVE, LOVE.

My dear mother was a shining example of this. We moved into a home they'd had built in 1969. It was the first time we'd had that much room- a formal living room and dining room and FOUR bedrooms (with 5 children it was about time). The living room and dining room were empty for years. When they entertained, Mom and Dad had a folding card table and folding chairs that they used. Mom liked to buy on "90 days, same as cash" terms and she paid in full before the 90 days were up so there were no interest charges. I think they finally had those rooms furnished by the time I got out of college in 1975. It was good stuff- Mom called the style Italian provincial, so nothing up-to-the-minute but a classic style that would last. And it has- Mom and Dad are gone now but the furniture is scattered among various family members.

And yes, I swear stuff is programmed to break down right after closing. After my divorce I bought another house and in the first few years I had to replace the pool pump, the pool filter and a built-in microwave. My late husband and I bought the house I'm in now in 2016. It was 20 years old so we knew the HVAC was old but we had to replace the heating system that fall and the A/C the next spring. Planned improvements also cost more than we expected. Of course.

Still. I love the autonomy of making changes if and when I want and knowing that the appreciation in value, if any, is mine and not the landlord's.

[honeysalt]

Jan 14, 2022 14:31:09 GMT -5 nidena said:

Jan 14, 2022 13:45:15 GMT -5 honeysalt said:

True. I'm open to changing my mind, and we got 2.75%, so less than inflation.  It will also be easier to stomach later in the loan when the majority of payment goes to principal rather than interest.  

Your point about the unexpected costs hits home.  So many things have come up.  Washer and dryer were listed in the sale, but our agent made a mistake.  She offered to pay, but she was excellent overall and everyone makes mistakes.  Then the mother board went out on the dishwasher.  Pool equipment broke.  We replaced it all.  Furniture.  We went from a 2br apartment to a house with a living room and sitting room.  Partner has expensive taste while I had spent less than 5k on furniture in my life.  However, since he compromised with me on price, I've compromised on furniture, etc.  The good news is that the cash drain seems to have subsided.  Going to start saving for an HVAC replacement though!

I bought my house in July 2020.  It still has NO furniture in the living room.  I'm going to be replacing the flooring this year.  I'll get furniture AFTER that.  I didn't see the point in moving stuff more than necessary.

I share this to say: don't be in a hurry to get things just so that you're space is filled (doesn't sound like YOU would do that but your partner, on the other hand...lol).  Take your time and find pieces that you absolutely LOVE, LOVE, LOVE.

I've compromised on price, but not on pieces we love. We both like mid century modern, which is typically expensive. Article has been amazing. 2k for a couch seems crazy to me, but I do love the couch, and modern sofas at other sites were 3X that priceor more. 

You are right about partner.  His family is coming to visit in a couple of months and he wants everything perfect for when they get here.  Normally I wouldn't be so inclined to compromise, but he has compromised so much.  Our next door neighbors at our apartment were in their early twenties and worked at Walgreen's.  Great neighbors, but it gives you an idea of how modest the apartment was.  He admitted after buying the house that he "humbled" himself to live there.  It never occurred to me to be embarrassed.  It was clean and safe, which is all my friends and family care about. 

The good news is that we are rubbing off on each other.  My joy in saving has rubbed off on him - he used to buy clothes monthly - he is now on my schedule of buying things once a year or to replace things.  His joy in aesthetics is rubbing off on me.  It is nice to have nice things, but I've never allowed myself that before.

 

[Cookies Galore]

Googles Article... Oh shit. I want.

[tskeeter]

Jan 13, 2022 19:25:30 GMT -5 honeysalt said:

Infrequent poster who has been lurking since the MSN days. 

Partner and I just bought a house for around 600k.  Median home price in our city is 400k - our neighborhood median is 650k. My desired budget was 300k - partner's was 900k.    We compromised in the middle and got a great place in our dream neighborhood at the end of last year.  Very happy with the house and area, but experiencing a lot of anxiety about purchasing such an expensive house. First time home buyer, so buying into this market didn't help matters.

Here is the breakdown -

Monthly take home:

17k net (pretty even split between me and partner)

Retirement:

450k (me)

300k (partner)

Taxable:

70k (me)

90k (partner)

Savings:

35K (me)

20K (partner)

Other:

400k Rental Property (partner)

Debt:

0 (me)

100K (partner - (mortgage on rental)

We put down 25% and have split all costs.  Our mortgage payment is $2,300 and interest is 2.75% on a 30 year.  We are both early 40's and are putting a little extra towards the monthly payment and plan on making a triple payment every January (we did this year). 

Please help me with the hamster running on an endless wheel in my head. Did we buy too much house or am I letting my bag lady fears get the best of me? 

At 2.75% interest, I wouldn’t pay off the mortgage one second before I had to.  No extra each month.  No triple payment in January.

Money that you spent on additional mortgage payments is not available to cover the unexpected expenses that you are concerned about.

More importantly, why would you give up 10%, 15%, or 20% investment returns to save 2.75% in mortgage interest?  Although we could have paid cash for our house 15 years ago, we chose to finance part of the purchase.  Our mortgage balance is about $150K at 3%.  Or, about $4,500 in interest last year.  Last year, our portfolio earned about 15.25%.  So we got about $22,800 in gains on the $150K we didn’t tie up in the house.  By putting the $150K into investment accounts we came out about $18,300 ahead for the year.  That’s enough to pay for a new AC system or a new roof every year with money to spare.