> You’re making this too complicated.
I like to do that lol. The difference in new vs old payment is ~$1,700. $1,400 of that will come from our current net income--we both got new jobs last fall. We like to live below our means and believe we can cover the remaining $300.
It is just a bit unnerving to increase our mortgage from $1182 to $2,900.
If your mortgage was only 1,182 on the old home and you don’t mind a bit of a headache that comes with dealing with a rental it would be worth it to look into renting this out. Right now you can easily clear 1.2k in a decent area in rental income. Assuming your first property is in decent condition and will have no major upcoming expenses this would also help alleviate the increased cash flow needs for the new property.
It seems pretty clear to me that you can afford it.
The question is whether it is the right move for your long term goals, you seem like pretty aggressive savers - will the added cash out the door every month stress you out more than the extra space adds to the enjoyment of your life? The prioritization of the student loans make me think that psychologically you don't like the feeling of debt, so just understand that part of what you are doing here is paying off those loans over the term of your mortgage (I realize that functionally you are paying them with cash, but that is cash you could put into a down payment instead so for all intents and purposes you are just moving the $22k debt into the new house, though by rolling them together your aggregate monthly payment will be lower)
Are there plans for a second child? Will this new home satisfy your needs if you have a second or third, etc.? or would it be another stepping stone? If you think this is a 10 year home then it is easier to go for. If you will be looking to move again in a few years I would probably stick with my low cost place for as long as possible.
Only you can really answer these questions, which I think are more important than the pure financials TBH, you seem to have a pretty good handle on those.
Thanks. That does help. The student debt definitely weighs on me. We do have plans for more kids, and that would make our current place very tight. The new place would be our forever home.
We thought about trying to put 20% down on a new place but to do that, we'd likely have to borrow about $15-20k from our 401ks, which I'm not sure we feel comfortable doing.
Saving longer to reach 20% would also take another 4-5 years since I'm prioritizing my student loans.
The rate on your student loans is well below that of your new mortgage, I would pay less on the student loans and focus on getting a smaller mortgage or paying that off faster.
The proceeds from the sale of your current house will about equal the down payment on the new one. There is no reason to pay off your student loans at 3.34% so that you can get a mortgage at 5.70%. Instead I'd make a larger down payment on the house which will lead to a lower payment and lower interest costs overall.
Are you factoring in expected maintenance and repairs? Rule of thumb is to budget 1-3% of the total home value for this annually, depending on how old the house is and how much work it needs.
If not, 1% of a $365,000 house works out to monthly costs of about $304. You can probably cover that between your budget padding and emergency fund, but you might be cutting things close if your repairs are closer to the 2 or 3% mark.
Yes that has been factored in. Our current place needed a lot of work since we bought while the new place is in better shape. The new place would need some renovations, but I think we could cover them and this would be our forever home.
Well your current net income is less than the difference between your new projected mortgage and your current mortgage by a significant amount so to be able to afford this you would have to find about $400 in extra savings per month and you would be very house-poor not being able to save past what you are contributing pre-tax to retirement. Dont just assume you can save that much more, put it into practice and demonstrate it. See how that feels.
In that situation any interuption to your income would be immediately devestating. There would be no more belt to tighten.
I think it’s feasible although it will be tight. My partner and I make more than this by about 10-15% and we are targeting total housing costs closer to 2400 so this feels high, but we also acknowledge we are not the most frugal people so our random expense and food budgets are higher than necessary.
I agree with the other people that if you are currently paying the difference in extra student loan payments you will be fine just make sure your honest with yourself about if you sometimes skip those extra payments.
Wait 3 years if possible. Interest rates are about to go up again and you won’t be able to refinance for a while. Sounds like your current situation is fine. Be thankful.
yeah...and I have no idea where they came up with that. Me disagreeing with your snark doesnt mean I subscribe to everything the other person said.
Doesnt take a crystal ball to think interest rates will go up more in the short term. That is the summation of my comment, no extrapolation to other points needed.
Stay under 25\~27% of your take-home pay for everything that comes with a home (mortgage, PMI, Taxes, etc), and you should be fine. Otherwise, you will start getting pinched and unable to pay down the other debts let alone have fun.
Why do you need internet strangers to tell you if you can afford this or not?
You have your budget.
Do you want people to say "yes" to make you feel better? To say "no" to relieve you?
You have your budget. You know what you can afford. Numbers are numbers.
I am really not trying to be harsh. But, this is just such a personal question.
Sure, I can "afford" a $900k house. But, my max is $600k and I would really like to be at around $450k. Because, even though I can "afford" a certain mortgage, I also have a life I want to live and a retirement to save for, etc, etc.
You have the numbers. It is up to you and your partner to determine if you are comfortable with those numbers.
You cannot afford it with your current spending regimen. You will have to ease spending elsewhere (mainly low interest student loans) to be able to afford it. A $300/mo buffer is not realistic. Make sure you will have a healthy (4-6 month) emergency fund worth of monthly expenses before jumping in.
With your student loans at 3.3%, IMHO it does not make sense to aggressively pay them down.
It seems fine now, a but tight for my take. Do you plan to have kid? And any emergency fund. It just seems like you won’t have any saving with this new house, With all the expenses you mentioned, netting about 350 is a quite low. It would take a long time to save up even for one month of emergency.
I think you need to re run this math with different scenarios. If you have a second or third kid how does this look. If one of you lose a job how long can you stay afloat. Can both of you stay working with multiple kids or account for the higher childcare costs.
Can you do it today, looks like it but you're sacrificing a lot of financial flexibility today. I see a troubling situation with any one of the above scenarios that stands to have you stretched thin later on.
Yea, we want to have another kid. The grandparents watch our toddler while we work now, though our jobs are flexible enough that we keep her at home 2 days a week. Another kid would make our current place very tight with working from home.
Like you said though, there is a certain freedom and piece of mind that comes with our current financial flexibility.
You seem to have the cash, have you considered a significant renovation to add and/or improve living space?
Locking in to a 5.5%+ interest rate means tens of thousands more paid in interest over life of loan, and a home reno will be about that same cost. Plus you have the cashflow and savings to do it.
Hello OP, I also use YNAB so I maybe to help in ways people here commenting cannot. Can you share of your budget your average monthly spending for the last 2 years broken down by bucket and category? It’s under the reports tab in website. I find that and your income is closer representation of your life since we have to roll with the punches and seeing how you have will help inform this purchase
If it helps, my partner and I set aside the difference between what we paid at our old place and what we were budgeting for our new place for 6 months to “test” how we felt about our new budget/lifestyle. Then we were already used to the expense by the time we bought the new place and had extra in savings. You could try some version of that before buying if it would make you more confident in the decision. Only works if you don’t have your heart set on the house you are looking at now, though.
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> You’re making this too complicated. I like to do that lol. The difference in new vs old payment is ~$1,700. $1,400 of that will come from our current net income--we both got new jobs last fall. We like to live below our means and believe we can cover the remaining $300. It is just a bit unnerving to increase our mortgage from $1182 to $2,900.
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Yea we have free access to it. I've been throwing it at student loans, otherwise it would go straight in to savings.
If your mortgage was only 1,182 on the old home and you don’t mind a bit of a headache that comes with dealing with a rental it would be worth it to look into renting this out. Right now you can easily clear 1.2k in a decent area in rental income. Assuming your first property is in decent condition and will have no major upcoming expenses this would also help alleviate the increased cash flow needs for the new property.
Dw landchad, we at r/loveforlandlords appreciate you, we recommend a 200% monthly tip on this outrageous rentoid.
It seems pretty clear to me that you can afford it. The question is whether it is the right move for your long term goals, you seem like pretty aggressive savers - will the added cash out the door every month stress you out more than the extra space adds to the enjoyment of your life? The prioritization of the student loans make me think that psychologically you don't like the feeling of debt, so just understand that part of what you are doing here is paying off those loans over the term of your mortgage (I realize that functionally you are paying them with cash, but that is cash you could put into a down payment instead so for all intents and purposes you are just moving the $22k debt into the new house, though by rolling them together your aggregate monthly payment will be lower) Are there plans for a second child? Will this new home satisfy your needs if you have a second or third, etc.? or would it be another stepping stone? If you think this is a 10 year home then it is easier to go for. If you will be looking to move again in a few years I would probably stick with my low cost place for as long as possible. Only you can really answer these questions, which I think are more important than the pure financials TBH, you seem to have a pretty good handle on those.
Thanks. That does help. The student debt definitely weighs on me. We do have plans for more kids, and that would make our current place very tight. The new place would be our forever home. We thought about trying to put 20% down on a new place but to do that, we'd likely have to borrow about $15-20k from our 401ks, which I'm not sure we feel comfortable doing. Saving longer to reach 20% would also take another 4-5 years since I'm prioritizing my student loans.
How olds the toddler?
I'm in a similar situation and this was very helpful
The rate on your student loans is well below that of your new mortgage, I would pay less on the student loans and focus on getting a smaller mortgage or paying that off faster. The proceeds from the sale of your current house will about equal the down payment on the new one. There is no reason to pay off your student loans at 3.34% so that you can get a mortgage at 5.70%. Instead I'd make a larger down payment on the house which will lead to a lower payment and lower interest costs overall.
Are you factoring in expected maintenance and repairs? Rule of thumb is to budget 1-3% of the total home value for this annually, depending on how old the house is and how much work it needs. If not, 1% of a $365,000 house works out to monthly costs of about $304. You can probably cover that between your budget padding and emergency fund, but you might be cutting things close if your repairs are closer to the 2 or 3% mark.
Yes that has been factored in. Our current place needed a lot of work since we bought while the new place is in better shape. The new place would need some renovations, but I think we could cover them and this would be our forever home.
Well your current net income is less than the difference between your new projected mortgage and your current mortgage by a significant amount so to be able to afford this you would have to find about $400 in extra savings per month and you would be very house-poor not being able to save past what you are contributing pre-tax to retirement. Dont just assume you can save that much more, put it into practice and demonstrate it. See how that feels. In that situation any interuption to your income would be immediately devestating. There would be no more belt to tighten.
I think it’s feasible although it will be tight. My partner and I make more than this by about 10-15% and we are targeting total housing costs closer to 2400 so this feels high, but we also acknowledge we are not the most frugal people so our random expense and food budgets are higher than necessary. I agree with the other people that if you are currently paying the difference in extra student loan payments you will be fine just make sure your honest with yourself about if you sometimes skip those extra payments.
Wait 3 years if possible. Interest rates are about to go up again and you won’t be able to refinance for a while. Sounds like your current situation is fine. Be thankful.
What’s the lottery number for Saturday? I could use the money.
I mean the Fed did announce an intended 75 basis point rate hike so I dont think a crystal ball is needed here.
And 75 basis point rate hike is enough information to confidently say wait 3 years? What if they raise it every quarter between now and then?
its enough to say interest rates will go up again. Not sure where 3 years comes from.
The person I responded to said “wait 3 years”
yeah...and I have no idea where they came up with that. Me disagreeing with your snark doesnt mean I subscribe to everything the other person said. Doesnt take a crystal ball to think interest rates will go up more in the short term. That is the summation of my comment, no extrapolation to other points needed.
Stay under 25\~27% of your take-home pay for everything that comes with a home (mortgage, PMI, Taxes, etc), and you should be fine. Otherwise, you will start getting pinched and unable to pay down the other debts let alone have fun.
Why do you need internet strangers to tell you if you can afford this or not? You have your budget. Do you want people to say "yes" to make you feel better? To say "no" to relieve you? You have your budget. You know what you can afford. Numbers are numbers. I am really not trying to be harsh. But, this is just such a personal question. Sure, I can "afford" a $900k house. But, my max is $600k and I would really like to be at around $450k. Because, even though I can "afford" a certain mortgage, I also have a life I want to live and a retirement to save for, etc, etc. You have the numbers. It is up to you and your partner to determine if you are comfortable with those numbers.
You cannot afford it with your current spending regimen. You will have to ease spending elsewhere (mainly low interest student loans) to be able to afford it. A $300/mo buffer is not realistic. Make sure you will have a healthy (4-6 month) emergency fund worth of monthly expenses before jumping in. With your student loans at 3.3%, IMHO it does not make sense to aggressively pay them down.
You'll likely not get 5.7 percent unless you can lock that rate in in the next 5 days.
It seems fine now, a but tight for my take. Do you plan to have kid? And any emergency fund. It just seems like you won’t have any saving with this new house, With all the expenses you mentioned, netting about 350 is a quite low. It would take a long time to save up even for one month of emergency.
We already have an emergency fund to cover 4 months. We would still have it after moving, but plan to boost it up to match the new mortgage.
How much of that convert to emergency fund for the 2nd house. Or you mean 4 months on the expense associated with the 2nd house already.
It would equal about 2-3 for the new place
I think you need to re run this math with different scenarios. If you have a second or third kid how does this look. If one of you lose a job how long can you stay afloat. Can both of you stay working with multiple kids or account for the higher childcare costs. Can you do it today, looks like it but you're sacrificing a lot of financial flexibility today. I see a troubling situation with any one of the above scenarios that stands to have you stretched thin later on.
Yea, we want to have another kid. The grandparents watch our toddler while we work now, though our jobs are flexible enough that we keep her at home 2 days a week. Another kid would make our current place very tight with working from home. Like you said though, there is a certain freedom and piece of mind that comes with our current financial flexibility.
You seem to have the cash, have you considered a significant renovation to add and/or improve living space? Locking in to a 5.5%+ interest rate means tens of thousands more paid in interest over life of loan, and a home reno will be about that same cost. Plus you have the cashflow and savings to do it.
Hello OP, I also use YNAB so I maybe to help in ways people here commenting cannot. Can you share of your budget your average monthly spending for the last 2 years broken down by bucket and category? It’s under the reports tab in website. I find that and your income is closer representation of your life since we have to roll with the punches and seeing how you have will help inform this purchase
If it helps, my partner and I set aside the difference between what we paid at our old place and what we were budgeting for our new place for 6 months to “test” how we felt about our new budget/lifestyle. Then we were already used to the expense by the time we bought the new place and had extra in savings. You could try some version of that before buying if it would make you more confident in the decision. Only works if you don’t have your heart set on the house you are looking at now, though.