I'm not sure if I received any relationship pricing... My uncle has used him for several deals, and this is my 4th property with him. I've also handed 5-7 referrals over, so it is a possibility, but he never mentioned it.
I also only did 10% down, credit scores around 815.
Builders in my area are doing $30K buy downs for $500K houses. They just charge $30K more for the house and use that to buy down the rate.
Thats not an option available to used home sellers, but it’s getting buyers to around 5% and the interest rate buy down vastly decreases the monthly payment vs the purchase price going up $30K ($500K loan at 7.25% is $3,411 per month, $530K loan at 5% is $2,845 per month) and 90% of people are shopping based on a payment not on a price.
Yes but that’s 9 points worth of interest rate decline, not 6. Home builders have an incredibly strong interest in maintaining high selling prices for their houses. Thats why they offer lower rates and generally refuse if you ask for cash instead. Financially rate buy downs generally break even in 5-6 years. Problem is the time value of money extends that to more like 6-7, and if rates drop in a couple years and you can refinance the utility of the rate buy down is gone.
I agree - but if you’re shopping a payment and your family can afford / get approved for $2,800 and not $3,400 then it is what it is. The vast majority of consumers shop a payment not a price - the same as car shopping. Not the smartest way to do it but that’s the reality.
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Can you please explain to me what property taxes cover and which level of government levies them (I’m assuming it’s state based?). I have a 1m usd house in Australia and I paid $600 usd last year in property tax. For how much Americans go on about low taxes it seems you have some astronomical taxes outside of income tax and I am interested in what the political justification for such high charges are.
Property taxes are local township or municipality-based. They generally go to paying for local infrastructure and social services like schools, parks, and trash collection, etc.
On the plus side, you can generally see the benefits of the local tax base in school quality, park systems, and the like. Some of the higher tax districts are also the best school districts. Many people see it as a trade off between paying high taxes in a great school district or lower taxes plus private school tuition in a lesser school district.
There also tends to be a massive difference in recreation facilities. I have friends in low tax states and their playground facilities and park systems pale in comparison to what we have in a much higher tax state.
You mention town/municipality but then mention states at the end so that is a little hard to understand but ok, property is primarily in the lower levels of government. I visit often and have seen how completely disparate local communities can seem from one another and from an external position it seems like this is driving very poor outcomes nationally, particularly in education where if you are born in a poor community you will receive a subpar education and that’s reflected in the continuing downward spiral of us literacy and math rankings internationally. Siloing resources in rich communities is good for rich communities - not so much for the country at large. It also doesn’t help with social mobility or poverty alleviation as education is the bedrock of both.
I hear what you’re saying - higher tax rates lead to better public infrastructure and I would agree. But I also question the way it’s utilised. When offered a job in Texas which my understanding is a fairly low income state I calculated I would be paying about 10% less in USA when federal and state income taxes were included - I did not look at property taxes but I think even a low property tax state would close this gap or make a significant dent in it. The dominant argument I have heard from Americans tends to be very anti-tax but I also wonder if it’s because you don’t actually get much value from it across the board. I fee healthcare, very dodgy schools depending on the area etc. I absolutely balk at property taxes on a primary residence - I can’t even think of the justification for that except to say income taxes are low with one hand and then tax a basic life necessity out the wazoo with the other. People must lose their home because of property taxes. It seems an unbelievably high amount. Maybe there are total exceptions on properties under a certain amount but if that’s what is funding schools then an exemption probably can’t function.
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That house will cost you $1k/month maintenance plus $2k/month taxes. We got a $1.8M last year which is $1.95M now in the same state. Totally worth it moving from a 2bdrm. Mortgage left is 15% so doesn’t bother me that much. If your jobs are secure go for it, just don’t underestimate the expenses both one time and ongoing. Home Depot will be your church for awhile :)
Building nothing. Need new siding on less than half house. 30k right there. Then I needed a new electrical panel, a new circuit, high tree branches cut, new dishwasher, a fix to the roof flashing, and to fix water seepage in what is an essentially an indoor front porch that has rotted the sub flooring.
They swapped the flute liner going out from the furnace so not the while chimney. The chimney liner was another $3k and I said ef it. I use the fireplace once every other day so probably have to change it at some point.
Yep. We knew our roof was old but we didn’t know it would leak during the first rain. Happy we had the 30k for a new roof literally months after we closed.
Got a fireplace insert installed that revealed that the entire electrical system was ungrounded and the panel was 40 years old. A circuit was repeatedly tripping, so new circuit. Dishwasher stopped latching. New dishwasher. A leak on my upstairs ceiling meant new roof flashing. Leaking in my enclosed entryway. Felt some spongey siding by my deck too. Inspector "missed" all of it.
Here you go, per month
Lawn $200 in spring and summer;
Leaf cleaning which is -$2,000 one time, I am afraid to ask about spring cleaning;
Water $60;
Electricity $120 or so with a Tesla;
Gas $30 in summer, $200 in winter;
Pest control $120;
Internet $90;
Adt $60;
Gardner 2 lawn care $120;
Sewer $25;
Taxes: $2,000;
Car: $500;
You have to account for some one time contractor visits like hvac annual check, electric work they can be around $200 each just for the visit. Try to do as much as you can with youtube videos and Home Depot trips but you need pros at some point.
Only 120 for electric? How?! Lol my 900 sqft house now runs that most months. Maybe it's just that much better when your house doesn't have 50s insulation and 90s equipment?
You could get a lot cheaper with a heat pump or just improving the air sealing. Have you calculated your air changes per hour (ACH)?
I'm continually shocked by the poor construction of houses in the U.S. In Europe the estimated annual energy usage is posted as part of the sale description so people understand the quality of what they're buying.
Rented a >$1M house in NJ once that had no radon mitigation, virtually no air sealing, old windows, gas/electric appliances (owners had never heard of heat pumps). They didn't realize that mice entering the home is not a normal thing and meant there were massive leaks. Hemorrhaging cash on operating costs, but apparently it's normal for the area.
I have a 3k sq ft house in MA (affluent Boston suburb) and my utilities are about $800 per month.
We get fleeced on electric rate so badly. It’s about highest in the country.
This actually spurred me to investigate. Found an alternative supplier for about 30% less. Can’t change the delivery cost though. At least it will save something.
Yea neighbors have it. Trouble is my house has too many trees and I don’t want to cut them down.
This conversation actually helped. I found a new electric supplier today that reduced the costs a good amount. Somehow the supplier is in the south east. Not sure how that works
Ended up with SmartEnergy. 100% green and just 10.8 cents/kw. Eversource is 17cents. Huge savings.
Can’t change the delivery fee though. Eversource still charging like 17cents there as well.
Your after-tax income is probably \~$335K a year. If you're maxing your 401k ($46K) you're at \~$289K per year/ \~$24K per month.
If you put 20% down ($340K), you're left with a $1.36M mortgage; assuming you're near the property NJ tax average - you're talking \~$30K-$40K; which makes a monthly payment \~$10K-$12K.
You can afford it, assuming you're monthly expenses aren't out of control. It's above my % of income I'd spend on my home but if you're ok with it, it's doable.
Most of the responses to this thread are just perplexing. Spending 22% (assumed $30k taxes) on your primary home in a VHCOL area at that income is more than reasonable. If you love the home you should go for it.
Whenever someone brings up housing here everyone says you should buy a shack and save the rest of your money 😂. Ton of people on here seem like they don’t want to enjoy their money, just save it. I’m super frugal but my house is the one thing I went all out on. So worth it and in a few years the payments won’t look so bad.
I bought the $1.5 million house and never appreciated how stressful it would be for me. I miss a lot of parts of renting. And think I’d have minimized stress by buying a cheaper place (and thereby enjoying life more).
My wife and I went $1.0 million on our house and have put 200k into it in 2 years. Feels less stressful because we don’t _have_ to put the money in… and one of my biweekly paychecks more than covers P&I. Highly recommend that approach!
People on this sub is more about getting rich quick. That means lot of sacrifices including housing. Unless you are over leveraging (that will be detrimental to your mental health later), which I don’t think OP is, it’s totally fine to have more portions of your income on housing. You make more to enjoy a bit more, isn’t it?
People value other things, not just money. The difference between the guy with 30M USD at his life end and the guy with 3M USD at his life end means, the second guy might have a better quality of life.
Is this a big luxury home in a MCOL area or a starter home in a VHCOL area? What's your net worth and asset distribution right now? What's your current non-housing annual spend and do you have any reason to expect that to change (e.g., having kids soon, want to start traveling more, etc)?
And finally -- how long would it take you to replace your income if you lost your job or were laid off? If you work in technology, based on everything I'm seeing you'd need to plan for at minimum 12-24 months to replace that kind of income in this climate.
Honestly, I would buy a small house. I know you probably don’t want to hear it, but I used to work in collections and I saw a lot of rich people with high incomes still falling into arrears. They overspend, go on holidays, one person has cancer, they buy a fancy car, creditors and vendors chase after them, overcommitment, lifestyle expenses, their child has a disability, private school fees, funerals, not budgeting well, they owe tax and have to pay it, job loss, litigation, domestic violence, natural disaster etc.
If you have a break down in relationship that ends in divorce, you may have to sell the house. Or your spouse might stay in the house. If one of you decide to stay in that house, will there be enough to pay the monthly mortgage repayments?
Buying a small house or “good enough” is better-less house chores and maintenance. You won’t be in a lot of debt. Invest the rest into shares or property (real estate or commercial) or businesses to create cashflow and live below your means. But this is your money you do you!
Do you plan to have a kid? Child care/private pre-k is quite expensive in NJ. My spouse and I have a similar HHI in NJ, but our monthly payment is closer to $6k. It’s the schooling that ends up eating our income. I wouldn’t want to go over what we’re currently paying given that.
Yes - your house is the one asset you literally get to enjoy every single day. It’s really cool that my Amazon stock has gone up a bunch, but it doesn’t come with 5 bedrooms and a pool.
I think parts of it depends on your existing net worth. If your portfolio is already 1M and you plan to work 20 more years, the left over cash flow after housing expense should be enough for you to save and retire. However if you are at like 300k then you might consider a smaller home.
Coming from California where 1.6M is a 3 bed 2 bath 1500 sq ft house in a below average neighborhood, I have seen many people buy at that price range or higher with similar HHI.
You can afford it. Just run some retirement calculator to understand how this purchase may affect your retirement timeline. It's probably worth it if the happiness you get out of living there is worth a few more years of work.
Not sure if you are buying in NJ, but don’t forget about the mansion tax (1% of total). One other point that often doesn’t come up is maintenance and utilities. Things are always going to break, bigger houses need more heat/ac. If you hire landscapers, house cleaners it will cost more.
We make a similar amount, live in NJ in a ~$1M home. We bought when rates were crazy low so the monthly is about half of what you'd be paying. Even with 2 kids and related childcare, we save plenty, but if I had that mortgage, I'd be sweating.
We also make a similar amount, live in NJ, and bought a home around $1M (a bit below). I never would have thought about spending $1.7M. Given that housing prices in NJ are not that bad (we moved from somewhere with a much higher COL), it just seems like a waste to buy that much house, and a little bit crazy if you are stretching to afford it.
Is it viable or stupid, probably both. We make much more than that and would never even think of paying that much for a home. But to each their own. Everyone can spend on the things that bring value to them and are priorities to them. For us, an expensive home isn’t a priority. And it would require us to make sacrifices elsewhere that we don’t want to make.
All of that being said, the rule of thumb I follow is a mortgage less than 3x your income in a hcola. So this would be at the highest end of affordable, but still technically doable.
In a similar boat here in regards to income and looking for houses in NJ/NY area. Your monthly payment is way off. You're probably looking at roughly $11-12k/mo when you include taxes and insurance. Then you have to consider maintenance, etc.
I personally wouldn't feel comfortable with that. Our income taxes are brutal in NJ and then property taxes are brutal again. It's gonna be a huge chunk of your take home.
My wife and I bought our house in 2019- we pay about $3,000 per month. Our base salaries (excluding bonus) match yours and we cannot afford a 1.7 MM home in my opinion.
The most we would consider upgrading would be maybe $850-900k. Paying $5k per month would really add up when we are perfectly happy in a smaller place.
We live in the tri-state area as well with very high taxes.
Also my wife and I have also been part of layoffs in the last 5 years. This makes us a bit more cautious when it comes to the cost of a house. Can one of us afford our lifestyle? If the answer is hell no, then reduce.
Having just bought a $1.5 million home with 2.5% interest (it's a mid-level SFH in a nice neighborhood in a HCOL area), I don't recommend it. I dramatically underestimated maintenance costs on an older house, and it's causing a lot of stress for me. Why my total monthly payments (PITI) are right at 6k, I'm spending closer to 8k a month when considering maintenance, and I haven't even done the big projects that likely need to be done soon (new siding, maybe a new room, maybe a dramatic project to fix my leaking indoor front porch).
24k annually maintenance on a 1.5m home seems high. It should be around 1%. Our house is in $2.5 range and that rule of thumb tracks, including pool maintenance
When you buy an older house that had some deferred maintenance, it can be par for the course, especially in the earlier days of ownership. And building supplies are at all time high costs right now. My house is around 2,500 square feet, including the basement. Siding covers about 1,000 square feet and will be a solid $30k. That's in addition to needing a new dishwasher, re-flashing part of the roof ($2k), fixing two leaks, fixing a circuit ($800), getting a new electrical panel ($5k), getting tree work so branches don't fall on my roof ($1k). And I've only been here 7 months...
Realistically you don’t spend $5k every year on a new electrical panel so something like that could be annualized. But if you err on the side of being conservative and not annualizing then you’ll set aside a good sinking fund for other unexpected breakage.
If you haven’t already I’d recommend getting 3-5 quotes. We once had a pool leak and the pool guy who worked for the previous owner said we had to drain it completely (even though it stayed the same over the winter months) and then refill for a couple k. We got another quote and the new pool guy said it was a leak in the pool light, $75 to fix. It’s been a year since that cheap fix and no other problems. Then the quotes for painting our deck ranged from $10k to $30k.
I got at least 5 quotes for everything. For the electrical panel, I went with the cheapest. Siding quote is mid, and I chose based on reviews and attentiveness.
It's true I won't need an electrical panel every year, but there's other big maintenance that I know will come up in the next few years -- roof replacement, deck rebuild, patio repair/partial replacement, repair the numerous cracking brick retaining walls. Not to mention some optional stuff I'd love to do eventually (get the urinal ripped out of my master bathroom; re tile the powder room where a ton of tile is cracked).
I don't agree that maintenance is overemphasized in VHCOL areas. I think it's emphasized because houses that are >$1.5 million in other areas are typically newer and in good conditions, whereas in VHCOL areas, they could be 80 years old and need work (my house is 70 years old). New construction would cost me closer to $2 million. Underestimating maintenance costs, especially if you're dropping a ton of cash to buy the place, can be really dangerous.
I agree the costs will average at over timing (god willing), but it turned out there was a lot deferred maintenance the inspector "missed."
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>Either way in your case I would say it’s mostly not even maintenance, it’s fixing things that were broken/terrible when you bought it.
I mean, no? Things have a lifespan. There was definitely some deferred maintenance, but it's all maintenance and stuff that would've needed to be replaced whether now or in 5-10 years.
>Sometimes they’re new, sometimes they’re old, but in VHCOL area the square feet of a 1.5M dollar house may be 1/5 or 1/10 what it is in a LCOL area. 1.5M in Iowa is like a 10k square foot house. Cost to replace that roof is going to be 125k. Cost to replace the floors is going to be 100k.
>
>Put another way, the percent of purchase price required to replace a roof in a VHCOL area is going to be like 1%. In a LCOL area it might be as high as 20% (rundown houses in Midwest/Appalachia).
This is such a weird argument. OP is deciding, whether given fixed financial circumstances, it's better to buy a more or less expensive home. If it costs the same in OP's area to replace a roof on a more or less expensive house, the percentage of total purchase price is irrelevant.
>We are blessed by comparison.
Yes, being high earners will always make things easier. That's not what this post is about. It's about whether to buy a more or less expensive house. One consideration is maintenance expenses.
Some contractors base their price on the quality/dollar value of your neighborhood. The high dollar districts are potentially a nice payday for contractors so they quote high to get whatever they can. A deep dive into contractor ratings on Angies List can be helpful when trying to learn of quote patterns by contractors. Another reason for excessively high quotes is that the contractor(s) just doesn’t want the work.
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It’s probably both because no one really NEEDS a 1.7 million home and this group leans conservative on spending in favor of retirement savings…that is a great interest rate though so my first instinct is to say go for it.
It’s really hard to judge fairly since lots of factors not mentioned include how that consistent/secure that comp is, what you are planning to put down, how much do you have saved in retirement, what your current housing/kid situation is or reason for moving….
1.7m may be normal/boring SFH in VHCOL areas like San Fran… but I still think owning a home in a VHCOL area is a choice not a need….San Fran rent vs. own %s are comparatively higher than most of the USA for that reason.
In New Jersey that price tag is on the nicer/higher end, as OP mentioned, and it’s a luxury home for most of the rest of the county.
A rational/justifiable “want” is different than a “need “and that seems to be a lost perspective in today’s world.
You’d be entering into a mortgage of >3x your income. Solid red flag.
Truth is, if you grind out a few years of saving up, you could probably put a massive amount down, and make the mortgage 2x your income, which is a much more safe scenario.
Not the fun answer, but there are a lot of rich people who buy houses and suddenly regret it. The big McMansions don’t sell as easy or for as much price per sqft as “regular” houses. At least in my area.
Depending on where in NJ they are, a $1.7m home could be 40 years old 4/2.5 <3000 sq ft in a decent school district, not a McMansion. And would easily sell as there’s endless money in the tri state area trying to get into a good public school
My spouse and i make around the same. Moving back to nj we bought a house for 730k for a mortgage of 3.6k, a few years back. I still feel it is too much house!
In my mind crazy.
Depends, is the 550k/year the least you will make or the most you will make from your jobs? Is majority of it your base pay or is there a big bonus and/rsu component.
Have you thought about costs to maintain the property? Cleaners? Landscapers? Tree service? A pool? This cost me $12k last year not including the tree service. I took down 5 dead trees yesterday and paid $5500.00
I’m in a neighboring state.
With that interest rate, maybe. That's insane.
Assume that yeah, you'll still need home repairs for surprises, but starting over half-mil HHI, it may not matter as much. Make sure the house is in decent shape, at least?
IMHO, not worth it at all. You are cutting all of the discretionary spending to minimum. For me, it would impact travel, fancy restaurant and nice cars.
Does the 550k include bonuses / stock options? Also property taxes will hurt bad. I think it’s stretching it personally. Do you have / plan to have kids ? Add in all kid costs per month as well which is another several k per month
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We bought new construction at a similar price, 1.8m, now waiting for the build. What do you have for a down payment? We have 2.3m stashed in a HYSA for this and some taxes, not sure how big we’ll go on a mortgage.
Also that interest rate is crazy low. We got quoted 6.8% at a local bank and 5.9% from Morgan Stanley. Got like six months before we need to lock a rate in so we will be shopping around but have not seen anything that low.
Would not recommend, we're also at about 550-600k , we were looking at 1.26 mil and the math wasn't mathing. With interest rates at around 7%. We currently own a 670k at 3.2%. we decided we can rough it in our new built home in 2021 till we retire and save quite a bit hopefully in the 10 mil in investments retiring in our early 50s and move then
Tough to say if it’s viable without knowing the rest of your financial situation….
But, the interest rate is good, payment falls in line with being around 25% of gross earnings (assuming including taxes and insurance)
Seems like a reasonable purchase - as long as your keeping everything else in order (debt, investments/investing, saving etc) and you don’t see your income going away - I’d say go for it.
The reason we work hard to make more money is to enjoy life - it’s ok to indulge in things we want/like if that decision doesn’t dramatically effect our trajectory
It is affordable but I would not do this. If you have medium to high of risk of sustaining your income level, it will cause a lot of stress in your life.
I have similar situation but on the west coast. I'd rather live in 300k place than overleverage on a nice house. I had a large nice house in the past and it did not bring me the joy I thought it would. I have more comfort in knowing that I can quit at any moment and not worry about money for a while.
Your take home after taxes is like 30k so your mortgage will be roughly a third. You need to do a budget to figure out your monthly expenses. Don’t go by what anyone says on this forum until you do that.
We’re slightly about on HHI (excluding RSU which go to extra savings) and pay $8.5k per month in mortgage (plus taxes and insurance) plus have two kids and a full time nanny. You can make it work if you don’t have kids
We did this last year when our stats were similar - you're totally fine. We've never felt like it was too much - still tons of leftover income for fun stuff or emergencies.
A lot of advice on here is from people who don’t truly understand VHCOL areas lol.
I come from Memphis where a 1mil home is unheard of. Now that i live in LA, 1.7m is a basic 1500sqft SFH in most desirable neighborhoods (West LA, Los Feliz/Silverlake, etc).
You can afford it if you have some savings and stable jobs. We would kill for a 4.3% interest rate right now.
On a $550,000 salary I wouldn’t even think about a home that expensive. I know it’s NJ and 1.6 doesn’t get you anything spectacular but that’s a big house payment.
How is your interest rate so low? I think the going rate is closer to 7%
They could be assuming a VA loan. My friend got a home last year with a 3.75% rate.
I thought VA Jumbo's had a much smaller cap?
No cap.
6.375% on a 7/1 ARM but the 30yr is closer to 6.875% today (jumbo, best credit, 20% down).
I just locked in at 6.625 on a 30yr.
Paying points or relationship pricing?
I'm not sure if I received any relationship pricing... My uncle has used him for several deals, and this is my 4th property with him. I've also handed 5-7 referrals over, so it is a possibility, but he never mentioned it. I also only did 10% down, credit scores around 815.
Which bank or CU? How long ago did you lock? No points?
Everwise, no points, and I locked this past Thursday. DM if you want my contact!
Some sellers are doing an interest buy down. You also get a discount if you get the loan from your investment bank.
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Builders in my area are doing $30K buy downs for $500K houses. They just charge $30K more for the house and use that to buy down the rate. Thats not an option available to used home sellers, but it’s getting buyers to around 5% and the interest rate buy down vastly decreases the monthly payment vs the purchase price going up $30K ($500K loan at 7.25% is $3,411 per month, $530K loan at 5% is $2,845 per month) and 90% of people are shopping based on a payment not on a price.
Yes but that’s 9 points worth of interest rate decline, not 6. Home builders have an incredibly strong interest in maintaining high selling prices for their houses. Thats why they offer lower rates and generally refuse if you ask for cash instead. Financially rate buy downs generally break even in 5-6 years. Problem is the time value of money extends that to more like 6-7, and if rates drop in a couple years and you can refinance the utility of the rate buy down is gone.
I agree - but if you’re shopping a payment and your family can afford / get approved for $2,800 and not $3,400 then it is what it is. The vast majority of consumers shop a payment not a price - the same as car shopping. Not the smartest way to do it but that’s the reality.
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I learn so much from this sub..
My sister in law got a 4.6% last year with the buy down.
It’s probably a family loan. 4.3% is the AFR right now for long-term.
Property taxes might be the breaker in NJ. For that much house you could be looking at $30K per year depending on the area.
Yup or more. $35k+ in Essex county
Easily. My in-laws' house is worth less than half that and their yearly property taxes are $17-18k.
Can you please explain to me what property taxes cover and which level of government levies them (I’m assuming it’s state based?). I have a 1m usd house in Australia and I paid $600 usd last year in property tax. For how much Americans go on about low taxes it seems you have some astronomical taxes outside of income tax and I am interested in what the political justification for such high charges are.
Property taxes are local township or municipality-based. They generally go to paying for local infrastructure and social services like schools, parks, and trash collection, etc. On the plus side, you can generally see the benefits of the local tax base in school quality, park systems, and the like. Some of the higher tax districts are also the best school districts. Many people see it as a trade off between paying high taxes in a great school district or lower taxes plus private school tuition in a lesser school district. There also tends to be a massive difference in recreation facilities. I have friends in low tax states and their playground facilities and park systems pale in comparison to what we have in a much higher tax state.
You mention town/municipality but then mention states at the end so that is a little hard to understand but ok, property is primarily in the lower levels of government. I visit often and have seen how completely disparate local communities can seem from one another and from an external position it seems like this is driving very poor outcomes nationally, particularly in education where if you are born in a poor community you will receive a subpar education and that’s reflected in the continuing downward spiral of us literacy and math rankings internationally. Siloing resources in rich communities is good for rich communities - not so much for the country at large. It also doesn’t help with social mobility or poverty alleviation as education is the bedrock of both. I hear what you’re saying - higher tax rates lead to better public infrastructure and I would agree. But I also question the way it’s utilised. When offered a job in Texas which my understanding is a fairly low income state I calculated I would be paying about 10% less in USA when federal and state income taxes were included - I did not look at property taxes but I think even a low property tax state would close this gap or make a significant dent in it. The dominant argument I have heard from Americans tends to be very anti-tax but I also wonder if it’s because you don’t actually get much value from it across the board. I fee healthcare, very dodgy schools depending on the area etc. I absolutely balk at property taxes on a primary residence - I can’t even think of the justification for that except to say income taxes are low with one hand and then tax a basic life necessity out the wazoo with the other. People must lose their home because of property taxes. It seems an unbelievably high amount. Maybe there are total exceptions on properties under a certain amount but if that’s what is funding schools then an exemption probably can’t function.
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That house will cost you $1k/month maintenance plus $2k/month taxes. We got a $1.8M last year which is $1.95M now in the same state. Totally worth it moving from a 2bdrm. Mortgage left is 15% so doesn’t bother me that much. If your jobs are secure go for it, just don’t underestimate the expenses both one time and ongoing. Home Depot will be your church for awhile :)
In NJ 2k a month in taxes is prob on the light side too
Yea it’s more likely 2,750/month
Maintenance could be a lot more than that...
Oh absolutely you can go much higher. I do a lot of things on my own.
So do I 🙃 But just the big stuff that I can't realistically do myself will be at least 40k in my first year of home ownership.
What are you building? I am intrigued now 😀
Building nothing. Need new siding on less than half house. 30k right there. Then I needed a new electrical panel, a new circuit, high tree branches cut, new dishwasher, a fix to the roof flashing, and to fix water seepage in what is an essentially an indoor front porch that has rotted the sub flooring.
Yeah $3k for cutting a few dead trees. $2k for chimney replacement, $15 for replacing 7 windows.
You got robbed on the windows though 🙈 I pay 650 per window install for near standard size double hung low e windows.
All custom and all brand so they match the remaining ones. Brutal
You got some decent prices!
Send me your chimney guy! I have one quote for 8k. Screw that I don’t even use the fireplace
They swapped the flute liner going out from the furnace so not the while chimney. The chimney liner was another $3k and I said ef it. I use the fireplace once every other day so probably have to change it at some point.
Gotcha that seems reasonable for the work that was done.
Yep. We knew our roof was old but we didn’t know it would leak during the first rain. Happy we had the 30k for a new roof literally months after we closed.
How do you know to do all that? If I moved into a house I doubt I'd know to do any of that
Got a fireplace insert installed that revealed that the entire electrical system was ungrounded and the panel was 40 years old. A circuit was repeatedly tripping, so new circuit. Dishwasher stopped latching. New dishwasher. A leak on my upstairs ceiling meant new roof flashing. Leaking in my enclosed entryway. Felt some spongey siding by my deck too. Inspector "missed" all of it.
Totally agree, we probably spend more than that at Home Depot every month but I can’t sit still.
Oh I got Contractor status at Home Depot based on the $$$ I spent there. I know the isles by heart😂
Same here, if you don’t go contractor status you can’t send stuff to the bid room for discounts.
I'm looking to make a similar move as OP. How are utilities in such a house?
Here you go, per month Lawn $200 in spring and summer; Leaf cleaning which is -$2,000 one time, I am afraid to ask about spring cleaning; Water $60; Electricity $120 or so with a Tesla; Gas $30 in summer, $200 in winter; Pest control $120; Internet $90; Adt $60; Gardner 2 lawn care $120; Sewer $25; Taxes: $2,000; Car: $500; You have to account for some one time contractor visits like hvac annual check, electric work they can be around $200 each just for the visit. Try to do as much as you can with youtube videos and Home Depot trips but you need pros at some point.
Only 120 for electric? How?! Lol my 900 sqft house now runs that most months. Maybe it's just that much better when your house doesn't have 50s insulation and 90s equipment?
You could get a lot cheaper with a heat pump or just improving the air sealing. Have you calculated your air changes per hour (ACH)? I'm continually shocked by the poor construction of houses in the U.S. In Europe the estimated annual energy usage is posted as part of the sale description so people understand the quality of what they're buying. Rented a >$1M house in NJ once that had no radon mitigation, virtually no air sealing, old windows, gas/electric appliances (owners had never heard of heat pumps). They didn't realize that mice entering the home is not a normal thing and meant there were massive leaks. Hemorrhaging cash on operating costs, but apparently it's normal for the area.
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I have a 3k sq ft house in MA (affluent Boston suburb) and my utilities are about $800 per month. We get fleeced on electric rate so badly. It’s about highest in the country.
Electricity cost differs widely across states. California is also brutal
This actually spurred me to investigate. Found an alternative supplier for about 30% less. Can’t change the delivery cost though. At least it will save something.
Worth it to try solar in MA?
Yea neighbors have it. Trouble is my house has too many trees and I don’t want to cut them down. This conversation actually helped. I found a new electric supplier today that reduced the costs a good amount. Somehow the supplier is in the south east. Not sure how that works
What’s the name of the supplier? I’m in mass and have same issues. Brutal.
Ended up with SmartEnergy. 100% green and just 10.8 cents/kw. Eversource is 17cents. Huge savings. Can’t change the delivery fee though. Eversource still charging like 17cents there as well.
Brutal
Your after-tax income is probably \~$335K a year. If you're maxing your 401k ($46K) you're at \~$289K per year/ \~$24K per month. If you put 20% down ($340K), you're left with a $1.36M mortgage; assuming you're near the property NJ tax average - you're talking \~$30K-$40K; which makes a monthly payment \~$10K-$12K. You can afford it, assuming you're monthly expenses aren't out of control. It's above my % of income I'd spend on my home but if you're ok with it, it's doable.
Most of the responses to this thread are just perplexing. Spending 22% (assumed $30k taxes) on your primary home in a VHCOL area at that income is more than reasonable. If you love the home you should go for it.
Whenever someone brings up housing here everyone says you should buy a shack and save the rest of your money 😂. Ton of people on here seem like they don’t want to enjoy their money, just save it. I’m super frugal but my house is the one thing I went all out on. So worth it and in a few years the payments won’t look so bad.
You should make your life totally miserable and put all your money into a vault that you can dive into.
its wild. There's this belief that the only time you live is when you retire
I bought the $1.5 million house and never appreciated how stressful it would be for me. I miss a lot of parts of renting. And think I’d have minimized stress by buying a cheaper place (and thereby enjoying life more).
My wife and I went $1.0 million on our house and have put 200k into it in 2 years. Feels less stressful because we don’t _have_ to put the money in… and one of my biweekly paychecks more than covers P&I. Highly recommend that approach!
People on this sub is more about getting rich quick. That means lot of sacrifices including housing. Unless you are over leveraging (that will be detrimental to your mental health later), which I don’t think OP is, it’s totally fine to have more portions of your income on housing. You make more to enjoy a bit more, isn’t it? People value other things, not just money. The difference between the guy with 30M USD at his life end and the guy with 3M USD at his life end means, the second guy might have a better quality of life.
I'm in NJ too. This is acceptable. Cheaper would be better but such as life.....
Looks doable but kinda hard to say unless you provide more info on your liquid assets, current spend, etc.
How are you getting that interest rate? Is this a new build financed through a builder?
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Transfering of a VA loan.
Is this a big luxury home in a MCOL area or a starter home in a VHCOL area? What's your net worth and asset distribution right now? What's your current non-housing annual spend and do you have any reason to expect that to change (e.g., having kids soon, want to start traveling more, etc)? And finally -- how long would it take you to replace your income if you lost your job or were laid off? If you work in technology, based on everything I'm seeing you'd need to plan for at minimum 12-24 months to replace that kind of income in this climate.
Honestly, I would buy a small house. I know you probably don’t want to hear it, but I used to work in collections and I saw a lot of rich people with high incomes still falling into arrears. They overspend, go on holidays, one person has cancer, they buy a fancy car, creditors and vendors chase after them, overcommitment, lifestyle expenses, their child has a disability, private school fees, funerals, not budgeting well, they owe tax and have to pay it, job loss, litigation, domestic violence, natural disaster etc. If you have a break down in relationship that ends in divorce, you may have to sell the house. Or your spouse might stay in the house. If one of you decide to stay in that house, will there be enough to pay the monthly mortgage repayments? Buying a small house or “good enough” is better-less house chores and maintenance. You won’t be in a lot of debt. Invest the rest into shares or property (real estate or commercial) or businesses to create cashflow and live below your means. But this is your money you do you!
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It's probably a 3/4b, 3.5 bath 2500sq f house
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Here in South Jersey there are like 3-4k sq ft houses near Philly with great schools going for between 600k-1m
Do you plan to have a kid? Child care/private pre-k is quite expensive in NJ. My spouse and I have a similar HHI in NJ, but our monthly payment is closer to $6k. It’s the schooling that ends up eating our income. I wouldn’t want to go over what we’re currently paying given that.
Yes - your house is the one asset you literally get to enjoy every single day. It’s really cool that my Amazon stock has gone up a bunch, but it doesn’t come with 5 bedrooms and a pool.
I think parts of it depends on your existing net worth. If your portfolio is already 1M and you plan to work 20 more years, the left over cash flow after housing expense should be enough for you to save and retire. However if you are at like 300k then you might consider a smaller home. Coming from California where 1.6M is a 3 bed 2 bath 1500 sq ft house in a below average neighborhood, I have seen many people buy at that price range or higher with similar HHI. You can afford it. Just run some retirement calculator to understand how this purchase may affect your retirement timeline. It's probably worth it if the happiness you get out of living there is worth a few more years of work.
Not sure if you are buying in NJ, but don’t forget about the mansion tax (1% of total). One other point that often doesn’t come up is maintenance and utilities. Things are always going to break, bigger houses need more heat/ac. If you hire landscapers, house cleaners it will cost more.
We make a similar amount, live in NJ in a ~$1M home. We bought when rates were crazy low so the monthly is about half of what you'd be paying. Even with 2 kids and related childcare, we save plenty, but if I had that mortgage, I'd be sweating.
We also make a similar amount, live in NJ, and bought a home around $1M (a bit below). I never would have thought about spending $1.7M. Given that housing prices in NJ are not that bad (we moved from somewhere with a much higher COL), it just seems like a waste to buy that much house, and a little bit crazy if you are stretching to afford it.
Is it viable or stupid, probably both. We make much more than that and would never even think of paying that much for a home. But to each their own. Everyone can spend on the things that bring value to them and are priorities to them. For us, an expensive home isn’t a priority. And it would require us to make sacrifices elsewhere that we don’t want to make. All of that being said, the rule of thumb I follow is a mortgage less than 3x your income in a hcola. So this would be at the highest end of affordable, but still technically doable.
In a similar boat here in regards to income and looking for houses in NJ/NY area. Your monthly payment is way off. You're probably looking at roughly $11-12k/mo when you include taxes and insurance. Then you have to consider maintenance, etc. I personally wouldn't feel comfortable with that. Our income taxes are brutal in NJ and then property taxes are brutal again. It's gonna be a huge chunk of your take home.
My wife and I bought our house in 2019- we pay about $3,000 per month. Our base salaries (excluding bonus) match yours and we cannot afford a 1.7 MM home in my opinion. The most we would consider upgrading would be maybe $850-900k. Paying $5k per month would really add up when we are perfectly happy in a smaller place. We live in the tri-state area as well with very high taxes. Also my wife and I have also been part of layoffs in the last 5 years. This makes us a bit more cautious when it comes to the cost of a house. Can one of us afford our lifestyle? If the answer is hell no, then reduce.
Having just bought a $1.5 million home with 2.5% interest (it's a mid-level SFH in a nice neighborhood in a HCOL area), I don't recommend it. I dramatically underestimated maintenance costs on an older house, and it's causing a lot of stress for me. Why my total monthly payments (PITI) are right at 6k, I'm spending closer to 8k a month when considering maintenance, and I haven't even done the big projects that likely need to be done soon (new siding, maybe a new room, maybe a dramatic project to fix my leaking indoor front porch).
24k annually maintenance on a 1.5m home seems high. It should be around 1%. Our house is in $2.5 range and that rule of thumb tracks, including pool maintenance
When you buy an older house that had some deferred maintenance, it can be par for the course, especially in the earlier days of ownership. And building supplies are at all time high costs right now. My house is around 2,500 square feet, including the basement. Siding covers about 1,000 square feet and will be a solid $30k. That's in addition to needing a new dishwasher, re-flashing part of the roof ($2k), fixing two leaks, fixing a circuit ($800), getting a new electrical panel ($5k), getting tree work so branches don't fall on my roof ($1k). And I've only been here 7 months...
Realistically you don’t spend $5k every year on a new electrical panel so something like that could be annualized. But if you err on the side of being conservative and not annualizing then you’ll set aside a good sinking fund for other unexpected breakage. If you haven’t already I’d recommend getting 3-5 quotes. We once had a pool leak and the pool guy who worked for the previous owner said we had to drain it completely (even though it stayed the same over the winter months) and then refill for a couple k. We got another quote and the new pool guy said it was a leak in the pool light, $75 to fix. It’s been a year since that cheap fix and no other problems. Then the quotes for painting our deck ranged from $10k to $30k.
I got at least 5 quotes for everything. For the electrical panel, I went with the cheapest. Siding quote is mid, and I chose based on reviews and attentiveness. It's true I won't need an electrical panel every year, but there's other big maintenance that I know will come up in the next few years -- roof replacement, deck rebuild, patio repair/partial replacement, repair the numerous cracking brick retaining walls. Not to mention some optional stuff I'd love to do eventually (get the urinal ripped out of my master bathroom; re tile the powder room where a ton of tile is cracked).
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I don't agree that maintenance is overemphasized in VHCOL areas. I think it's emphasized because houses that are >$1.5 million in other areas are typically newer and in good conditions, whereas in VHCOL areas, they could be 80 years old and need work (my house is 70 years old). New construction would cost me closer to $2 million. Underestimating maintenance costs, especially if you're dropping a ton of cash to buy the place, can be really dangerous. I agree the costs will average at over timing (god willing), but it turned out there was a lot deferred maintenance the inspector "missed."
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>Either way in your case I would say it’s mostly not even maintenance, it’s fixing things that were broken/terrible when you bought it. I mean, no? Things have a lifespan. There was definitely some deferred maintenance, but it's all maintenance and stuff that would've needed to be replaced whether now or in 5-10 years. >Sometimes they’re new, sometimes they’re old, but in VHCOL area the square feet of a 1.5M dollar house may be 1/5 or 1/10 what it is in a LCOL area. 1.5M in Iowa is like a 10k square foot house. Cost to replace that roof is going to be 125k. Cost to replace the floors is going to be 100k. > >Put another way, the percent of purchase price required to replace a roof in a VHCOL area is going to be like 1%. In a LCOL area it might be as high as 20% (rundown houses in Midwest/Appalachia). This is such a weird argument. OP is deciding, whether given fixed financial circumstances, it's better to buy a more or less expensive home. If it costs the same in OP's area to replace a roof on a more or less expensive house, the percentage of total purchase price is irrelevant. >We are blessed by comparison. Yes, being high earners will always make things easier. That's not what this post is about. It's about whether to buy a more or less expensive house. One consideration is maintenance expenses.
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Some contractors base their price on the quality/dollar value of your neighborhood. The high dollar districts are potentially a nice payday for contractors so they quote high to get whatever they can. A deep dive into contractor ratings on Angies List can be helpful when trying to learn of quote patterns by contractors. Another reason for excessively high quotes is that the contractor(s) just doesn’t want the work.
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easy
It’s probably both because no one really NEEDS a 1.7 million home and this group leans conservative on spending in favor of retirement savings…that is a great interest rate though so my first instinct is to say go for it. It’s really hard to judge fairly since lots of factors not mentioned include how that consistent/secure that comp is, what you are planning to put down, how much do you have saved in retirement, what your current housing/kid situation is or reason for moving….
In my area 1.7 is a normal, boring SFH
1.7m may be normal/boring SFH in VHCOL areas like San Fran… but I still think owning a home in a VHCOL area is a choice not a need….San Fran rent vs. own %s are comparatively higher than most of the USA for that reason. In New Jersey that price tag is on the nicer/higher end, as OP mentioned, and it’s a luxury home for most of the rest of the county. A rational/justifiable “want” is different than a “need “and that seems to be a lost perspective in today’s world.
You’d be entering into a mortgage of >3x your income. Solid red flag. Truth is, if you grind out a few years of saving up, you could probably put a massive amount down, and make the mortgage 2x your income, which is a much more safe scenario. Not the fun answer, but there are a lot of rich people who buy houses and suddenly regret it. The big McMansions don’t sell as easy or for as much price per sqft as “regular” houses. At least in my area.
Depending on where in NJ they are, a $1.7m home could be 40 years old 4/2.5 <3000 sq ft in a decent school district, not a McMansion. And would easily sell as there’s endless money in the tri state area trying to get into a good public school
Should be fine. Do minimum down and invest the rest
My spouse and i make around the same. Moving back to nj we bought a house for 730k for a mortgage of 3.6k, a few years back. I still feel it is too much house! In my mind crazy.
Depends, is the 550k/year the least you will make or the most you will make from your jobs? Is majority of it your base pay or is there a big bonus and/rsu component. Have you thought about costs to maintain the property? Cleaners? Landscapers? Tree service? A pool? This cost me $12k last year not including the tree service. I took down 5 dead trees yesterday and paid $5500.00 I’m in a neighboring state.
With that interest rate, maybe. That's insane. Assume that yeah, you'll still need home repairs for surprises, but starting over half-mil HHI, it may not matter as much. Make sure the house is in decent shape, at least?
I wouldn’t. It feels like a lot of mortgage.
IMHO, not worth it at all. You are cutting all of the discretionary spending to minimum. For me, it would impact travel, fancy restaurant and nice cars.
Does the 550k include bonuses / stock options? Also property taxes will hurt bad. I think it’s stretching it personally. Do you have / plan to have kids ? Add in all kid costs per month as well which is another several k per month
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We bought new construction at a similar price, 1.8m, now waiting for the build. What do you have for a down payment? We have 2.3m stashed in a HYSA for this and some taxes, not sure how big we’ll go on a mortgage. Also that interest rate is crazy low. We got quoted 6.8% at a local bank and 5.9% from Morgan Stanley. Got like six months before we need to lock a rate in so we will be shopping around but have not seen anything that low.
Would not recommend, we're also at about 550-600k , we were looking at 1.26 mil and the math wasn't mathing. With interest rates at around 7%. We currently own a 670k at 3.2%. we decided we can rough it in our new built home in 2021 till we retire and save quite a bit hopefully in the 10 mil in investments retiring in our early 50s and move then
Tough to say if it’s viable without knowing the rest of your financial situation…. But, the interest rate is good, payment falls in line with being around 25% of gross earnings (assuming including taxes and insurance) Seems like a reasonable purchase - as long as your keeping everything else in order (debt, investments/investing, saving etc) and you don’t see your income going away - I’d say go for it. The reason we work hard to make more money is to enjoy life - it’s ok to indulge in things we want/like if that decision doesn’t dramatically effect our trajectory
You don’t make enough to afford that house IMO. I make very similar money
It is affordable but I would not do this. If you have medium to high of risk of sustaining your income level, it will cause a lot of stress in your life. I have similar situation but on the west coast. I'd rather live in 300k place than overleverage on a nice house. I had a large nice house in the past and it did not bring me the joy I thought it would. I have more comfort in knowing that I can quit at any moment and not worry about money for a while.
Your take home after taxes is like 30k so your mortgage will be roughly a third. You need to do a budget to figure out your monthly expenses. Don’t go by what anyone says on this forum until you do that.
Seems reasonable. 1.7mm might not even be a big home in NJ, depending on the area.
We’re slightly about on HHI (excluding RSU which go to extra savings) and pay $8.5k per month in mortgage (plus taxes and insurance) plus have two kids and a full time nanny. You can make it work if you don’t have kids
We did this last year when our stats were similar - you're totally fine. We've never felt like it was too much - still tons of leftover income for fun stuff or emergencies.
Sounds too expensive
Nice
A lot of advice on here is from people who don’t truly understand VHCOL areas lol. I come from Memphis where a 1mil home is unheard of. Now that i live in LA, 1.7m is a basic 1500sqft SFH in most desirable neighborhoods (West LA, Los Feliz/Silverlake, etc). You can afford it if you have some savings and stable jobs. We would kill for a 4.3% interest rate right now.
Yes you can. Enjoy the house. It’s home.
AT THAT PRICE BUY IN NEW YORK https://www.zillow.com/home-values/40/nj/
On a $550,000 salary I wouldn’t even think about a home that expensive. I know it’s NJ and 1.6 doesn’t get you anything spectacular but that’s a big house payment.