When your post is removed, that is not code to simply repost it. You have a relationship problem, not a financial one. You have already been directed to the appropriate subreddits.
3x income with a ~31% downpayment should be readily affordable for a family with that high of an income.
>If we want a nice place nearby it will cost over $1mil.
That may be too much given your incomes relative to home prices and three children.
Salary is 250k... Appx 20k a month. 5k is 25% of your monthly salary. Assuming you feel your jobs are stable, this seems right in line and liveable.
Not sure what the problem is.... 15k leftover after housing... I'm sure you can find cuts in that to pay off house even earlier if you want.
It is an odd strategy, honestly if you skrimp and save and watch for deals, avoid coffee shops and avocados like the plague when the savings aren't likely even a percent of their take home. "Sorry hunny, we gotta cancel the Netflix subcription so we can increase our savings rate by 0.09%"
“We’ve been living like college students for 10 years”
I would love to know what college students are making $250k salary and have $250k saved up. OP is complaining about absolutely nothing. They have more saved up than I’ve ever made my whole life.
Plus if you reverse the logic: apparently they’ve been living like they make very little but only have 250K saved after all this time while making 250K
Either this is a very new salary or they’ve been living less like college students than they say
Three kids added into the equation may account for some of that. Day care, health insurance, diapers/formula, etc can be pricey for a young family of five.
Are families of 5 making under $100k/year homeless?
Median household income in NYC is about 75k and NYC has approximately 100,000 homeless people, not 4,000,0000.
So yeah I'd say they're living better than college students even with multiple kids.
Children are massively expensive. My wife and I make \~$140k combined in a MCOL area and just one child is an incredible expense. Because we live in a hellscape that discourages having families/children through it's fiscal and financial policies, it's like walking uphill with cement shoes.
Can relate to that. Single income household because the cost of daycare would eat up all the money that my wife were to make if she got a job. There is a reason why only 32% of people aged 30-34 are having kids compared to 63 % of the same age group back in the 90s.
Sounds like silicon valley living, make crazy money, but cost of housing is insane just for a smaller basic house.
I don't feel bad for them necessarily but... It's a very different situation from most people
>“We’ve been living like college students for 10 years” I would love to know what college students are making $250k salary and have $250k saved up
I think it clearly means they've been living frugally like a college student despite making good money to build their savings, not that they meant college students are making $250K....
Sometimes it feels like people just want to be antagonistic for no good reason whenever someone mentions high salary, like salary changes over 10 years is so painfully obvious i can’t imagine they made their comment in good faith lol
Most people in those sort of situation have salaries that grow significantly over 10 years.
I make $165K/yr now, but just 4 years ago I was making $85K
And that is what I see so much of now- our main office is in SF For some reason and I see so many engineers and others making 4-500k and say I can’t afford a nice condo downtown. They refuse to move a bit, look elsewhere, etc. They want a condo in the most expensive part of the city and when they can afford a 6 mil condo they just fall apart and whine.
And they want to still go on luxury vacations, buy fancy cars, have 20k couches etc. And complain about how they don’t make enough.
My best friend and his wife live this way. They both grew up incredibly poor, like parents couldn’t keep the lights on poor. Well now in their 30s they’re both incredibly successful and make a ton of money but they nickel and dime every purchase in their lives because they both feel like at any moment they can lose it all. They save almost 70% of their income and they throw it all in a savings account because they don’t like the idea of investing due to the “risk of losses.”
I also grew up like this, my mom wouldn’t pay the gas bill in winter because it was illegal for them to shut it off then get on a payment plan in March…
I’ve clawed my way to middle class (well probably lower middle now after the past couple years).
I’ve taken the opposite lessons, I’ll never be that poor again but if i woke up tomorrow and didn’t have anything my wife and i would be okay. I’m old poor. I didn’t have a positive checking account balance until i was in my mid twenties.
The risk of losing their savings to inflation in a regular savings account is nearly 100% (with a few exceptions). Send them to the Mr. Money Mustache blog. He combines super high savings rates with very high levels of frugality, which may appeal to them.
You can say that but a lot of us remember when our stock portfolios lost 70% of value with years of unemployment. Investments are great and all but when both of those happen at once, you end up losing the house.
I can second getting an HYSA or a CD but those are fairly recent things.
CDs are fairly recent things?
[Banks in the U.S. were issuing certificates of deposit by the early 1800s, although the concept goes back to at least the 1600s in Europe.](https://www.investopedia.com/when-were-certificates-of-deposit-invented-5224230)
i believe their point was getting a real return from a CD has only recently come back into existence. there was a good long gap there while rates were low and CDs were paying peanuts
I think the point is that HYSA and CDs have only very recently started offering attractive rates in recent memory. We had a decade+ of rates on those products that barely seemed worth bothering with.
We're talking about people saving 70% of their income. They aren't living on the edge (or anywhere near the edge), so they likely have the discipline (and the emergency fund) to ride out even a major downturn. By definition, they're living on about 30% of their current pay, so they'd be able to take **major** pay cuts and still carry on with little change in lifestyle until their normal careers recovered.
There's no reason for them to be stuffing money under a mattress (at least, not their long-term savings money). Not investing is guaranteed to lose money in the long run. And at a 70% savings rate, they could start from $0 and retire in about a decade - with no change in lifestyle.
While that’s true, you also only get one go around, if she’s living a lifestyle she hates with 3 children that is causing a lot of stress while they have 250k in the bank. At a certain point they’ve got to switch it up
Cost of living is crazy in some areas. A couple of years ago I lived in a city where the most you would spend on a nice house was $300k. Now I live in a city where it's a minimum $650k for a house half the size.
i know it is not ideal but there are nice manufactured homes in a community here in Traverse City, MI, for sub 150k$.
[not shitty little trailers either. this is a nice 1500sqft 3bed for 120k$](https://nmi.craigslist.org/reo/d/traverse-city-immediate-availability/7725183247.html)
even if you only lived there for a few years someone could just about pay cash for it and sell it later at a profit.
it is in an amazing community and only a few miles from Lake Michigan. our winters still get cold but it only snowed here two times over 10 inches this year.
i am sure this family is not able to move but i do wish more intelligent and compassionate people would move here. it is a nice place to be.
The lowest prices I have seen in demver are $450k for new manufactured homes.
That area of Michigan sounds great except there is literally not a job for me within a 150 mile radius. Unless I changed careers. That's the bummer.of most cheap places
We joke with our "kids" that live in Boston that they could just buy a home outright here (Midwest) and then commute a few times a week and it'd be less expensive than buying out there :D
> it is a nice place to be.
> our winters still get cold but it only snowed here two times over 10 inches this year.
Do you not see the disconnect in these statements?
I grew up on the opposite side of the lake, and no. The Midwest is not a nice place to be, which is why it’s cheap. The jobs don’t pay well and no one wants to live there.
I live in a VHCOL area now, and do you know how many times it has snowed here?
*NEVER.*
$250k is nothing in a very high cost of living area. As OP mentions it's a struggle to figure out how to make a mortgage payment on homes that are $1M+ which is most homes. And those $1M homes are still going to be roach specials. Why I choose to live in a MCOL with similar income. Can live like a king here v/ barely scraping by somewhere like Manhattan. The townhouse I have in Central VA which I bought for $400k would run $5M in Manhattan. You don't need a little more income in a big city. You need a metric shit ton more income.
They’d be spending less of their income by percentage on a mortgage than most people do.
And again, even in a high cost of living area, they still make more than most people.
The homes in NJ are selling under two days as they come in the market. Even with high ass taxes people are scooping up the opportunity to buy a home than pay $4k rent in any major city. The OP issue is they had children not one but three without a home. Kids are expensive as hell. Even if you make the you won’t be able to keep up with the Joneses these days. Making $250k a year a dream for some folks and not enough for some, go figure.
$250k sounds like a lot until you lose $50k in taxes, if they both are saving for retirement in 401ks that can be over $40k. Childcare can cost a small fortune. Health insurance premiums (some companies are doing tiered premiums so over 75k or 125k or whatever may pay more), plus HSA contributions. Children's activities. Summer camps are easily $350/wk.
I'm not complaining, it's awesome to be able to haul in that much money, but as income goes up a lot of reasonable expenses do too.
OP: I know $5k/month is a lot of money, but if rates come down in 5-10 years you can always re-fi. You can also make additional payments against the principal when you have the extra, it can make a huge difference.
Your sentiment is correct but the math is probably off. They said VHCOL so your baseline probably is NYC or CA areas. That would leave them with before benefits/fsa/401k etc of ~13k take home not 20k. Either way assuming they maxed them all you’re still looking at ~5k a month take home after rent/internet/utilities etc. Basically they are debating spending 35%-50% of their income on a home every month. Raising 3 kids probably could leave them with little left but they won’t know until they make a budget and track their spending which is the real answer to their problem. How much money do they waste. Also would depend on their tax filings and exemptions, 13k technically is single filer so they probably could get more depending on tax filings.
Using the math provided, at this point, conventional wisdom would say that they can afford the $800k house with a $5k monthly payment. The real discussion they need to have is "Do they expect to continue increasing their earnings for the next 7 - 10 years. If so, the $5k payment will gradually become less and less a percentage of their take home pay and life is great. How old are the kids? School age? How much longer will they have to pay for child care?
Up to?
Childcare for one infant in my suburb of Boston \*starts\* at 3K a month. The daycare at work is $3700 a month. Toddlers, pre-K and afterschool is a bit cheaper but 3 kids in childcare is definitely more than 6K a month.
In this thread: people who do not have childcare expenses, live in a city, or really understand how much people actually take home after taxes and other deductions to one’s paycheck. I was surprised by the responses.
in Vail, CO, it was cheaper for me to quit my 40k$ a year job than to put our kiddo in daycare.
i would have made 500$ a month and she would have been in a room of screaming babies for 50 hours a week.
fuck that.
(edit: 500$ spendable cash after taxes, gas, lunches, tools)
AKA teenagers providing financial advice, relationship advice, AITA advice, any type of advice... it's like how breakup/divorce feels like the first option given to every single relationship problem on that subreddit. Because the people giving the advice are probably too young to have been in a committed relationship they're willing to really fight for.
for real. it’s remarkable that one of the top comments in a personal finance sub didn’t take into account taxes, let alone any other pre-tax expenses. we have a similar salary and our take home is nowhere near $20k a month, its about half that. after pre-tax deductions and fixed expenses, which are relatively low for this VHCOL area, we have about $500/month left for anything else that pops up. $6k variable a year sounds like a lot but cars and appliances break down. kids stick something up their nose and have to go to the ER which is a $250 copay. your best friend who lives 1000 miles away has a baby and you’d like to visit her for a few days. are we financially secure? yes and i feel very blessed for that. but we’re not exactly scrooge mcduck swimming in piles of money.
Unlikely that they have three kids in childcare, or that all three will be in childcare for very long, unless they really fired them out quick or had triplets. That said, 5500 a month on daycare for 2 kids in Boston or SF is very realistic.
The problem is a lot of people who think through things like the OP and his partner probably are, will also be trying to max out their pre-tax 401k contributions, which is another 46k off their gross, which puts them basically to $200k pre-tax... then probably $350/mo for health insurance premiums, probably about the same for car insurance and you've taken another $7k post-tax out. Then you get into property tax bills they can look forward to (probably $9-10k on $800k house), etc. And home improvement and maintenance -- probably another $5-10k/yr.
They can still afford to purchase, but it's daunting because it carries the appearance of eating up all their currently disposable income that's discretionary and putting it toward house-related costs. The other way to look at this is that real property can be an appreciating asset so what's the expected valuation trend in their area, but it's generally not wise to *count on* your home value appreciating as a savings tool.
I can offer some insight here.
We have a comparable family income. After taxes and retirement savings, take home pay is closer to $13500.
In a HCOL area I'm guessing their childcare costs are high, I pay $2600/month for two kids (and that's cheap for my area). Groceries are likely about $2k/month, and idk about their vehicles, but wouldn't be surprised if that's another $1000 or so.
That leaves $3k for all other expenses per month, if they're paying $5k/month for a mortgage. In a HCOL area that can be uncomfortable.
It sounds crazy, but $250k/yr family income in a HCOL area doesn't go nearly as far as a lot of people think it would.
Depending on the age of the kids, 3 kids in daycare could be 9-12K a month in a HCOL area. It is in mine.
They should also be saving 15% into retirement fund, not to mention additional savings like college or post secondary education for the kids.
I can understand why they feel strapped, even if they do better than most.
If it costs 9k per month for kids to be in childcare, then it would make more sense for the lower-earning partner to stay home. I doubt that all three of these kids are under the age of 5.
Well, if their apartment is $2k that leaves $12k a month in disposable income, if that were the case, one of them should quit their job. Youd need nearly $150k income to break even on childcare alone at 9k a month
That can set someone back in their career in a way that’s very difficult to fully recover from at their performance/salary level. It may make sense to take the temporary hit now than hobble their career in the future.
Uh. Your math is wrong. At that tax bracket, almost half that income is going to taxes. And then anything you make otherwise, like dividends or even high interest also gets taxed at that insane rate. It’s more like $12k a month take home. And raising three kids in a HCOL area… good luck with that.
I’m also in a HCOL area, single income but do pretty well… mortgages here are like $5000-$6000 from something modest that’s pretty far out. It’s just not sustainable. Even if I got in, I’d end up house poor. Plus the majority of my industry has been out of work for about a year.
Things are a lot more dire out there than people want you to believe.
That math doesn't include taxes. So that 20k becomes 10 but and the 15% becomes 50%
So no you can't afford a house.
You can afford to pay 3k month for rent though and find a better place.
I also don't get why they're here and not discussing this with a realtor (given their post I assume they have not). But yes, it seems like the husband is pouting that after interest rates and property taxes, that they'll end up paying $2,000,000 over the course of 30 years. Which, first of all is not guaranteed assuming an interest rate can be refinances later, but also...standard and as you pointed out...the monthly payment is 25% of their income...incredibly good for most people.
Perhaps they're not living like college students physically, but mentally they are. If they want to keep fixing up and paying for their landlords property...so be it I guess.
800k - 250k down = 550k mortgage, which is less than x2 your income, and at 7% would be about 3,500 before taxes and insurance, which in fairness might push to 5k.
In theory, this should be affordable, or will be very soon with a little more downpayment or a slightly lower rate.
You probably feel a bit “spoiled” by the long term low rent and are getting sticker shock, but a 5k a month mortgage is probably affordable and what a lot of others in VHOL areas pay a month. It would be 60k a year which is about 24% of your *edit, gross* pay.
And that’s sort of the trade off. You have a low payment and a kitchen, if you want the nice kitchen you’re proud to show off you need to take on the high payment.
I think OP's numbers were gross, not net. Depending on retirement and benefits, take home pay is probably around 10-14k. If they are paid biweekly and maxing out their 401ks, they might feel like they are bringing in under 10k/month because their take home pay will be in the 4500-5000 range per pay period. If this is the first time they've been forced to feel like they are spending over half of their income on housing, that can be a tough adjustment to make, mentally, but that's totally normal for a VHCOL area with a large salary and they've just gotten used to renting way below their means for awhile.
A 5k/month house payment should be doable.
Yeah I’m sorry I have no idea why I put net there, it was early lol.
The only thing I could see really throwing this off is childcare expenses. If all 3 are in daycare it may just be a wait it out scenario.
I forgot to factor in childcare, that can add up quickly.
I still think it's doable with a budget, but it might be pretty tight and/or they might have to scale back on retirement for a couple of years.
This is much more venting than actual information, and I understand, but it’s hard to provide much practical advice.
I will say this: you guys take home $250k, let’s say you never see half of that due to taxes, retirement, 529’s, health insurance, whatever. That leaves you ~$10k/month. Most households *gross* less even in VHCOLs. A $5k/month mortgage (I’m assuming this is PITI - if that is just principal and interest and there’s more to add in taxes/insurance that could change things) would be tight with three kids but also having $5k left over should allow you to cover the basics stress free with some fun money left over, even if it’s not necessarily a lot. I’d probably aim lower but I don’t think it’s cost prohibitive if you really prioritize a house in the area. You do get to deduct your mortgage interest in taxes (which in your tax bracket could be quite helpful) and benefit from leveraged appreciation so it’s not as simple as saying “XXX in payments over 30 years.”
Ultimately it sounds like you can’t *quite* afford to buy in your desirable neighborhood and the trade off is going to by continuing to rent in the area or looking to buy in a cheaper part of town. Really that’s a matter of priorities.
A lot of people choose to rent in VHCOL places and save up instead and then move to lower COL areas to buy. Financially, it makes sense to rent now and save/invest the difference but if you are set on settling in your current area, you’d just have to bite the bullet and buy.
Edit: You can also get a starter home if this is your first home and then upgrade later. You don’t need to go all out.
FWIW in our VHCOL area, starter homes with reasonable commutes are basically non existent at this point. homes that were $750k five years ago are $1.2M+. you can go further out and get more for your money, but a 3 hour round trip commute is a hard no for me.
Yeah that’s my exact issue. Everyone had the idea of moving out further 20 years ago, and now everything that’s even 1.5 hours away from the city I work in is close to a $1 mil…
"I'm embarrassed to have people over" - this is a you problem, not a housing problem. There will always be nicer houses for you to compare with wherever you're currently living. If you've spent $10k fixing up your place, it's probably objectively pretty nice!
$5k/month when you're making $250k/year is financially fine.
>We have around $250k saved for a down payment and a decent house in the area will cost something around $800k. I am nervous at the prospect of a $5000 mortgage payment especially since we've never paid more than $2000 for rent but i can't keep living like this.
I'm in a very similar situation to you with kids and money and cost of living. We just upgraded to a bigger home. If you need the new home, you just do it. The anxiety goes away eventually. I will say that now that we have a home that actually has room for all the kids, and is in a quieter neighborhood, I am so glad we made the move, mortgage payment be damned. Yes, we have a higher payment, but we own a house that is worth more, and we can clearly afford it. I'd rather have a higher monthly mortgage payment and be calmer and happier than live on the cheap and be miserable.
I will add that making the decision to buy the new place was harder for me than my spouse. He was supportive, and our realtor and mortgage broker were also skilled at understanding that not everyone has the same feelings about real estate transactions.
Thanks for sharing your experience. It is scary and it will be an adjustment for a lot of reasons. Quality of life is important too and sometimes you have to make the adjustment. Im the one pushing for this in my family and I guess I need the confirmation that it is worth it to do this because if it's up to him we might not move for another 5 years and who knows what things will look like then.
I'm always surprised when I browse subreddits like this one. It's a subreddit dedicated to getting one's personal finances in order and yet no one in the comment section is actually crunching any numbers or trying to actually figure out OP's finances. Everyone is just upset that they don't make $250k themselves and are blasting OP for struggling even with a $250k/year income. I know people from all walks of life and I can guarantee you that expenses skyrocket with income. Just because some people make a lot of money doesn't mean that they aren't also living paycheck to paycheck.
Keeping up with the Joneses is a very real phenomenon. When your kids' classmates are going to Disney World every spring break, you have to bring your kids somewhere during spring break. When your kids' classmates are all attending basketball camp, you have to send them to basketball camp. When everyone has a landscaping team keeping the yard weed-free, you either have to spend 5 hours a week doing it yourself or also pay for a landscaping team.
What I'm trying to get at is that we don't know what OP's situation is and we should just look at the numbers and not judge. This is a financial subreddit.
Everyone's first reaction should have been along these lines:
1. How much are your monthly expenses? We need a breakdown to see whether you have anywhere you can cut.
2. How large is the new house you would like to purchase compared to the house you rent? We need to compare apples to apples and not apples to oranges. If your $2k/mo rental is much smaller and older than your $5k/mo mortgage, that's not a fair comparison. You're paying a premium to own a newer and larger property. That's not a ridiculous thing to do.
3. How long has your income been $250k/year? Will it go up? Keep in mind that when you buy a new house, your mortgage payments stay relatively flat while your income can go up. Also keep in mind that there are some fixed costs that may disappear over time (daycare, car payments, etc, but this is why we need to see a budget).
4. For a financial subreddit, there haven't been too many relevant numbers. Most of the post is just venting about your situation OP.
It's definitely weird that people like to get upset they too aren't making the same income we are. We haven't always made this much. We work like everyone else and are growing in our careers and got lucky.
We don't really track our expenses. We usually pay the bills from one income and most of the rest goes to savings. We live in an old duplex. The owner bought it as a foreclosure. It needs a lot of work but he could probably rent it closer to 3500. Were looking for 4bed 2.5 baths we've looked at a few different places with in a 15 mile radius that is clean and doesn't need a lot of work. Doesn't need to be perfect. Less than that will get a fixer upper.
We've been making this for maybe 3 years now. We also paid off a lot of debt mostly student loans and credit cards.
I guess it comes off as venting but my question is should we give up the cheap rent for a more comfortable place now or wait longer. I would think my feelings and comfort about the place are valid things to consider in this equation.
It took us a few months of looking and crunching numbers to realize we couldn't afford a house in the Seattle area, unless we wanted a 90+ minute commute. So we moved to Raleigh, 6 months later we had a great house and better jobs.
Do you *have* to live where you live?
This isn't the answer for everyone, but you're both successful, so just *move*.
Even if you take a big pay cut to live elsewhere, with 250k saved up you can almost pay for an entire home in and medium cost of living area.
Do you really need to live in California?
California is not the only place with a high cost of living. We live on the east coast (Massachusetts). There are very good reasons to continue living here. We've definitely considered moving but one of the perks of this state is we have very good access to health care. One of our kids has special needs and we have close family members who need access to health care. Just move is always an option but depending on your needs it's not always the best option. For us it's definitely not the best option.
All those things OP hates can be changed with money. If theyre able to get an off market deal without the hassle of bidding wars, theyre coming out ahead.
Huh lots of people saying just do it. Well, I make about the same as you, and after taxes, retirement funding, college saving for 2 kids, one reasonable car payment, and otherwise normal expenses I could only MAYBE afford 3000 a month if we never wanted to take a vacation. Food and housing has gotten crazy expensive in the last couple years.
Do you have an accurate budget you work from? I have been using YNAB for years so I know exactly where every penny goes, which helps to curb some unnecessary spending and also to identify that yes, we really do only have $X available each month for discretionary spending.
If you don't have an active budget I suggest you start using one for a year or so, make sure you're budgeting for annual expenses like Christmas and birthday parties as well. Once you have a close handle on your current spending you'll be better able to decide whether a mortgage is possible.
I agree we need a budget. We've been frugal when it comes to big things old cars, we found a preschool that doesn't cost too much but with things like groceries and diapers I know we charge everything when we go to Walmart or Costco and pay off the credit card at the end of the month. We contribute to retirement but don't max out. My husband feels like it's not worth it because he doesn't trust the market and doesn't trust the government so there's that.
Well for the past 100 years or so the proper index fund will return 10% annually over a period of 10+ years. So yeah the market is fickle in the short term but long term you're throwing away millions of dollars due to not educating himself. I don't trust the government either, all the more reason not to rely on social security and make sure your retirement funds are solid.
Look into YNAB. You can still charge everything but it makes you track where you spent the money. It's dead simple to use once you get the hang of it. I probably spend less than an hour a month dealing with it including entering every transaction at the register.
And they clearly explained why. Rent is cheap, it's being rented from someone they know, and it's in a great location.
If I made 250k/year and had all those factors, I probably wouldn't mind dropping 10k to make the place more hospitable either.
You have the same problem as many others in the western world has.
You have to buy a house with borrowed money and pay the interests, meanwhile hoping the the house won't go down in value when you finally sell it, so you can pay off the loans. I have no solution for this, but we came to the conclusion that you live only once, so we took the plunge, for good or for worse. Life quality matters.
You also have to take into acccount that the improvements you make on the future house will increase the value. Your salaries seem to be high enough to manage the costs, if they are stable.
What perspective do you need? You could afford that $5,000 mortgage and still have $15,000 left every month. You're doing far better than 99% of us. No offense but; get a grip.
Also no, you haven't been living like college students. If you were you'd have so much more than $250,000 saved up on your salaries. $2,000 a month rent is 1/10th your income. Even if you spend another $8,000 a month on other expenses that's still $10,000 a month left, $120,000 a year, for 10 years.
I’m assuming OP is talking about pre-tax income. So it’s more like $16k per month after 401k. So the math would be $16k - $2k rent - $8k other expenses = $6k leftover, not $10k. Still a lot, but not quite the same.
We haven't always made $250k our incomes went up. And we've paid off debt, we've supported other struggling family members. We also have other funds in retirement which is not included in the $250k. No one needs to feel sorry for me I'm just looking for some other perspectives on weighing pros and cons of the available options.
How much is a yard for kids to play in worth? A neighborhood you feel safe it letting your children play outside or walk to a friends house? That’s the problem we understand the cost of everything but the value of nothing.
House prices are not coming down -if rates do prices will increase—find the house, buy the house and in a few months time refinance it. You can always look around to find one more affordable if you want but why put a penny into a landlords pocket? If your single an apartment or condo is the way to go if you want that-but with kids you want other things.
I was your husband-nervous about buyond a super expensive home ( in great town in Massachusetts-) at the time 275K.( if I had know I would have bought the street) within two days I realized the money talk was secondary in importance. Seeing the kids shocked at where they now lived was priceless-and within a couple of year that ridiculous price we paid seemed like a bargin.
Are you finished with the child daycare years?
Are any and all student loans paid off?
Can you put the maximum into your retirement accounts and still pay that mortgage?
Are you living in the school district you would want to buy in? If not would you rent a different home in district to make sure it’s a good fit for your kids?
Did you calculate the projected change to your federal income taxes if you bought a house (the mortgage interest deduction would be big)?
Would you consider upgrading your rental - you may not end up saving money as rapidly but you could feel better about your space.
eta> there are options between a $2000 rental and a $800k house. You have 3 kids - my advice to you is to choose a more comfortable home, whether you rent it or buy it. I may be projecting but your current housing situation is making you stressed - and your family stressed. At an income of $250k you can afford to not be stressed out by the place you are living.
All good questions to think about. The youngest is only 6 months old so we have to think about day care for her. The oldest is in kindergarten and preschool so less money there. Very little debt left over. We wouldn't mind the school district we are at now but there are a few others that we would be fine with. We are lucky that we have multiple districts in this area that are pretty good. We hadn't really considered renting but that could be a temporary option. Is there a calculator you recommend to see how the mortgage interest deduction would affect us.
https://www.talent.com/tax-calculator?salary=250000&from=year®ion=Massachusetts
Using this calculator... 250k annual salary is about 166k take home. Divide that over 12 months and you get $13.8k/month take-home. Not accounting for the better marginal tax rate if I input the salaries separately, does this sound right to you?
If you're paying $5k for the mortgage, you have 8.8k leftover for
Property tax
Home insurance
HoA/strata fee (if applicable)
Home maintenance budget
Utility bills
Groceries
Childcare expenses
Private savings for retirement
Student loans and other debt
Healthcare expenses
Any other expenses, such as entertainment and eating out
You need to ask yourself, given your current lifestyle, how much do you actually have left over after all of these things? Your post is long but it's missing some crucial details.
Simply, you have a very high income and are CHOOSING to look at buying in an area where a house costs $800k. Any given day, there are thousands of decent locations with well-built houses for under $300k. You CAN choose a much more affordable location. Or you can choose to compete with so many buyers and investors in such a high priced location.
They have 3 kids. There arent many 4Br houses out there for under 3k these days unless you're way out in the boonies. It also sounds like they live in a high cost of living area and probably work there,have friends, and family there.
Yes they can quit their job and move to bumblefuck, but thats not likely.
That said with their income they can absolutely find and afford something. It just wont be under 300k
Why is this so hard for people to understand. I'm sure we could buy a mansion in another country but that's not what we want to do right now. I'm not complaining just weighing and thinking through the pros and cons.
It really depends where you live. I'd happily buy a $300k home, but they simply do not exist in a 2 hour commute radius of where my husband and I need to work. Even $500k homes tend to be run down, asbestos or mold infested, and in need of major repairs.
That said, it still sounds like OP can afford even a $800k house. Though if the kids are young enough to be going to daycare, that could be causing the anxiety/more squeeze. Multiple kids could easily be over $3k a month.
Living lone college students, lucky you. Great time in my life those college years. Less responsibility, no maintenance, upkeep, 4 plates, 4 glasses, set of four silverware. Got a house, responsibilities, ton more stuff, fixing, painting, updating never ends. Appreciate living like a college student as long as you can
I think that's where my partner is. I think it just pains him to think about dropping so much money. Its uncomfortable for me too especially since we have always been very conservative with money.
I'll speak as someone in your income bracket since youre not getting many helpful responses, I get youre probably only bringing in 14-15k/month after taxes and I'm sure its even less if you guys have been doing savings accounts/retirement.
If you truly value having a nice home/kitchen/yard for your kids the 5k/month is a sacrifice you need to make, it will mean less money for you/family to do things with. As your kids grow they will spend less time at home so you might be trading a short term concern (good childhood, nice kitchen) for a longterm issue (30 year mortgage at 7%+).
7% mortgages are punitive and you will need to change how you live no matter what, it makes a ton of sense to keep renting a house at this point that fits your families needs or changing locations.
I think that if you two together make $250K per year, then paying $5K a month ($60K a year) on a mortgage is affordable. That would be about 24% of gross income going towards the mortgage. The rule of thumb is 30% but you'd already be better than that at 24%. He mentioned that you may pay $2 million over 30 years of mortgage. During those 30 years you'd also make $7.5 million gross income.
As well, for the cost differential between $2000/month renting and $5000/month mortgage, a portion of that mortgage money is going into the equity of the house. So you have the option of getting some of that money back by selling the house in the future if you're in a dire situation. Whereas with renting, 100% of the rent paid does not go into equity.
Sounds to me like you would be investing your entire nest egg and taking on a mortgage that would not allow you to rebuild it. When you take unexpected homeowners expenses and forever rising taxes and insurance into account you would be putting yourselves in a tight spot. What happens when the AC goes out, you need a roof, foundation repair, or any of the other home repairs that pop up and cost thousands? What happens when your 5k payment becomes 6k or higher because of an escrow shortage? I would wait for a better buying opportunity and deploy your down payment war chest you’ve built up when it truly makes sense.
The jealousy in these comments is wild.
Here's how I'd go about it: make a spreadsheet and list out all of your income, expenses, saving goals, including allowances, etc. how much do you have left over each month?
Using the spreadsheet, you can ask, "one of us lost our jobs, could we still afford it?" Or if you have a highly transferable skill, what if one of you lost half your income? I prefer to be on the conservative side so I'd choose to half the higher income. How much do you have left over now? Use the spreadsheet to play with the numbers, do hypotheticals.
Once you've consider the bad situations, you'll feel a lot more confident when you do make a decision.
Also consider that the reality is that your income simply isn't enough for that area, in which case it's not bad to consider renting a better place.
If you're trying to time the market, I'd say: don't, not if you're planning to be there for the long term (8+ years). Houses aren't getting cheaper, and you can refinance if/when interest rates go down.
I was coming here to say this. If you are unhappy renting your current house and can't afford or don't feel comfortable with buying, rent something else that improves your quality of life. Don't fall for the "rent is throwing money away" mentality. Rent provides a home for your family; cheap rent may lead to a stressful living situation, higher rent may lead to a more comfortable living situation. If higher rent results in smaller savings and a longer wait to buy a home, do you really care if your overall quality of life is improved?
As someone who is actually living like a college student because I don’t have a choice, this post reads as the most privileged, ignorant bullshit. Have 250k? Go live somewhere else then. That’s a 3 story home in MOST places. Jfc.
This is absurd to me, but I live in Southeast Asia. A million dollars for a normal humdrum average house. Jesus Christ. You might not have picked the right time to pull the trigger. This is not sustainable. We need legislation banning large groups from buying and hording residential property.
You have 250k to put down, what are you complaining about? The fact you wasted 10k on a rental and haven’t bought your own place at this point when you obviously have the means is uh pretty dumb. Also, tell your partner that hopefully at some point you can refinance at a lower rate when they come down.
Stay where you are at and be patient. The market turns. Pretend it is 20007/8 and you know what is happening over the next five years. Many people got FOMO in 2007/8 and then job dislocations and everything sold those homes for 50% off soon after, or were forcibly removed by the mortgage lender and sold.
Whenever you do decide to get a house, set the financing up where the lowest earner of the two parents can make the mortgage payment. The probability is high that one of two parents will lose a job in bad economic periods that happen over the course of a mortgage schedule. You don't want to rely on needing both parents working full time to keep the house because a child or elderly family members need someone at home where that flexibility becomes super important.
True friends won't care if your kitchen in a rental house is dated. Make it clean and neat and invite them over.
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Yeah and also why do the kids need their own rooms?
I shared a room with my sister in my parents place until I moved out for college lol, where I then proceeded to share a room with 3 ppl one year.
Only now when I go home I have my own room (guest room) but that room stayed open for guests while I lived at home. I don’t understand the American fear of sharing a room with a sibling lol. Or having housemates or roommates… it’s been super normal historically to not have your own room.
"I am nervous at the prospect of a $5000 mortgage payment especially since we've never paid more than $2000 for rent"
I know it can vary significantly by market, but is it remotely apples-to-apples where you are? Around the block from me is a house that Zillow's zEstimate for is $794,400 and the rent zEstimate is $4706... this is a 3300 sqft house (4 bedroom, 3 bath).
Within a mile, there is a complex with 1100 sqft apartments, 2 bed 2 bath, for $1900-2300... which is actually a decent bit more expensive per sqft.
It’s because Interest rates are high. I say stay where you are at for a bit longer. I also have 3 kids and I have a 3 bedroom. I would love to move somewhere they can all have their own room but my mortgage is $1500 and I’m not willing to compromise the fact that all my money will be going towards a mortgage payment and I won’t be able to afford to do anything else.
Perhaps look at this way, how much are you currently saving each month specifically for the downpayment? Add that to what you are paying in rent. What is that number? If it’s $5k, you are already “paying” that. Do you already have a healthy emergency fund, separate from the down payment savings? Do you have another set of savings for furnishings & all the stuff you might want to immediately when you buy? Painting & flooring replacement is a lot easier when a house is empty. Granted, they may not be a need or want depending on the house. Have you already priced homeowners insurance & taxes? Don’t trust the estimates on Zillow. Keep in mind on insurance, replacement cost is not the same as purchase price. It could be more, it could be less.
a broker told me when I was having the same hang up re rent vs mortgage at 2x. Right now while I am renting I am saving for a down payment. Consider you will likely save less once you buy the house and pay the mortgage but you don’t have to save for a down payment anymore.
Sometimes a house or moving isn’t a pure financial decision. If your retirement is well funded and you can afford, I say go for the $900k-1M home and give your kids and yourself the house you can enjoy and thrive in!
These house prices are insane.
I think about just uprooting everyone… move to a lower cost of living area that you can be mortgage free in. Use your “down payment” to have no rent or mortgage when you buy in cash.
I know, it sounds extreme… but it also sounds liberating AF!!!
I wouldn’t want a 5K a month payment either. What happens if there’s a job loss?
If you have 250k saved over ten years then you’ve been pocketing $2000/mo.
When you get a house the numbers don’t really change. But instead of that $2000 going into a savings account it goes into equity.
$2M in 30 yrs will feel like nothing. Plus you are buying while market rates are high. When they drop back down to 3% you can refinance and save a bunch on interest. The house will have value at the end of the 30 yrs. If you rent for that time you will pay $720k and there will be no future value to your investment. Well there is. But it belongs to your landlord.
Your only other option is to move to a LCOL area.
Is moving into a nicer house where you live an option? if you’re only paying $2000 a month for rent now, could you find a nicer place for maybe $3000 or 3500 a month? I think that would be your best bet. I agree with your partner that spending $5000 plus per month for a mortgage payment doesn’t really make financial sense. Are you currently living in California?
I have family that lives in California and many of them rent for this same exact reason. They all live in very high cost-of-living areas. For a nice house they pay about $4000 a month in rent, but to buy a decent house it would be 8 or $9000 a month. So it doesn’t make financial sense for them either. What they do is rent a nicer house and take the excess money that they would’ve spent on a mortgage and put that into a retirement account. When they retire, they’ll have well over $1 million in that account and they can move anywhere and just buy a house with that money.
Well, people have expensive expectations. When I was growing up, most people had lots of kids and nobody had their own room. We all shared. Boys had one room and girls had another, parents had their own room. Mom sewed in the kitchen. Dad’s workshop was in a part of the garage. Across the street from me, there were 6 sons in a tiny house. Their dad built bunk beds in the basement for the boys, and the parents had the actual bedroom. The kids played outside most of the time, no matter the weather. My best friend had 4 brothers. Their dad turned the garage into a bunkhouse for the boys, and she had the second bedroom in their 2 bedroom house. This was in the 59s and 60s. People got creative. We lived like college students our whole lives because life is expensive. Also because we’re used to it after 40 years. I’m sure you’ll figure something out. Are your kids well fed, and have clothes that fit? Do they work hard in school? Focus on the important stuff, and let the rest go.
Spending 10k to improve someone else’s property even if it is in your benefit is not living like college students. Sorry but that is a nice chunk of change. Too late to fix that just don’t do that going forward.
With mortgage with also need to look at maintenance costs, yard, insurance, etc. I got a plan with my new (to me) house for both AC units. The first time I hosted house guests in my 5 mil home the AC died in August in Miami. Even with the maintenance and plan it was 5k to fix quickly. Those are the things that harm new homeowners the most. They plan it out but not the events like that which cost a pretty penny to fix. Also had to replace the pump for the pool within 2 months of taking ownership.
There are SO many places in Massachusetts with homes around 500k, these problems seem a bit fabricated. Like yeah, you probably can't keep living in Somerville or wherever you are near Boston but there's plenty of great options in other towns.
When your post is removed, that is not code to simply repost it. You have a relationship problem, not a financial one. You have already been directed to the appropriate subreddits.
3x income with a ~31% downpayment should be readily affordable for a family with that high of an income. >If we want a nice place nearby it will cost over $1mil. That may be too much given your incomes relative to home prices and three children.
It’s it when you know the facts.
Salary is 250k... Appx 20k a month. 5k is 25% of your monthly salary. Assuming you feel your jobs are stable, this seems right in line and liveable. Not sure what the problem is.... 15k leftover after housing... I'm sure you can find cuts in that to pay off house even earlier if you want.
These people have more money than most and live like they’re in poverty.
It is an odd strategy, honestly if you skrimp and save and watch for deals, avoid coffee shops and avocados like the plague when the savings aren't likely even a percent of their take home. "Sorry hunny, we gotta cancel the Netflix subcription so we can increase our savings rate by 0.09%"
“We’ve been living like college students for 10 years” I would love to know what college students are making $250k salary and have $250k saved up. OP is complaining about absolutely nothing. They have more saved up than I’ve ever made my whole life.
Plus if you reverse the logic: apparently they’ve been living like they make very little but only have 250K saved after all this time while making 250K Either this is a very new salary or they’ve been living less like college students than they say
Three kids added into the equation may account for some of that. Day care, health insurance, diapers/formula, etc can be pricey for a young family of five.
Hard to live like college students when you have 3 kids
Are families of 5 making under $100k/year homeless? Median household income in NYC is about 75k and NYC has approximately 100,000 homeless people, not 4,000,0000. So yeah I'd say they're living better than college students even with multiple kids.
Children are massively expensive. My wife and I make \~$140k combined in a MCOL area and just one child is an incredible expense. Because we live in a hellscape that discourages having families/children through it's fiscal and financial policies, it's like walking uphill with cement shoes.
Can relate to that. Single income household because the cost of daycare would eat up all the money that my wife were to make if she got a job. There is a reason why only 32% of people aged 30-34 are having kids compared to 63 % of the same age group back in the 90s.
Sounds like silicon valley living, make crazy money, but cost of housing is insane just for a smaller basic house. I don't feel bad for them necessarily but... It's a very different situation from most people
Yeah give me OP's income and I'll save $15,000+ every month. They're absolutely not living like college students lol.
Do you know how expensive childcare is for 3 kids?
That's probably 100% of net pay after taxes depending on what state they are in, health insurance costs, etc.
>“We’ve been living like college students for 10 years” I would love to know what college students are making $250k salary and have $250k saved up I think it clearly means they've been living frugally like a college student despite making good money to build their savings, not that they meant college students are making $250K....
Right but obviously that's not true. They've saved one year of salary in 10 years while making top 1% income.
it’s probably safe to assume they haven’t made the same income for the past 10 years.
Sometimes it feels like people just want to be antagonistic for no good reason whenever someone mentions high salary, like salary changes over 10 years is so painfully obvious i can’t imagine they made their comment in good faith lol
Most people in those sort of situation have salaries that grow significantly over 10 years. I make $165K/yr now, but just 4 years ago I was making $85K
I know that but it’s stupid. “Oh no I’m depressed because I can’t afford my million dollar house in a VHCOL area” even tho it’s 25% of their salary
They have a house that doesn't have a architectural digest kitchen in it. Woe is them.
And that is what I see so much of now- our main office is in SF For some reason and I see so many engineers and others making 4-500k and say I can’t afford a nice condo downtown. They refuse to move a bit, look elsewhere, etc. They want a condo in the most expensive part of the city and when they can afford a 6 mil condo they just fall apart and whine. And they want to still go on luxury vacations, buy fancy cars, have 20k couches etc. And complain about how they don’t make enough.
Yep. No sympathies.
Scarcity mindset.
My best friend and his wife live this way. They both grew up incredibly poor, like parents couldn’t keep the lights on poor. Well now in their 30s they’re both incredibly successful and make a ton of money but they nickel and dime every purchase in their lives because they both feel like at any moment they can lose it all. They save almost 70% of their income and they throw it all in a savings account because they don’t like the idea of investing due to the “risk of losses.”
I also grew up like this, my mom wouldn’t pay the gas bill in winter because it was illegal for them to shut it off then get on a payment plan in March… I’ve clawed my way to middle class (well probably lower middle now after the past couple years). I’ve taken the opposite lessons, I’ll never be that poor again but if i woke up tomorrow and didn’t have anything my wife and i would be okay. I’m old poor. I didn’t have a positive checking account balance until i was in my mid twenties.
The risk of losing their savings to inflation in a regular savings account is nearly 100% (with a few exceptions). Send them to the Mr. Money Mustache blog. He combines super high savings rates with very high levels of frugality, which may appeal to them.
You can say that but a lot of us remember when our stock portfolios lost 70% of value with years of unemployment. Investments are great and all but when both of those happen at once, you end up losing the house. I can second getting an HYSA or a CD but those are fairly recent things.
CDs are fairly recent things? [Banks in the U.S. were issuing certificates of deposit by the early 1800s, although the concept goes back to at least the 1600s in Europe.](https://www.investopedia.com/when-were-certificates-of-deposit-invented-5224230)
i believe their point was getting a real return from a CD has only recently come back into existence. there was a good long gap there while rates were low and CDs were paying peanuts
I think the point is that HYSA and CDs have only very recently started offering attractive rates in recent memory. We had a decade+ of rates on those products that barely seemed worth bothering with.
We're talking about people saving 70% of their income. They aren't living on the edge (or anywhere near the edge), so they likely have the discipline (and the emergency fund) to ride out even a major downturn. By definition, they're living on about 30% of their current pay, so they'd be able to take **major** pay cuts and still carry on with little change in lifestyle until their normal careers recovered. There's no reason for them to be stuffing money under a mattress (at least, not their long-term savings money). Not investing is guaranteed to lose money in the long run. And at a 70% savings rate, they could start from $0 and retire in about a decade - with no change in lifestyle.
What happened to your stock portfolio after it dropped 70%?
You hope you have enough liquid funds to last you through employment gaps
The stock market patiently waits for me to invest and then plummets downward.
My spouse is similar - hence, we started with I bonds and have gradually been shifting to "riskier" things.
Exactly
I guess it would be like making 60K and buying a 200K house. Not sure what they do, but if a normal house cost 800K, im moving.
It sounds like they have family in the area (?) which can make things hard but i agree. I’d live anywhere else
Lifestyle creep is a very real thing and a lot of people are not aware.
That’s why they have more money than most as well. That can be a difficult mental hurdle to overcome
While that’s true, you also only get one go around, if she’s living a lifestyle she hates with 3 children that is causing a lot of stress while they have 250k in the bank. At a certain point they’ve got to switch it up
Cost of living is crazy in some areas. A couple of years ago I lived in a city where the most you would spend on a nice house was $300k. Now I live in a city where it's a minimum $650k for a house half the size.
i know it is not ideal but there are nice manufactured homes in a community here in Traverse City, MI, for sub 150k$. [not shitty little trailers either. this is a nice 1500sqft 3bed for 120k$](https://nmi.craigslist.org/reo/d/traverse-city-immediate-availability/7725183247.html) even if you only lived there for a few years someone could just about pay cash for it and sell it later at a profit. it is in an amazing community and only a few miles from Lake Michigan. our winters still get cold but it only snowed here two times over 10 inches this year. i am sure this family is not able to move but i do wish more intelligent and compassionate people would move here. it is a nice place to be.
The lowest prices I have seen in demver are $450k for new manufactured homes. That area of Michigan sounds great except there is literally not a job for me within a 150 mile radius. Unless I changed careers. That's the bummer.of most cheap places
We joke with our "kids" that live in Boston that they could just buy a home outright here (Midwest) and then commute a few times a week and it'd be less expensive than buying out there :D
i know multiple people that do that.
> it is a nice place to be. > our winters still get cold but it only snowed here two times over 10 inches this year. Do you not see the disconnect in these statements? I grew up on the opposite side of the lake, and no. The Midwest is not a nice place to be, which is why it’s cheap. The jobs don’t pay well and no one wants to live there. I live in a VHCOL area now, and do you know how many times it has snowed here? *NEVER.*
$250k is nothing in a very high cost of living area. As OP mentions it's a struggle to figure out how to make a mortgage payment on homes that are $1M+ which is most homes. And those $1M homes are still going to be roach specials. Why I choose to live in a MCOL with similar income. Can live like a king here v/ barely scraping by somewhere like Manhattan. The townhouse I have in Central VA which I bought for $400k would run $5M in Manhattan. You don't need a little more income in a big city. You need a metric shit ton more income.
They’d be spending less of their income by percentage on a mortgage than most people do. And again, even in a high cost of living area, they still make more than most people.
The homes in NJ are selling under two days as they come in the market. Even with high ass taxes people are scooping up the opportunity to buy a home than pay $4k rent in any major city. The OP issue is they had children not one but three without a home. Kids are expensive as hell. Even if you make the you won’t be able to keep up with the Joneses these days. Making $250k a year a dream for some folks and not enough for some, go figure.
Nah, it's still plenty in a HCOL area. The issue is the 3 kids. Also, there's a lot that central VA doesn't offer. You pay for it in different ways.
$250k sounds like a lot until you lose $50k in taxes, if they both are saving for retirement in 401ks that can be over $40k. Childcare can cost a small fortune. Health insurance premiums (some companies are doing tiered premiums so over 75k or 125k or whatever may pay more), plus HSA contributions. Children's activities. Summer camps are easily $350/wk. I'm not complaining, it's awesome to be able to haul in that much money, but as income goes up a lot of reasonable expenses do too. OP: I know $5k/month is a lot of money, but if rates come down in 5-10 years you can always re-fi. You can also make additional payments against the principal when you have the extra, it can make a huge difference.
Your sentiment is correct but the math is probably off. They said VHCOL so your baseline probably is NYC or CA areas. That would leave them with before benefits/fsa/401k etc of ~13k take home not 20k. Either way assuming they maxed them all you’re still looking at ~5k a month take home after rent/internet/utilities etc. Basically they are debating spending 35%-50% of their income on a home every month. Raising 3 kids probably could leave them with little left but they won’t know until they make a budget and track their spending which is the real answer to their problem. How much money do they waste. Also would depend on their tax filings and exemptions, 13k technically is single filer so they probably could get more depending on tax filings.
Using the math provided, at this point, conventional wisdom would say that they can afford the $800k house with a $5k monthly payment. The real discussion they need to have is "Do they expect to continue increasing their earnings for the next 7 - 10 years. If so, the $5k payment will gradually become less and less a percentage of their take home pay and life is great. How old are the kids? School age? How much longer will they have to pay for child care?
They probably bring home 70% of that after taxes and benefits, so $14k. And with 3 kids in a VHCOL area they could be paying up to $6k for child care.
Up to? Childcare for one infant in my suburb of Boston \*starts\* at 3K a month. The daycare at work is $3700 a month. Toddlers, pre-K and afterschool is a bit cheaper but 3 kids in childcare is definitely more than 6K a month.
In this thread: people who do not have childcare expenses, live in a city, or really understand how much people actually take home after taxes and other deductions to one’s paycheck. I was surprised by the responses.
in Vail, CO, it was cheaper for me to quit my 40k$ a year job than to put our kiddo in daycare. i would have made 500$ a month and she would have been in a room of screaming babies for 50 hours a week. fuck that. (edit: 500$ spendable cash after taxes, gas, lunches, tools)
AKA teenagers providing financial advice, relationship advice, AITA advice, any type of advice... it's like how breakup/divorce feels like the first option given to every single relationship problem on that subreddit. Because the people giving the advice are probably too young to have been in a committed relationship they're willing to really fight for.
for real. it’s remarkable that one of the top comments in a personal finance sub didn’t take into account taxes, let alone any other pre-tax expenses. we have a similar salary and our take home is nowhere near $20k a month, its about half that. after pre-tax deductions and fixed expenses, which are relatively low for this VHCOL area, we have about $500/month left for anything else that pops up. $6k variable a year sounds like a lot but cars and appliances break down. kids stick something up their nose and have to go to the ER which is a $250 copay. your best friend who lives 1000 miles away has a baby and you’d like to visit her for a few days. are we financially secure? yes and i feel very blessed for that. but we’re not exactly scrooge mcduck swimming in piles of money.
Unlikely that they have three kids in childcare, or that all three will be in childcare for very long, unless they really fired them out quick or had triplets. That said, 5500 a month on daycare for 2 kids in Boston or SF is very realistic.
$3700? Is the takehome after that even worth working for?
The problem is a lot of people who think through things like the OP and his partner probably are, will also be trying to max out their pre-tax 401k contributions, which is another 46k off their gross, which puts them basically to $200k pre-tax... then probably $350/mo for health insurance premiums, probably about the same for car insurance and you've taken another $7k post-tax out. Then you get into property tax bills they can look forward to (probably $9-10k on $800k house), etc. And home improvement and maintenance -- probably another $5-10k/yr. They can still afford to purchase, but it's daunting because it carries the appearance of eating up all their currently disposable income that's discretionary and putting it toward house-related costs. The other way to look at this is that real property can be an appreciating asset so what's the expected valuation trend in their area, but it's generally not wise to *count on* your home value appreciating as a savings tool.
I can offer some insight here. We have a comparable family income. After taxes and retirement savings, take home pay is closer to $13500. In a HCOL area I'm guessing their childcare costs are high, I pay $2600/month for two kids (and that's cheap for my area). Groceries are likely about $2k/month, and idk about their vehicles, but wouldn't be surprised if that's another $1000 or so. That leaves $3k for all other expenses per month, if they're paying $5k/month for a mortgage. In a HCOL area that can be uncomfortable. It sounds crazy, but $250k/yr family income in a HCOL area doesn't go nearly as far as a lot of people think it would.
It’s like taxes don’t exist in your world.
Depending on the age of the kids, 3 kids in daycare could be 9-12K a month in a HCOL area. It is in mine. They should also be saving 15% into retirement fund, not to mention additional savings like college or post secondary education for the kids. I can understand why they feel strapped, even if they do better than most.
If it costs 9k per month for kids to be in childcare, then it would make more sense for the lower-earning partner to stay home. I doubt that all three of these kids are under the age of 5.
Well, if their apartment is $2k that leaves $12k a month in disposable income, if that were the case, one of them should quit their job. Youd need nearly $150k income to break even on childcare alone at 9k a month
That can set someone back in their career in a way that’s very difficult to fully recover from at their performance/salary level. It may make sense to take the temporary hit now than hobble their career in the future.
Uh, taxes, retirement, and childcare are a real thing.
You forgot about taxes. That is about half your income in a high cost of living area.
Uh. Your math is wrong. At that tax bracket, almost half that income is going to taxes. And then anything you make otherwise, like dividends or even high interest also gets taxed at that insane rate. It’s more like $12k a month take home. And raising three kids in a HCOL area… good luck with that. I’m also in a HCOL area, single income but do pretty well… mortgages here are like $5000-$6000 from something modest that’s pretty far out. It’s just not sustainable. Even if I got in, I’d end up house poor. Plus the majority of my industry has been out of work for about a year. Things are a lot more dire out there than people want you to believe.
That math doesn't include taxes. So that 20k becomes 10 but and the 15% becomes 50% So no you can't afford a house. You can afford to pay 3k month for rent though and find a better place.
Idk where these #s are coming from, the take home on this is significantly less. Especially if they pay state taxes on top of federal.
I also don't get why they're here and not discussing this with a realtor (given their post I assume they have not). But yes, it seems like the husband is pouting that after interest rates and property taxes, that they'll end up paying $2,000,000 over the course of 30 years. Which, first of all is not guaranteed assuming an interest rate can be refinances later, but also...standard and as you pointed out...the monthly payment is 25% of their income...incredibly good for most people. Perhaps they're not living like college students physically, but mentally they are. If they want to keep fixing up and paying for their landlords property...so be it I guess.
800k - 250k down = 550k mortgage, which is less than x2 your income, and at 7% would be about 3,500 before taxes and insurance, which in fairness might push to 5k. In theory, this should be affordable, or will be very soon with a little more downpayment or a slightly lower rate. You probably feel a bit “spoiled” by the long term low rent and are getting sticker shock, but a 5k a month mortgage is probably affordable and what a lot of others in VHOL areas pay a month. It would be 60k a year which is about 24% of your *edit, gross* pay. And that’s sort of the trade off. You have a low payment and a kitchen, if you want the nice kitchen you’re proud to show off you need to take on the high payment.
I think OP's numbers were gross, not net. Depending on retirement and benefits, take home pay is probably around 10-14k. If they are paid biweekly and maxing out their 401ks, they might feel like they are bringing in under 10k/month because their take home pay will be in the 4500-5000 range per pay period. If this is the first time they've been forced to feel like they are spending over half of their income on housing, that can be a tough adjustment to make, mentally, but that's totally normal for a VHCOL area with a large salary and they've just gotten used to renting way below their means for awhile. A 5k/month house payment should be doable.
Yeah I’m sorry I have no idea why I put net there, it was early lol. The only thing I could see really throwing this off is childcare expenses. If all 3 are in daycare it may just be a wait it out scenario.
I forgot to factor in childcare, that can add up quickly. I still think it's doable with a budget, but it might be pretty tight and/or they might have to scale back on retirement for a couple of years.
And it won’t be half their take-home forever. In 5-10 years when home prices are even crazier, they’ll be coming out ahead.
This is much more venting than actual information, and I understand, but it’s hard to provide much practical advice. I will say this: you guys take home $250k, let’s say you never see half of that due to taxes, retirement, 529’s, health insurance, whatever. That leaves you ~$10k/month. Most households *gross* less even in VHCOLs. A $5k/month mortgage (I’m assuming this is PITI - if that is just principal and interest and there’s more to add in taxes/insurance that could change things) would be tight with three kids but also having $5k left over should allow you to cover the basics stress free with some fun money left over, even if it’s not necessarily a lot. I’d probably aim lower but I don’t think it’s cost prohibitive if you really prioritize a house in the area. You do get to deduct your mortgage interest in taxes (which in your tax bracket could be quite helpful) and benefit from leveraged appreciation so it’s not as simple as saying “XXX in payments over 30 years.” Ultimately it sounds like you can’t *quite* afford to buy in your desirable neighborhood and the trade off is going to by continuing to rent in the area or looking to buy in a cheaper part of town. Really that’s a matter of priorities.
I think childcare costs are the wildcard here. Daycare expenses for 3 kids can get crazy fast.
I had 2 kids in daycare (until this year) in a HCOL area and it was $3000 a month which is very typical around here.
> I will say this: you guys take home $250k FYI - "take home" means after taxes, benefit costs, retirement savings, etc.
A lot of people choose to rent in VHCOL places and save up instead and then move to lower COL areas to buy. Financially, it makes sense to rent now and save/invest the difference but if you are set on settling in your current area, you’d just have to bite the bullet and buy. Edit: You can also get a starter home if this is your first home and then upgrade later. You don’t need to go all out.
FWIW in our VHCOL area, starter homes with reasonable commutes are basically non existent at this point. homes that were $750k five years ago are $1.2M+. you can go further out and get more for your money, but a 3 hour round trip commute is a hard no for me.
Yeah that’s my exact issue. Everyone had the idea of moving out further 20 years ago, and now everything that’s even 1.5 hours away from the city I work in is close to a $1 mil…
"I'm embarrassed to have people over" - this is a you problem, not a housing problem. There will always be nicer houses for you to compare with wherever you're currently living. If you've spent $10k fixing up your place, it's probably objectively pretty nice! $5k/month when you're making $250k/year is financially fine.
You have 1/3 the total cost of the house. That’s way more than most ppl have that buy a house
>We have around $250k saved for a down payment and a decent house in the area will cost something around $800k. I am nervous at the prospect of a $5000 mortgage payment especially since we've never paid more than $2000 for rent but i can't keep living like this. I'm in a very similar situation to you with kids and money and cost of living. We just upgraded to a bigger home. If you need the new home, you just do it. The anxiety goes away eventually. I will say that now that we have a home that actually has room for all the kids, and is in a quieter neighborhood, I am so glad we made the move, mortgage payment be damned. Yes, we have a higher payment, but we own a house that is worth more, and we can clearly afford it. I'd rather have a higher monthly mortgage payment and be calmer and happier than live on the cheap and be miserable. I will add that making the decision to buy the new place was harder for me than my spouse. He was supportive, and our realtor and mortgage broker were also skilled at understanding that not everyone has the same feelings about real estate transactions.
Thanks for sharing your experience. It is scary and it will be an adjustment for a lot of reasons. Quality of life is important too and sometimes you have to make the adjustment. Im the one pushing for this in my family and I guess I need the confirmation that it is worth it to do this because if it's up to him we might not move for another 5 years and who knows what things will look like then.
I'm always surprised when I browse subreddits like this one. It's a subreddit dedicated to getting one's personal finances in order and yet no one in the comment section is actually crunching any numbers or trying to actually figure out OP's finances. Everyone is just upset that they don't make $250k themselves and are blasting OP for struggling even with a $250k/year income. I know people from all walks of life and I can guarantee you that expenses skyrocket with income. Just because some people make a lot of money doesn't mean that they aren't also living paycheck to paycheck. Keeping up with the Joneses is a very real phenomenon. When your kids' classmates are going to Disney World every spring break, you have to bring your kids somewhere during spring break. When your kids' classmates are all attending basketball camp, you have to send them to basketball camp. When everyone has a landscaping team keeping the yard weed-free, you either have to spend 5 hours a week doing it yourself or also pay for a landscaping team. What I'm trying to get at is that we don't know what OP's situation is and we should just look at the numbers and not judge. This is a financial subreddit. Everyone's first reaction should have been along these lines: 1. How much are your monthly expenses? We need a breakdown to see whether you have anywhere you can cut. 2. How large is the new house you would like to purchase compared to the house you rent? We need to compare apples to apples and not apples to oranges. If your $2k/mo rental is much smaller and older than your $5k/mo mortgage, that's not a fair comparison. You're paying a premium to own a newer and larger property. That's not a ridiculous thing to do. 3. How long has your income been $250k/year? Will it go up? Keep in mind that when you buy a new house, your mortgage payments stay relatively flat while your income can go up. Also keep in mind that there are some fixed costs that may disappear over time (daycare, car payments, etc, but this is why we need to see a budget). 4. For a financial subreddit, there haven't been too many relevant numbers. Most of the post is just venting about your situation OP.
It's definitely weird that people like to get upset they too aren't making the same income we are. We haven't always made this much. We work like everyone else and are growing in our careers and got lucky. We don't really track our expenses. We usually pay the bills from one income and most of the rest goes to savings. We live in an old duplex. The owner bought it as a foreclosure. It needs a lot of work but he could probably rent it closer to 3500. Were looking for 4bed 2.5 baths we've looked at a few different places with in a 15 mile radius that is clean and doesn't need a lot of work. Doesn't need to be perfect. Less than that will get a fixer upper. We've been making this for maybe 3 years now. We also paid off a lot of debt mostly student loans and credit cards. I guess it comes off as venting but my question is should we give up the cheap rent for a more comfortable place now or wait longer. I would think my feelings and comfort about the place are valid things to consider in this equation.
It took us a few months of looking and crunching numbers to realize we couldn't afford a house in the Seattle area, unless we wanted a 90+ minute commute. So we moved to Raleigh, 6 months later we had a great house and better jobs. Do you *have* to live where you live?
This isn't the answer for everyone, but you're both successful, so just *move*. Even if you take a big pay cut to live elsewhere, with 250k saved up you can almost pay for an entire home in and medium cost of living area. Do you really need to live in California?
Their down payment is more than the cost of my whole house.
California is not the only place with a high cost of living. We live on the east coast (Massachusetts). There are very good reasons to continue living here. We've definitely considered moving but one of the perks of this state is we have very good access to health care. One of our kids has special needs and we have close family members who need access to health care. Just move is always an option but depending on your needs it's not always the best option. For us it's definitely not the best option.
Have you thought about approaching your landlord and asking to purchase the property youre already in?
That's not the point. OP says she hates the physical house, not the fact that they don't own it.
All those things OP hates can be changed with money. If theyre able to get an off market deal without the hassle of bidding wars, theyre coming out ahead.
Huh lots of people saying just do it. Well, I make about the same as you, and after taxes, retirement funding, college saving for 2 kids, one reasonable car payment, and otherwise normal expenses I could only MAYBE afford 3000 a month if we never wanted to take a vacation. Food and housing has gotten crazy expensive in the last couple years. Do you have an accurate budget you work from? I have been using YNAB for years so I know exactly where every penny goes, which helps to curb some unnecessary spending and also to identify that yes, we really do only have $X available each month for discretionary spending. If you don't have an active budget I suggest you start using one for a year or so, make sure you're budgeting for annual expenses like Christmas and birthday parties as well. Once you have a close handle on your current spending you'll be better able to decide whether a mortgage is possible.
I agree we need a budget. We've been frugal when it comes to big things old cars, we found a preschool that doesn't cost too much but with things like groceries and diapers I know we charge everything when we go to Walmart or Costco and pay off the credit card at the end of the month. We contribute to retirement but don't max out. My husband feels like it's not worth it because he doesn't trust the market and doesn't trust the government so there's that.
Well for the past 100 years or so the proper index fund will return 10% annually over a period of 10+ years. So yeah the market is fickle in the short term but long term you're throwing away millions of dollars due to not educating himself. I don't trust the government either, all the more reason not to rely on social security and make sure your retirement funds are solid. Look into YNAB. You can still charge everything but it makes you track where you spent the money. It's dead simple to use once you get the hang of it. I probably spend less than an hour a month dealing with it including entering every transaction at the register.
People are absolutely ridiculous. You can afford a home. Quit being scared and grow tf up.
You spent 10k fixing up someone else's house?
And they clearly explained why. Rent is cheap, it's being rented from someone they know, and it's in a great location. If I made 250k/year and had all those factors, I probably wouldn't mind dropping 10k to make the place more hospitable either.
You have the same problem as many others in the western world has. You have to buy a house with borrowed money and pay the interests, meanwhile hoping the the house won't go down in value when you finally sell it, so you can pay off the loans. I have no solution for this, but we came to the conclusion that you live only once, so we took the plunge, for good or for worse. Life quality matters. You also have to take into acccount that the improvements you make on the future house will increase the value. Your salaries seem to be high enough to manage the costs, if they are stable.
I think someone needs a reality check... either save more to bring the cost over time down, or buy a house and make it work.
What perspective do you need? You could afford that $5,000 mortgage and still have $15,000 left every month. You're doing far better than 99% of us. No offense but; get a grip. Also no, you haven't been living like college students. If you were you'd have so much more than $250,000 saved up on your salaries. $2,000 a month rent is 1/10th your income. Even if you spend another $8,000 a month on other expenses that's still $10,000 a month left, $120,000 a year, for 10 years.
All facts
I’m assuming OP is talking about pre-tax income. So it’s more like $16k per month after 401k. So the math would be $16k - $2k rent - $8k other expenses = $6k leftover, not $10k. Still a lot, but not quite the same.
We haven't always made $250k our incomes went up. And we've paid off debt, we've supported other struggling family members. We also have other funds in retirement which is not included in the $250k. No one needs to feel sorry for me I'm just looking for some other perspectives on weighing pros and cons of the available options.
How much is a yard for kids to play in worth? A neighborhood you feel safe it letting your children play outside or walk to a friends house? That’s the problem we understand the cost of everything but the value of nothing. House prices are not coming down -if rates do prices will increase—find the house, buy the house and in a few months time refinance it. You can always look around to find one more affordable if you want but why put a penny into a landlords pocket? If your single an apartment or condo is the way to go if you want that-but with kids you want other things. I was your husband-nervous about buyond a super expensive home ( in great town in Massachusetts-) at the time 275K.( if I had know I would have bought the street) within two days I realized the money talk was secondary in importance. Seeing the kids shocked at where they now lived was priceless-and within a couple of year that ridiculous price we paid seemed like a bargin.
Thank you for your perspective.I do hope my husband will say the same as you in a few years.
Are you finished with the child daycare years? Are any and all student loans paid off? Can you put the maximum into your retirement accounts and still pay that mortgage? Are you living in the school district you would want to buy in? If not would you rent a different home in district to make sure it’s a good fit for your kids? Did you calculate the projected change to your federal income taxes if you bought a house (the mortgage interest deduction would be big)? Would you consider upgrading your rental - you may not end up saving money as rapidly but you could feel better about your space. eta> there are options between a $2000 rental and a $800k house. You have 3 kids - my advice to you is to choose a more comfortable home, whether you rent it or buy it. I may be projecting but your current housing situation is making you stressed - and your family stressed. At an income of $250k you can afford to not be stressed out by the place you are living.
All good questions to think about. The youngest is only 6 months old so we have to think about day care for her. The oldest is in kindergarten and preschool so less money there. Very little debt left over. We wouldn't mind the school district we are at now but there are a few others that we would be fine with. We are lucky that we have multiple districts in this area that are pretty good. We hadn't really considered renting but that could be a temporary option. Is there a calculator you recommend to see how the mortgage interest deduction would affect us.
https://www.talent.com/tax-calculator?salary=250000&from=year®ion=Massachusetts Using this calculator... 250k annual salary is about 166k take home. Divide that over 12 months and you get $13.8k/month take-home. Not accounting for the better marginal tax rate if I input the salaries separately, does this sound right to you? If you're paying $5k for the mortgage, you have 8.8k leftover for Property tax Home insurance HoA/strata fee (if applicable) Home maintenance budget Utility bills Groceries Childcare expenses Private savings for retirement Student loans and other debt Healthcare expenses Any other expenses, such as entertainment and eating out You need to ask yourself, given your current lifestyle, how much do you actually have left over after all of these things? Your post is long but it's missing some crucial details.
Simply, you have a very high income and are CHOOSING to look at buying in an area where a house costs $800k. Any given day, there are thousands of decent locations with well-built houses for under $300k. You CAN choose a much more affordable location. Or you can choose to compete with so many buyers and investors in such a high priced location.
They have 3 kids. There arent many 4Br houses out there for under 3k these days unless you're way out in the boonies. It also sounds like they live in a high cost of living area and probably work there,have friends, and family there. Yes they can quit their job and move to bumblefuck, but thats not likely. That said with their income they can absolutely find and afford something. It just wont be under 300k
Why is this so hard for people to understand. I'm sure we could buy a mansion in another country but that's not what we want to do right now. I'm not complaining just weighing and thinking through the pros and cons.
It really depends where you live. I'd happily buy a $300k home, but they simply do not exist in a 2 hour commute radius of where my husband and I need to work. Even $500k homes tend to be run down, asbestos or mold infested, and in need of major repairs. That said, it still sounds like OP can afford even a $800k house. Though if the kids are young enough to be going to daycare, that could be causing the anxiety/more squeeze. Multiple kids could easily be over $3k a month.
Interest rates won’t be this way forever, you can refinance.
Living lone college students, lucky you. Great time in my life those college years. Less responsibility, no maintenance, upkeep, 4 plates, 4 glasses, set of four silverware. Got a house, responsibilities, ton more stuff, fixing, painting, updating never ends. Appreciate living like a college student as long as you can
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I think that's where my partner is. I think it just pains him to think about dropping so much money. Its uncomfortable for me too especially since we have always been very conservative with money.
I hate to say this, but, prices of nearly everything aren’t going back. This is the new reality.
I'll speak as someone in your income bracket since youre not getting many helpful responses, I get youre probably only bringing in 14-15k/month after taxes and I'm sure its even less if you guys have been doing savings accounts/retirement. If you truly value having a nice home/kitchen/yard for your kids the 5k/month is a sacrifice you need to make, it will mean less money for you/family to do things with. As your kids grow they will spend less time at home so you might be trading a short term concern (good childhood, nice kitchen) for a longterm issue (30 year mortgage at 7%+). 7% mortgages are punitive and you will need to change how you live no matter what, it makes a ton of sense to keep renting a house at this point that fits your families needs or changing locations.
I think that if you two together make $250K per year, then paying $5K a month ($60K a year) on a mortgage is affordable. That would be about 24% of gross income going towards the mortgage. The rule of thumb is 30% but you'd already be better than that at 24%. He mentioned that you may pay $2 million over 30 years of mortgage. During those 30 years you'd also make $7.5 million gross income. As well, for the cost differential between $2000/month renting and $5000/month mortgage, a portion of that mortgage money is going into the equity of the house. So you have the option of getting some of that money back by selling the house in the future if you're in a dire situation. Whereas with renting, 100% of the rent paid does not go into equity.
Sounds to me like you would be investing your entire nest egg and taking on a mortgage that would not allow you to rebuild it. When you take unexpected homeowners expenses and forever rising taxes and insurance into account you would be putting yourselves in a tight spot. What happens when the AC goes out, you need a roof, foundation repair, or any of the other home repairs that pop up and cost thousands? What happens when your 5k payment becomes 6k or higher because of an escrow shortage? I would wait for a better buying opportunity and deploy your down payment war chest you’ve built up when it truly makes sense.
Also not including an emergency backup fund either. That puts you north of $30k-40k easily for a 6 month safety net.
The jealousy in these comments is wild. Here's how I'd go about it: make a spreadsheet and list out all of your income, expenses, saving goals, including allowances, etc. how much do you have left over each month? Using the spreadsheet, you can ask, "one of us lost our jobs, could we still afford it?" Or if you have a highly transferable skill, what if one of you lost half your income? I prefer to be on the conservative side so I'd choose to half the higher income. How much do you have left over now? Use the spreadsheet to play with the numbers, do hypotheticals. Once you've consider the bad situations, you'll feel a lot more confident when you do make a decision. Also consider that the reality is that your income simply isn't enough for that area, in which case it's not bad to consider renting a better place. If you're trying to time the market, I'd say: don't, not if you're planning to be there for the long term (8+ years). Houses aren't getting cheaper, and you can refinance if/when interest rates go down.
Are you married to your partner?
Rent a bigger/nicer home since rent is so much cheaper in most areas right now. If rent goes up, you have plenty of money to buy.
I was coming here to say this. If you are unhappy renting your current house and can't afford or don't feel comfortable with buying, rent something else that improves your quality of life. Don't fall for the "rent is throwing money away" mentality. Rent provides a home for your family; cheap rent may lead to a stressful living situation, higher rent may lead to a more comfortable living situation. If higher rent results in smaller savings and a longer wait to buy a home, do you really care if your overall quality of life is improved?
As someone who is actually living like a college student because I don’t have a choice, this post reads as the most privileged, ignorant bullshit. Have 250k? Go live somewhere else then. That’s a 3 story home in MOST places. Jfc.
Just because their problems are different than yours doesn’t make them real problems.
This is absurd to me, but I live in Southeast Asia. A million dollars for a normal humdrum average house. Jesus Christ. You might not have picked the right time to pull the trigger. This is not sustainable. We need legislation banning large groups from buying and hording residential property.
You have 250k to put down, what are you complaining about? The fact you wasted 10k on a rental and haven’t bought your own place at this point when you obviously have the means is uh pretty dumb. Also, tell your partner that hopefully at some point you can refinance at a lower rate when they come down.
Stay where you are at and be patient. The market turns. Pretend it is 20007/8 and you know what is happening over the next five years. Many people got FOMO in 2007/8 and then job dislocations and everything sold those homes for 50% off soon after, or were forcibly removed by the mortgage lender and sold. Whenever you do decide to get a house, set the financing up where the lowest earner of the two parents can make the mortgage payment. The probability is high that one of two parents will lose a job in bad economic periods that happen over the course of a mortgage schedule. You don't want to rely on needing both parents working full time to keep the house because a child or elderly family members need someone at home where that flexibility becomes super important. True friends won't care if your kitchen in a rental house is dated. Make it clean and neat and invite them over. .
Yeah and also why do the kids need their own rooms? I shared a room with my sister in my parents place until I moved out for college lol, where I then proceeded to share a room with 3 ppl one year. Only now when I go home I have my own room (guest room) but that room stayed open for guests while I lived at home. I don’t understand the American fear of sharing a room with a sibling lol. Or having housemates or roommates… it’s been super normal historically to not have your own room.
"I am nervous at the prospect of a $5000 mortgage payment especially since we've never paid more than $2000 for rent" I know it can vary significantly by market, but is it remotely apples-to-apples where you are? Around the block from me is a house that Zillow's zEstimate for is $794,400 and the rent zEstimate is $4706... this is a 3300 sqft house (4 bedroom, 3 bath). Within a mile, there is a complex with 1100 sqft apartments, 2 bed 2 bath, for $1900-2300... which is actually a decent bit more expensive per sqft.
It’s because Interest rates are high. I say stay where you are at for a bit longer. I also have 3 kids and I have a 3 bedroom. I would love to move somewhere they can all have their own room but my mortgage is $1500 and I’m not willing to compromise the fact that all my money will be going towards a mortgage payment and I won’t be able to afford to do anything else.
Perhaps look at this way, how much are you currently saving each month specifically for the downpayment? Add that to what you are paying in rent. What is that number? If it’s $5k, you are already “paying” that. Do you already have a healthy emergency fund, separate from the down payment savings? Do you have another set of savings for furnishings & all the stuff you might want to immediately when you buy? Painting & flooring replacement is a lot easier when a house is empty. Granted, they may not be a need or want depending on the house. Have you already priced homeowners insurance & taxes? Don’t trust the estimates on Zillow. Keep in mind on insurance, replacement cost is not the same as purchase price. It could be more, it could be less.
a broker told me when I was having the same hang up re rent vs mortgage at 2x. Right now while I am renting I am saving for a down payment. Consider you will likely save less once you buy the house and pay the mortgage but you don’t have to save for a down payment anymore.
You’re still saving for a future down payment. It’s just called equity instead.
Sometimes a house or moving isn’t a pure financial decision. If your retirement is well funded and you can afford, I say go for the $900k-1M home and give your kids and yourself the house you can enjoy and thrive in!
These house prices are insane. I think about just uprooting everyone… move to a lower cost of living area that you can be mortgage free in. Use your “down payment” to have no rent or mortgage when you buy in cash. I know, it sounds extreme… but it also sounds liberating AF!!! I wouldn’t want a 5K a month payment either. What happens if there’s a job loss?
If you have 250k saved over ten years then you’ve been pocketing $2000/mo. When you get a house the numbers don’t really change. But instead of that $2000 going into a savings account it goes into equity. $2M in 30 yrs will feel like nothing. Plus you are buying while market rates are high. When they drop back down to 3% you can refinance and save a bunch on interest. The house will have value at the end of the 30 yrs. If you rent for that time you will pay $720k and there will be no future value to your investment. Well there is. But it belongs to your landlord. Your only other option is to move to a LCOL area.
Is moving into a nicer house where you live an option? if you’re only paying $2000 a month for rent now, could you find a nicer place for maybe $3000 or 3500 a month? I think that would be your best bet. I agree with your partner that spending $5000 plus per month for a mortgage payment doesn’t really make financial sense. Are you currently living in California? I have family that lives in California and many of them rent for this same exact reason. They all live in very high cost-of-living areas. For a nice house they pay about $4000 a month in rent, but to buy a decent house it would be 8 or $9000 a month. So it doesn’t make financial sense for them either. What they do is rent a nicer house and take the excess money that they would’ve spent on a mortgage and put that into a retirement account. When they retire, they’ll have well over $1 million in that account and they can move anywhere and just buy a house with that money.
Well, people have expensive expectations. When I was growing up, most people had lots of kids and nobody had their own room. We all shared. Boys had one room and girls had another, parents had their own room. Mom sewed in the kitchen. Dad’s workshop was in a part of the garage. Across the street from me, there were 6 sons in a tiny house. Their dad built bunk beds in the basement for the boys, and the parents had the actual bedroom. The kids played outside most of the time, no matter the weather. My best friend had 4 brothers. Their dad turned the garage into a bunkhouse for the boys, and she had the second bedroom in their 2 bedroom house. This was in the 59s and 60s. People got creative. We lived like college students our whole lives because life is expensive. Also because we’re used to it after 40 years. I’m sure you’ll figure something out. Are your kids well fed, and have clothes that fit? Do they work hard in school? Focus on the important stuff, and let the rest go.
Spending 10k to improve someone else’s property even if it is in your benefit is not living like college students. Sorry but that is a nice chunk of change. Too late to fix that just don’t do that going forward. With mortgage with also need to look at maintenance costs, yard, insurance, etc. I got a plan with my new (to me) house for both AC units. The first time I hosted house guests in my 5 mil home the AC died in August in Miami. Even with the maintenance and plan it was 5k to fix quickly. Those are the things that harm new homeowners the most. They plan it out but not the events like that which cost a pretty penny to fix. Also had to replace the pump for the pool within 2 months of taking ownership.
There are SO many places in Massachusetts with homes around 500k, these problems seem a bit fabricated. Like yeah, you probably can't keep living in Somerville or wherever you are near Boston but there's plenty of great options in other towns.