Author Topic: Reader Case Study – When would you buy the new house?  (Read 1701 times)

yandz

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Reader Case Study – When would you buy the new house?
« on: June 16, 2014, 02:36:40 PM »
Hi all - new here (though have been looking for a bit now) and figured my first post would lay it all on the table.

First a little background info – husband (34) and I (28) are recently married and enjoying the fun of combining finances (which I actually do find to be fun).  We did not combine in any way prior to marriage, but were open about them.  I am a bit more naturally Mustachian than he is; we are both working on buckling down a bit more. 


Income:
Total net income (what hits the bank after maxing out 401ks, health insurance, taxes): $127000
Where it comes from:
Him Primary Job Net- $53200
Me Primary Job Net-  $59800
Him National Guard Net- $6000 (5 years away from retiring from this, he will be 39 – VA retirement benefits kick in at 60 and will likely be around $1100/mo in today’s dollars adjusted for inflation)
Me Bonus Net (may vary, but generally) - $8000
He has some stock shares that were given as part of a raise that I don’t even count because I don’t know how it will play out (26k that vest over 4 years

Current expenses:

Total: 60k…sort of. We want to assume this as our expenses just in case/for retirement though likely less
But actually:
Car payments for 2 cars (2yrs left of these): .......$635/mo | $7620/yr
Car insurance...................................................$91/mo   | $1100/yr
Gas................................................................ $175/mo | $2100/yr
House payment (interest only)............................$256/mo | $3072/yr
House payment (taxes & Ins.)............................$321/mo | $3852/yr
Utilities (electric, gas, sewer, trash, internet).......$250/mo | $3000/yr   
Food/Household/Alcohol/pets (I know, I know).....$750/mo | $9000/yr
Everything else (gifts, haircuts, netflix, shopping, blah blah).....$500/mo | $6000/yr
Cell phones are employer paid

So our actual expenses are just over $30k per year.  And God knows we are not spending 30k per year in travel. Maybe 10k if we are really having a crazy year (which we have done before)

So with net take home of 127000 and 60000 of expenses we end up with $67,000 left over
and as of right now, all of our extra $$ is going toward paying off the our interest only mortgage and funding IRAs (401ks already funded before listing net incomes above). I would pay off cars first, but hubby is FAR more motivated to do the house – and our trajectory is so short, what does it matter in the long run?  Cars will be paid off “naturally” by the time the house is.

Expected ER expenses: 60k ;)

Assets: TOTAL: $379,000

      Tax deferred retirement savings: ~$165,000
      Other random investments:     ~$13,000
      House:                      ~$165,000
      Cars (total for 2)           ~$36,000
          Cash in checking (we keep between 5-10k in here) currently $8k

Liabilities:  TOTAL: $115,000
    Mortgage balance: Just under $100k after we paid it down with the proceeds from my house sale when we married, continuing to pay down significantly each month.
    Car loans (total for 2) ~$15,000

Specific Question(s): We want to move to a neighborhood that is more walkable and closer to both of our offices (I could and would get rid of my car when we move), but the price point is higher – probably $350,000. Assuming the move is inevitable, when would you do it? Now? Later? If later, when? We keep going back and forth if it is worth it just to do it (since we know we want to be there) or if we should wait until we can pay cash.
On a less specific note, any thoughts or feedback you have on the above novel is helpful 

Looking forward to your wisdom and facial hair.
« Last Edit: July 14, 2014, 04:01:32 PM by yandz »

clifp

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Re: Reader Case Study – When would you buy the new house?
« Reply #1 on: June 16, 2014, 05:36:10 PM »
Since all real estate is local, there where matters a lot.  If RE in your area is appreciating at pretty good clip say 10% last year, than I'd say sooner is better.  It sounds like you have just about enough equity in your home to pay sell the house and get enough money to pay the 20% down on 350K house. If prices are steady than it probably doesn't matter much.

I'd also educate your husband on why you should pay of the car loans first.
From the prospective of a lender it looks much much better for you to have a 0 car payments and higher mortgage value than the reverse.  You are going to be borrowing 280K+ and looking at payment of about $1,400 + tax and insurance which is close to the same as your current car+house payments.

It sounds like you are in the 28% bracket or at least near the top of the 25% so the value of higher mortgage interest today than when you are in retirement.

ambimammular

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Re: Reader Case Study – When would you buy the new house?
« Reply #2 on: June 17, 2014, 10:03:35 AM »
Congrats Yandz!

You guys are at such an exciting time! And I'm glad that you're getting all mustachian so early in your marriage. Good times ahead!