Author Topic: Should I afford this house?  (Read 547 times)

MrMasked

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Should I afford this house?
« on: June 24, 2018, 02:14:10 PM »
Hello everyone, and a big thanks to helping me a few months back. With your help, I rebalanced my finances and got rid of a car payment. Now a new dilemma, and I need some advice as I am on the fence. We are a family of 5 living in a small town in Ohio, we currently live in a tiny house with no basement and we are out of room (triple bunk beds anyone?)! The real estate market is hot, so the question is should I afford this house or am I being a bit crazy?

Background: We love living downtown. Yes taxes are higher, and inventory is low, however this is a big quality of life boost as we are always out and about walking, exploring, playing, etc. We want to stay downtown so choices are limited.

Current Mortgage: $1202 (Owe $160K, I have $65K Equity)

Monthly Income: $7416 after tax, 401k, etc
Monthly Expenses: $5598
Monthly Savings: $1818
Debt: Student loan owe $27k (payment included in monthly expense)


401K - $127,000 contribute $21,000 a year
Roth IRA - $23,000
Saving Account - $10,000
Index Funds (no tax advantage) - $70,000


My plan is to retire at 55 (33 now), I work for the county government so my job is stable but I will not have any more increases in salary nor will my wife. I get VA benefits, so my plan was to put nothing down on the new house, roll the $65K from equity into an index fund to make 8% yearly.


New House - $320,000
New City Tax - $5500 ($2500 increase from current home)
New mortgage Payment: $2050 a month



So the question becomes, is this too costly of a house? Should I look for something smaller? This one is a dream home, 4 beds, big yard, basement, downtown, etc. Do you think I am stretching myself too thin?


ysette9

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Should I afford this house?
« Reply #1 on: June 24, 2018, 02:28:51 PM »
There certainly are more houses in the world to choose from than your current house and this one you have your eyes on. Instead of looking at it as a binary decision how about deciding what kind of things you value, what your financial goals are, and then back calculating out how much you can afford for housing while meeting your goals? Then start looking for properties that meet those criteria.

Are you in a 2-bed now? If you have three then I’d argue you have enough space now. Pretty much no one in my state has a basement so I’m not sure why that is necessary. Is it just a place to store junk?
« Last Edit: June 24, 2018, 02:34:46 PM by ysette9 »
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Earlybirdretirement

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Re: Should I afford this house?
« Reply #2 on: June 24, 2018, 02:46:20 PM »
I think the quick answer is to really ponder why the 'more' is really needed.  You will likely feel a desire to fill it up, end up with higher repair costs, etc.  If you feel clear you want the larger space, I'd consider rolling more of the equity to keep payment lower, as your taxes will keep going up.  Or consider renting your tiny home out and renting something similar to what you want to see if it really brings you what you want...And finally, consider having a roommate or air b&b to help offset cost.  Good luck!