Author Topic: True cost of purchasing a more expensive home  (Read 4278 times)

Dmy0013

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True cost of purchasing a more expensive home
« on: June 22, 2016, 09:00:19 AM »
My wife and I are looking at purchasing a new home.

Currently we have a condo on which we owe 139,000 (market value roughly 260 - 270)
Payments are about 600 biweekly 10.5 YR amortization

We are looking at purchasing a house for 400 - 450 (starter home, expensive I know)
We would put roughly 110 - 120 from our condo sale towards it, then probably another 30,000 cash.
So we would owe roughly 250 - 300 - I still have roughly another 10,000 cash for closing fees and all the other hidden costs.
So this would give me a bi weekly payment of roughly 600 dollars on a 25 yr amortization

Does anyone know of a online calculator that can show me the true cost of this move?
Currently I pay 609 Bi weekly, with 138.51 going towards interest. (10.5 yr amortization)
If I purchase a new home and even though my payment remains the same how much of my payment will go towards interest?

Long story short my wife and I have been wanting to move for a year now.  We love our condo, and its beautiful inside and out, and in an awesome area of town.
However to some extent we want to "keep up with joneses" silly I know...  I get extremely bored.
We have been extremely diligent in saving money, making large extra payments on our mortgage.  While are friends travel the world, and drink their pay checks away... but at the end of the day we ended up at the same spot, because my condo has not gone up in value, but their house has gone up in value 10 - 15% a year... frustrating....

I understand there is no guarantee that I purchase a house and the value goes up... I get it...
I also get bored extremely easy, so I would enjoy having a basement to finish - I use to be a 3rd Year plumber so I am somewhat handy to do the bulk of the work myself, and I own a good chunk of the tools.

I guess I'm rambling on... so main question - does anyone know of a website / calculator that can show me the numbers and brake it down into a chart?

Choices

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Re: True cost of purchasing a more expensive home
« Reply #1 on: June 22, 2016, 09:06:16 AM »
There's more to it than just the numbers you mention.
- if it's in a nice neighborhood and you're "keeping up" you'll need a landscaper, a housekeeper, and a pool guy
- you'll also need nicer cars
- if you choose to maintain your home yourself, you'll spend a lot of time doing it, and the bigger the house the more time you'll spend
- don't forget property taxes and insurance will be higher
- you'll spend more to furnish all those empty rooms
- and you'll pay more to heat and cool it.
« Last Edit: September 23, 2016, 04:52:09 PM by Choices »

Metric Mouse

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Re: True cost of purchasing a more expensive home
« Reply #2 on: June 22, 2016, 11:21:12 PM »
There's more to it than just the numbers you mention.
- if it's in a nice neighborhood and you're "keeping up" you'll need a landscaper, a housekeeper, and a pool guy
- you'll also need nicer cars
- if you choose to maintain your home yourself, you'll spend a lot of time doing it, and the bigger the house the more time you'll spend
- don't forget property taxes and insurance will be higher
- you'll spend more to furnish all those empty rooms
- and you'll pay more to heat and cool it.
Check out more reasons here http://www.choosebetterlife.com/5-financial-myths-busted/

Yes, moving absolutely requires newer cars and hiring a housekeeper. I don't know anyone who has bought a house who didn't get a pool guy, but some people have gotten away doing most of the landscaping themselves. (So I've heard.)

ShoulderThingThatGoesUp

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Re: True cost of purchasing a more expensive home
« Reply #3 on: June 23, 2016, 03:38:33 AM »
You must keep a bigger cash reserve when you buy to solve whatever hideous problem you discover a few months into living in it.

boarder42

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Re: True cost of purchasing a more expensive home
« Reply #4 on: June 23, 2016, 06:00:28 AM »
having just upsized houses the biggest impact we've seen is in heating and cooling.  first summer cooling bill is in and its almost 42% higher than what we paid last year during a month of the same avg temp.

thedayisbrave

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Re: True cost of purchasing a more expensive home
« Reply #5 on: June 23, 2016, 06:17:48 AM »
Hard to say if you can make moves without knowing your whole financial picture.

Are your retirement accounts fully funded? Do you have goals of early retirement or financial independence?

IMO, buying a house just to "keep up with the Joneses" is the dumbest idea I've ever heard.

If you're bored and you have skills in a certain trade, pick up a side job.  You don't need to have your own house to work on a house.  Get a GC license if you don't have one already.  This way you can actually make money while "curing" your boredom, instead of spending it.

Trust me, a $400K house will get pretty boring after a while too.  Then what's next? The hamster wheel will never end.

mskyle

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Re: True cost of purchasing a more expensive home
« Reply #6 on: June 23, 2016, 06:59:44 AM »
I think you could actually use the NYTimes rent-vs-buy calculator to get some of the numbers you need - just ignore the "rent" part and fiddle with the numbers on the "buy" side.

I think one of the biggest things you're missing is closing costs. You can avoid those entirely if you stay where you are, and the more expensive the house is the more expensive your realtor fees, etc. will be. To sell your condo and buy a $300,000 house would cost a lot of money. And it would cost you more when you sell the more expensive house.

MandyM

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Re: True cost of purchasing a more expensive home
« Reply #7 on: June 23, 2016, 07:21:47 AM »
Hard to say if you can make moves without knowing your whole financial picture.

Are your retirement accounts fully funded? Do you have goals of early retirement or financial independence?

IMO, buying a house just to "keep up with the Joneses" is the dumbest idea I've ever heard.

If you're bored and you have skills in a certain trade, pick up a side job.  You don't need to have your own house to work on a house.  Get a GC license if you don't have one already.  This way you can actually make money while "curing" your boredom, instead of spending it.

Trust me, a $400K house will get pretty boring after a while too.  Then what's next? The hamster wheel will never end.

+1. Don't spend money as a hobby and stop comparing your equity to your neighbors. You have no idea what their whole financial picture is and it doesn't impact yours anyway.

You could also buy a fixer upper and flip it. I'm guessing that would cure your boredom right quick.

The $10K you have for closing costs and other hidden costs isn't likely going to cut it, btw.

Dmy0013

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Re: True cost of purchasing a more expensive home
« Reply #8 on: June 23, 2016, 08:54:27 AM »
Thanks for the advice I guess I should give a bit more information

I would actually have roughly 40,000 cash after purchasing the home - 10,000 I would expect to put towards unexpected fees, the other 30,000 is my emergency fund I don't want to dip into, but could if needed. 

Here comes a face punch...  Our retirement funds are not 100% topped off... between my wife and I we have roughly 175,000 put away (we are in our upper 20's)  there is probably room for another 10 - 15 K of contributions, I will find those final numbers out today.

a 450,000 dollar house here definitely does NOT get you a pool or anything fancy at all, 450,000 is a very plane jane house most likely does not even come with a garage.

MY wife and I are expecting our first child in about 10 days now.  There is room to have 1 child in this condo, but if we plan on having a second (which we do) there is no way to get a toddler and an infant in here.  The neighbourhood we live in we love!  and we want to stay in it, there is about 50 lots left, and we somewhat feel a push to get the ball rolling.

Yes I understand we can buy a house used like 90% of the population and I have no problem buying a used house.  The issue is 90% of the people buy these house, finish the basements, landscape the yard and then ask 550 - 600 for the starter home...  Thats out of my budget...

So let me pose a new question,

I have about 60,000 cash rotting in my bank account...
I am holding a much larger amount of cash then normal because we are about to start mat leave in a few days, and we want some additional cash to see how the budget goes after a few months.
I have debated what to do with the money... I could yes top up our retirement accounts, or I could put 27,000 down on my current mortgage (max allowed)
My mortgage is 2.6% interest (low I know) but If I put the money down on my mortgage then in 3-4 years when I definitely need to move atleast I can use that money towards a new house.

The area of town I live in, sees housing prices gaining year after year, where as my condo is worth about 10 K less then I paid.
In 2-3 years they will have completed 150 new suites in a very similar building to mine 2 blocks away, Im going to take a wild guess that all of these new suites on the market is not going to help the value of my condo.

So sounds like almost everyone is against buying a new house...
Should I start heavily working towards paying off my mortgage, so in 3-4 years I have a lot more equity which will allow me to purchase a home (maybe even with a garage!)  PS we live in canada where its -40 in the winter and your car won't start... so a garage would be nice!

Or do I top up my retirement accounts then worry about the mortgage?

HappyHoya

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Re: True cost of purchasing a more expensive home
« Reply #9 on: June 23, 2016, 08:56:41 AM »
There's more to it than just the numbers you mention.
- if it's in a nice neighborhood and you're "keeping up" you'll need a landscaper, a housekeeper, and a pool guy
- you'll also need nicer cars
- if you choose to maintain your home yourself, you'll spend a lot of time doing it, and the bigger the house the more time you'll spend
- don't forget property taxes and insurance will be higher
- you'll spend more to furnish all those empty rooms
- and you'll pay more to heat and cool it.
Check out more reasons here http://www.choosebetterlife.com/5-financial-myths-busted/

Yes, moving absolutely requires newer cars and hiring a housekeeper. I don't know anyone who has bought a house who didn't get a pool guy, but some people have gotten away doing most of the landscaping themselves. (So I've heard.)

I'm hoping this is all sarcastic, right?! I thought I was on the MMM forum-- Am I missing something? Having a house absolutely DOES NOT require all these things. Sure, maybe your utilities go up, but we offset that by doing energy efficient things we were it allowed to do in our condo (dry clothes outside, improve insulation). All that other stuff is only if you're committed to being a sucker, or decide it's worth it for you. Sure, now that we have a house, people like to tell us we need something, but there definitions of need we're going to be different than mine anyway, it's just maybe slightly more obvious now. I know quite a few very wealthy people who have pools and do not have a "pool boy." You pay something to open and close it, maybe, but that's all.

Dmy0013

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Re: True cost of purchasing a more expensive home
« Reply #10 on: June 23, 2016, 09:18:53 AM »
I had assumed they were just razzing me a bit about the situation as well!

There will be no need for a pool boy or landscaper, those types of neighbourhoods are minimum a million or two :(

Like I said this is a nice working class neighbourhood, and 450,000 is a starter home... No pool / no fancy landscaping / probably no garage and no drive way (street parking)

bacchi

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Re: True cost of purchasing a more expensive home
« Reply #11 on: June 23, 2016, 09:51:26 AM »
Keep the condo, save more money, and then decide to buy up if/when you decide to have another kid. Having a child and moving are two of the most stressful things you can do and you want to do them right after one another? Why not change careers while you're at it?

There will always be another "perfect" house.

Dmy0013

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Re: True cost of purchasing a more expensive home
« Reply #12 on: June 23, 2016, 09:53:32 AM »
hahahah I just changed careers a year ago!

We are first time parents, everything is still rainbows and butterflies

BFGirl

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Re: True cost of purchasing a more expensive home
« Reply #13 on: June 23, 2016, 10:01:07 AM »
I think the main question is are you going to still be able to afford the new house and expenses that come with it and continue to save money?  If the answer is "no", then perhaps you should wait.

I do understand the desire to get into a new subdivision when the prices are rising.  I bought a townhome in a new development and the costs of new townhomes that are smaller than mine are $40,000 more than what I paid for mine.  I don't know that I would be able to afford to move in here now given the increase in home valuations.

Plus, it is very hard to move and deal with a newborn at the same time.  My ex and I closed on a house 3 days after my daughter was born.

ShoulderThingThatGoesUp

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Re: True cost of purchasing a more expensive home
« Reply #14 on: June 23, 2016, 10:17:15 AM »
I'm sure you're antsy with the child on the way very soon, but pretty soon your space won't matter to you at all. When you get a good idea what you life will be like as parents, consider this again.

MandyM

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Re: True cost of purchasing a more expensive home
« Reply #15 on: June 23, 2016, 12:33:27 PM »
My mortgage is 2.6% interest (low I know) but If I put the money down on my mortgage then in 3-4 years when I definitely need to move atleast I can use that money towards a new house.

...
Should I start heavily working towards paying off my mortgage, so in 3-4 years I have a lot more equity which will allow me to purchase a home (maybe even with a garage!)  PS we live in canada where its -40 in the winter and your car won't start... so a garage would be nice!

Or do I top up my retirement accounts then worry about the mortgage?

There are a ton of threads that discuss investing vs. paying down a mortgage. The short story is: The math supports investing. But some people pay off their mortgage for emotional reasons.

Metric Mouse

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Re: True cost of purchasing a more expensive home
« Reply #16 on: June 24, 2016, 01:23:15 AM »
There's more to it than just the numbers you mention.
- if it's in a nice neighborhood and you're "keeping up" you'll need a landscaper, a housekeeper, and a pool guy
- you'll also need nicer cars
- if you choose to maintain your home yourself, you'll spend a lot of time doing it, and the bigger the house the more time you'll spend
- don't forget property taxes and insurance will be higher
- you'll spend more to furnish all those empty rooms
- and you'll pay more to heat and cool it.
Check out more reasons here http://www.choosebetterlife.com/5-financial-myths-busted/

Yes, moving absolutely requires newer cars and hiring a housekeeper. I don't know anyone who has bought a house who didn't get a pool guy, but some people have gotten away doing most of the landscaping themselves. (So I've heard.)

I'm hoping this is all sarcastic, right?! I thought I was on the MMM forum-- Am I missing something? Having a house absolutely DOES NOT require all these things. Sure, maybe your utilities go up, but we offset that by doing energy efficient things we were it allowed to do in our condo (dry clothes outside, improve insulation). All that other stuff is only if you're committed to being a sucker, or decide it's worth it for you. Sure, now that we have a house, people like to tell us we need something, but there definitions of need we're going to be different than mine anyway, it's just maybe slightly more obvious now. I know quite a few very wealthy people who have pools and do not have a "pool boy." You pay something to open and close it, maybe, but that's all.

I used to want to grow up and be a pool boy. Live in a plush pool house, dress in shorts every day, work on the tan and enjoy the attentions of the house owner. Hell, I still want to grow up to be a pool boy.  Let me know if anyone is in the market for one. :D

Choices

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Re: True cost of purchasing a more expensive home
« Reply #17 on: June 24, 2016, 09:10:35 AM »
There's more to it than just the numbers you mention.
- if it's in a nice neighborhood and you're "keeping up" you'll need a landscaper, a housekeeper, and a pool guy
- you'll also need nicer cars
- if you choose to maintain your home yourself, you'll spend a lot of time doing it, and the bigger the house the more time you'll spend
- don't forget property taxes and insurance will be higher
- you'll spend more to furnish all those empty rooms
- and you'll pay more to heat and cool it.
Check out more reasons here http://www.choosebetterlife.com/5-financial-myths-busted/

I absolutely was giving @Dmy0013 a bit of a hard time because he stated in his original post, "However to some extent we want to "keep up with joneses" silly I know...  I get extremely bored."

Of course not all these things are necessary, but if your reason for moving to a huge house is to "keep up with the Joneses" then these things go along with that. There's more to consider than purchase price. One of the huge benefits of living in a more modest neighborhood is that there's less temptation for lifestyle creep/lifestyle inflation if you're prone to those influences.