HELP! I accidentally saved up almost enough to pay cash for a house!

[BAMxi]

I'm gonna try to keep this brief, because I legitimately want your advice and don't want to type too many words and scare people away. Here's what's going on:

-I have been saving up for a downpayment on a house for a while now, and have basically ended up saving up almost $100k in a market where $100-150k will buy you a decent house. I won't get into the why (unless you're interested), but it basically boils down to indecisiveness/being picky about the house we buy, having a baby, and getting cheap rent for a while.

-The money (unfortunately) isn't currently invested in anything other than a savings account, because I just kept thinking we'd need it soon.

-We are early 30s and have zero debt. Just had our first baby 3 months ago.

-I make about $70k per year, wife is currently a stay at home mom, but was freelancing and making an extra $500-$1000 per month before the baby came. She'll go back to it soon.

-All I want to do is play outside all day with my wife and baby...so I hate working a full time job. A lot. But, I get that it's a thing that people do and have much worse jobs than I do.

Can you please help me figure out what to do with this pile of cash? Our primary goal is time freedom at all costs!

Considerations:

-If i were to pay cash for a house (waiting a little while longer to have saved up a cushion for emergencies), I could keep working (at a job I pretty much hate but pays higher than average for the area), and max out the 401k/other investments. I've admittedly been lacking in this area, and have only been investing about 6% of my income into my 401k to get a max employer match of 3%.

- my preference would be to do something more enjoyable part time, so I could spend more time with my wife and baby and not be so grumpy/stressed out all the time. However that wouldn't result in much money going into savings.

-I understand that the math of investing and taking out a mortgage versus paying off a mortgage favors investing over the long term. But I feel like I'm in a pretty good spot to potentially have no debt and a paid off house at 30 years old.

-I'm basically scared to make the wrong decision so I'm making no decision right now, which is a dumb thing to do.

-We could easily live off $1500-$2000 per month with no change in lifestyle, and could easily make this amount doing part-time/freelance work.

-I never would have thought having this much cash would be so stressful.

[tobitonic]

We're at about your age with DW staying at home, but with two young kids. Paid off our house at the end of last year, and no regrets.

[trashmanz]

1) find a job you can tolerate or maybe your wife can too and you can both do part time
2) don't tie up all your funds in one expense (your house). Save the money asides from 20% down into an investment and keep building near egg.
3) if you really want to spend time with family maybe take a year off. Live in an Rv or something cheap instead of focusing on a house. You want outdoors then camp around the us for a while.

[LeRainDrop]

I would keep in savings enough for a 20% down-payment, and then move the rest to investments, such as VTSAX.  My personal impression is that, given your zero taxable investments and low retirement savings, a choice to buy the house in cash now is focusing only on the present and ignoring the future.

[Drifterrider]

You can't eat a house (this isn't Hansel and Gretel).

If you WANT to buy a house, put 20% down (to avoid PMI).  On an $80,000 loan (remember, you put 20% down) at 4.5% your mortgage (less tax and insurance) would be $405 per month. 

Lots of breathing space there.

[BAMxi]

Wow thanks for all the replies. And I do tend to agree. I guess my mental struggle has been with how much to invest versus how much to put down and loan duration (15 year versus 30 year). If we were to buy right now, we wouldn't likely be mortgage free, as we'd be buying in the $125-$150k range, as the houses in the lower price ranges aren't really what we're looking for. I think the thought of paying on something for 30 years just makes me uneasy, especially if we both want time freedom ASAP. Though coming up with $500 per month for a mortgage payment shouldn't really be a problem no matter what our situation is, I guess.

[LeRainDrop]

Wow thanks for all the replies. And I do tend to agree. I guess my mental struggle has been with how much to invest versus how much to put down and loan duration (15 year versus 30 year). If we were to buy right now, we wouldn't likely be mortgage free, as we'd be buying in the $125-$150k range, as the houses in the lower price ranges aren't really what we're looking for. I think the thought of paying on something for 30 years just makes me uneasy, especially if we both want time freedom ASAP. Though coming up with $500 per month for a mortgage payment shouldn't really be a problem no matter what our situation is, I guess.

And the good news is this isn't a black and white decision.  You have more than two options -- (1) pay all cash for the home, (2) pay only the minimum 20% down to avoid PMI and make only minimum monthly payments on the mortgage, and (3) anywhere in the middle of that that brings you and your wife comfort.  Seriously, option 3 could be a whole range -- maybe it's 40% down, maybe it's making extra principal payments every month while you are working full-time, or maybe it's getting a 15 year mortgage instead of a 30 year mortgage.  None of those three options is *bad* -- it's a matter of what brings you the greatest peace of mind for your present and your future.  Great job on saving your dollars!

[Drifterrider]

I guess my mental struggle has been with how much to invest versus how much to put down and loan duration (15 year versus 30 year).

Unless you can get a super low rate, go with 30 years; you can always pay early but with lower monthly payments, you won't feel the squeeze if you have a few months of less income.

[GuitarStv]

Either buy the house, or invest the money (a case can be made for either) . . . but stop wasting it in your savings account!

[BigHaus89]

I would keep in savings enough for a 20% down-payment, and then move the rest to investments, such as VTSAX.  My personal impression is that, given your zero taxable investments and low retirement savings, a choice to buy the house in cash now is focusing only on the present and ignoring the future.

+1

[zephyr911]

Put just enough equity in your small, cheap, well-built house, to avoid PMI and minimize your APR. Put the rest in whatever investments make the most sense for you. For me, that would mean some small stock or ETF buys, and some multifamily rentals. For you, maybe something totally different.

[robartsd]

If you're sure you want to pay off the house quickly and the 15 year payment leaves plenty of flexibility in your budget, then it might be worth choosing a 15 year morgage instead of 30 to get a slightly lower interest rate.

If you're interested in buying a house soon, I'd hold about $40k as cash ($30k for 20% down on $150k house plus $10k for inspections, closing costs, emergency fund). Set up maxing out your 401k with your employer. Also plan to max out your IRA contributions. Use the $60k you have left for investments.

[fattest_foot]

While I'm all for homeownership, I think the GCC article on why it's not a great idea was superb. It was also a little bit of a punch in the gut as we had bought a house about 2 months before that article was published.

How I Made $102k in Real Estate and Am Poorer For It

[trashmanz]

Wow thanks for all the replies. And I do tend to agree. I guess my mental struggle has been with how much to invest versus how much to put down and loan duration (15 year versus 30 year). If we were to buy right now, we wouldn't likely be mortgage free, as we'd be buying in the $125-$150k range, as the houses in the lower price ranges aren't really what we're looking for. I think the thought of paying on something for 30 years just makes me uneasy, especially if we both want time freedom ASAP. Though coming up with $500 per month for a mortgage payment shouldn't really be a problem no matter what our situation is, I guess.

I'd be uneasy with having 100K all in one asset.  I can always walk away from a bad home purchase if the bank has all the risk, but not if all my money is tied up in it.  Much more powerful to maintain control over all your money.

[undercover]

While I'm all for homeownership, I think the GCC article on why it's not a great idea was superb. It was also a little bit of a punch in the gut as we had bought a house about 2 months before that article was published.

How I Made $102k in Real Estate and Am Poorer For It

Ultimately though, that's just a highly anecdotal account of one man's experience with his house purchase. If you look at all the things he did and didn't do, it's quite obvious why his experience ended up being bad. I mean come on...he bought a 3BR house as a single dweller and didn't rent out rooms? He bought in an area where renting was cheaper? So many mistakes. Amazing how good he is with running numbers but very bad at making good decisions.

I love how people screw up on their house purchase, have a bad experience, then preach about it online about how renting is always the best way to go. They immediately adopt a "buy bad! rent good!" mentality and nothing will ever change them.

Bottom line: everyone should run an analysis for themselves on a case-by-case scenario. All variables equal, buying is almost always cheaper in the long run.

[2Birds1Stone]

I would like to echo the advice about having a safety net and liquid funds.

In your situation I would put 20% down, get a mortgage @4% interest and invest the majority of the remaining cash.

Keep 6-12 months of living expenses in a high yield 1.05% APR account and start tossing every extra dollar you don't spend on life into a simple, balanced, low cost index fund portfolio.

If your goal is long term financial freedom you need to be beating inflation with your investments to the tune of 5-7% a year on average.

After you have everything on autopilot and the wife is ready to start some freelancing work I would start looking to replace the job you hate.

You can do this! This place can and will certainly help you get there.