Peeps, What is your financial setup/strategy for paying mortgage on 2M+ house with 10-14k/m housing expense? Context: Double income single kid family, considering a house upgrade (current townhouse valued @$1.3M, $0.6M mortgage @ 2.5%) to a SFH that has a decent size backyard. We got a 1y old baby now, and we might appreciate a larger space and play area. For a $2M house which fits our needs, even with 25% down, monthly payment comes down to ~12k-14k/month incl mortgage, tax, maintenance; which is ~170k/year; and almost an entire base pay post tax. Want to learn how you folks are managing this huge monthly expense. TC:600k|HH:750k|NW:2.7M
Don't buy. Rent. Save in Bitcoin. Why would you wanna be a Mortgage Serf? Real estate is a shitty investment. Also, you don't "own" that house. You rent it from the government: what happens if you stop paying property tax? A: the real owner (government) repossesses it
past performance is not an indicator of future performance
@CrayCray3 true, and the same can be said of real estate. How do you know the United States will be a desirable place to live in 20 years? How do you know home prices will keep going up forever?
Mortgage rates are so high you’d benefit from selling off RSUs and putting more down. Then “payback” your savings with subsequent RSUs
Why? Its likely that a tech company RSU grows at a higher rate than mortgage (6-7%).
I was thinking same. RSU gives me higher than 7% return and anecdotally, I’ll profit for the least possible downpayment that will get my monthly finances in a stable state. The risk with RSU heavy is added weight on one asset/company given both my vested and granted equity.
950k HH TC here, we pay around $9k a month for our house that we got for around $2 mil when we were making $650k. I think you were supposed to buy the bigger house instead of the townhouse, but there's no use crying over spilled milk. It really boils down to 2 things: 1. Increase HH TC 2. Liquidate your RSUs as they vest There's not much of a difference between using base to invest vs RSUs to invest as you are taxed on RSUs as if they are cash and you'll need to liquidate them anyways to buy other assets. Alternatively, buy the $2 mil house with a full cash offer and forget about the mortgage. You have the assets to cover it. Not saying this is financially advisable.
Bought the townhouse 5 years ago, so no regrets on it. I couldn’t have bought a more expensive property with 200k HH income back then:) Thank you for sharing your perspective. I’m assuming you are funneling 9k mortgage through your base pay given your high TC?
Yes. We pay with base, but we are also located in WA where income taxes are much lower.
Cash flow from rental properties
Sell the townhome and put the proceeds towards the current home to reduce ur monthly expense. That is the only option I see unless u r able to go gain a positive cash flow from renting ur current townhome, then totally worth to stretch and hold on to ur current home. We are in the same boat trying to catapult from a $1.3M home to $2.6M on a similar HH income.
Yeah, that is our plan. This property won’t be cash flow positive , even if it does, it will barely break even. I’d need the equity locked in to fund the down payment for the new house. As much as possible, I am optimizing to keep the rest of my portfolio intact.
Property doesn't have to be cash flow positive to be worth keeping. Remember that your rent only needs to cover interest, taxes, and maintenance. Principal payments are just asset allocation. So as long as your rent covers ITI, you're breaking even and reaping gains on appreciation.
Why would you want to be house poor?
1. Rent your townhome. You will never see 2.5% rates again. I am assuming you can manage $1000 per month cash outflow to contribute. 2. Set aside 6 to 8 months emergency fund. 3. Sell your RSUs now to reach target down payment that makes your monthly payments manageable for your comfort. 4. Refinance new home as you see lower rates.
This is the right advice!
Don't you need to convert townhouse mortgage since it will not be a primary residence anymore?
Similar situation , current monthly is $11K and HH TC is $650K Saving less , but we are in this house all the time and we love it . Why not spend $$$ where you are 75% of your day , more for kid We know we are going to have a year or more of high payments until rates come down to 5% (not seeing 3% again) House value is going to go up , may not be immediate, but if you love house and make some return and family is happy that is great ROI
If you have to ask, you can't afford it.
Looks like you did not read my question. I won’t expand here assuming you will not read anyways :) Good day!
No, I read your question. None of your options are good. Your response tells me your HHI is a bit high. I see a termination in your future. Good day!
Where u gonna get a 2m home? It’s at least 2.5m
Sure, my question is even more relevant! Isn’t it?
https://redf.in/uwiJfl