Too cheap to buy a new house?

[Too young to work]

Be prepared! Lots of reading ahead!

My wife and I both work for the same company, which happens to be a 30 minutes commute for me, and 36 minutes for her. This is 5 days a week. We would love to move closer to work as we've found a nice place that is only 4 minutes for me and 6 for her. This would add almost an hour a day to our free time! (Commute home at midnight is a little shorter) That is quite substantial when we think about it. Money is what is getting in our way, and we can't determine if it's because we're cheap, too focused on retirement, or just think we really can't afford it.

About this housing situation: We both love the new house. We also love our current house, so the decision is hard to make. We have some minor reservations but think the "risk" would be worth the much much shorter commute. Our concerns are that we currently live in a stand alone ranch home on 1.5 acres. If we move close to work, houses are MUCH more expensive for something comparable. This causes us to need to change to a town home which is affordable. We have looked endlessly for a house similar to ours near or closer to work but it just does not exist. Building is not an option as the land is far too expensive. The new house will have upgrades over our current home, which would entice us even more to move. Concerns about rowdy neighbors are a question, but we know someone who lives in this community and says neighbors are very nice and there aren't any problems that they've seen.

The financials of the situation is what makes us hesitate. If the house was the same price as ours, we would move instantly. However, our current house is valued at about 210k according to zillow. We paid 220 but got the 8000 tax rebate in 2009. We do not have to pay this back. We did do some upgrades that we believe should bring the value up, but probably only slightly from the 210. I have no idea what it would truly sell for.

So here's the catch. We own our home outright and have no debt at all. The new house is looking like it will end up at about 240k with all the options and "upgrades" that we would want. In our eyes, most of the upgrades are necessary. Ceiling lights, water line for the fridge, an extra window or 2, an outlet, an egress window... fireplace isn't necessary, but we have one now and use it all the time. I wouldn't dare move and not have one. The DW would kill me if we didn't have one. Quartz counter tops over laminate is again not necessary but we probably want to have them.

We hope that we could walk away with 195 to 200k after the 5% sales commission. This would leave us to spend about 45k, in addition to some other things we haven't accounted for in that house price like painting. Painting can be done fairly cheaply though, as I have a friend who likes to paint and would ask about 20 an hour, and a relative who would probably do it for free aside from paint costs.

Our financial overview:
Ages 27 and 28
Annual Income: Around 85k
Annual Expenditure: Under 30k
Debt: 0
Emergency Fund: 48k
401ks, IRAs, Pensions: 220k
House: Owned (210k value)
Stocks: 9k

We currently contribute 7.5% (me) and 10.5% (DW) of our pay to the pension, max out our Roth IRAs, Roth 401k, and traditional 401k. Our savings account hasn't really budged in the last 2 years. It stays fairly consistent meaning we are spending what we bring in. (aside from those contributions)

We own two cars, but may need to buy one relatively soon. The other car only has 28k miles. Should we move to this house and be so close to work, I could definitely consider riding a bike to work. If the old car died, we would be ok as I could bike, or in bad weather we could just carpool. Come to think of it, my coworker would actually drive past where I would be living so I could probably ride with him too.

I thought we could use the emergency fund as it is earning very little interest in savings, and a mortgage is in the upper 3% range. This would leave us with almost no emergency fund, but no other debt either. Should an emergency come up we could use a home equity loan or stop retirement contributions.

All of this, and our goal is to start early semi retirement by age 37 and 38. Early semi retirement to us is working to cover expenses somewhere nicer than we live now. We would not plan to touch retirement accounts for a few years after that. That all depends on how much we enjoy the jobs we meander into.

Is spending this extra 45k (maybe a little more) crazy? Are we cheap? It is hard to not take an extra hour of free time per day. We really like this house, and have looked at many in a similar price range and below, but nothing suited our style. Any and all thoughts are appreciated. Sorry for the long-winded post!

 

[Midpack]

All of this, and our goal is to start early semi retirement by age 37 and 38. Early semi retirement to us is working to cover expenses somewhere nicer than we live now. We would not plan to touch retirement accounts for a few years after that. That all depends on how much we enjoy the jobs we meander into.

Is spending this extra 45k (maybe a little more) crazy? Are we cheap? It is hard to not take an extra hour of free time per day. We really like this house, and have looked at many in a similar price range and below, but nothing suited our style. Any and all thoughts are appreciated. Sorry for the long-winded post!

There is no universal answer, as I suspect you know. You have to decide what's more important,​

a new house with a shorter commute (though I assume the ongoing expenses of the new house may be higher too - prop tax, utilities, maint, you didn't say IIRC)
OR
reaching FI on time/target.​

Putting more into a house, means you're giving up some ground toward FI, no matter how you spin it. Only you can decide where that balance is?

You're doing very well though, you should be pleased that you have "such problems."

 

[Texas Proud]

Heck, at your age and the probability of having to work many more years.... I would jump on the new house....


And added benefit is being able to go HOME for lunch... or heck, anything...

If you said you were going to retire in a year or so, then the decision is back to the toss up IMO...

PS... I did a quick calc and came up with $4 per hour cost to you for that extra hour for you and your DW.... IOW, if you could pay someone $4 per hour to do something that would free up an hour for you.... would you do it And this does NOT take into account the extra gas and wear and tear on your cars that you do not have to pay for... and you might even bike to work... or walk.... who knows.....

 

[bondi688]

There are pluses and minuses in home ownership. That said, FIREd means you have the luxury of having your time to yourself. Why do you want to defer that all to later? You have plenty if time to save for ER.
Is not an extra hour each day for 5 days a week for you and the wife worth something? What about savings from the extra commute you can put towards the house, and saving from psychic aggravation as the result of being stuck in a traffic jam? And a house may bring you returns as investment if you bought wisely.

 

[audreyh1]

With my job, I think I found the commute the most soul-deadening part of the whole deal, even though it was only 20 to 25 mins each way. I guess that's when I felt most intensely the frustration of going to work, and the exhaustion returning home. I suspect reducing commute time could be super beneficial (and you could even pop home for lunch), but of course you have to evaluate the big picture, and the trouble in moving.

 

[Meadbh]

It seems to me that moving would be a perfectly logical option. You have no current debt, so your total debt would be less than half of your combined annual earnings. If you can eliminate one vehicle the savings would get you started on paying the mortgage down. You would use less gas. You would probably get more exercise and your quality of life should improve. This sounds like a good trade off. One question I have is the stability of the company that you both work for. Your employment eggs are in one basket. How secure are your jobs? What would happen if one or both of you became unemployed? Would you be able to find new jobs in the same area?

 

[RE2Boys]

It's a lifestyle issue also. Having your own place and yard versus townhouse development. Any kids in the picture in the future?

 

[W2R]

I lived 6 minutes from work, and never once regretted it.

After work I would come home, change clothes and remove my shoes, and relax while thinking of all my co-workers who were battling traffic and wouldn't be home for another hour.

Whether or not it is worth it to you, is a decision only you can make, though. As you have pointed out, there are plusses and minuses to consider.

 

[Too young to work]

It's a lifestyle issue also. Having your own place and yard versus townhouse development. Any kids in the picture in the future?

We are not planning on having kids in the future. We also have none now.

We know we are more at risk because we both work at the same place, but the pay difference to work somewhere else, and the benefits just didn't make sense not to. My wife technically is on the books at two other jobs, but doesn't and hasn't worked for months. She would be able to jump into something fairly quickly. We work for a school district, so I believe we are safer than the average job in this area. Where we currently live, there are no jobs at all unless we want to work on a farm. Where we intend to move, there are many jobs nearby because it's more populated. Our living expenses are relatively low at under 30k a year, so with both of us working even low paying jobs, we could still cover our bills. This would be unfortunate, as we couldn't continue contributing to our retirement, but we have a very solid start.

What are your opinions on the mortgage? Spend some of the savings to make the mortgage small say 20 or 30k? Use all the savings and be left with little accept access to a CC or home equity loan? Or don't touch the savings?

I also forgot to mention that we could more easily pick up extra hours on the weekends as we would be living closer. Our jobs offer an hour or two of work each day of the weekend that we currently do not take because we live so far. If we only lived a couple minutes away, we would certainly take these extra hours which would amount to an extra 1 to 1.5k per year after tax. These hours would only be once every few weeks, so its not a huge impact. Regardless we would still have more free hours every week.

Overall I'm seeing the opinion is leaning towards moving, which is how we feel too. The money was really the big concern.

 

[travelover]

I live on 1.5 acres and it is my refuge. I could have moved closer to w*rk and saved a 45 minute commute, but it was worth the trade off to me. Many of my cow*rkers lived closer to w*rk, but bought vacation homes to "get away" - something I didn't feel a need to do.

So, I guess the answer is "it depends".

 

[bondi688]

Did not know you and your wife work at the same place, so it will be one commute expense instead of 2. And time spent together while commuting is still time together.
But working both for the same company do carry some financial risk unless the company is on solid financial ground and the jobs are secured.
Good luck to the both of you. It is good to plan ahead so early, and be so motivated towards saving towards FI.

 

[azphx1972]

Moving is as much an emotional decision as a financial one, so you'll have to decide for yourself what is right. Financially speaking, I think you can swing it. Emotionally, it's a different story. Living in the city is going to be vastly different than living out in the country with acreage. Is it possible to rent your current house out and use the proceeds to rent a place in the city to try it out for while?

Personally I wouldn't move because of a job. I've had short commutes (4 miles) and long ones (25 miles), and I didn't allow a job to dictate where I wanted to live. I've always viewed a job as a temporary situation, so I would never base a permanent decision like a house on that.

Good luck!

 

[Andre1969]

I live about 2 1/2 miles from work and, depending on how traffic and the lights cooperate, commute takes 5-10 minutes (ten if every single traffic light catches me on the way home).

Sometimes I get fed up with this county, and think I'd like to move a bit further out, but the short commute is always what brings me back down to earth. I think about the most I could tolerate is a 30 minute commute. But there aren't too many places within 30 mins of my job where I would have 4+ acres of relative solitude, like I do now. At least, not at a price I could afford!

Back in the early '00's, when I lived about 25-30 mins out, and in a condo, I had thought about buying a place with some land further out. But, any place I could find that I liked was at least an hour from work under even the best conditions, and no doubt a lot worse with rush hour.

Maybe if I get closer to retirement, and decide to go down to part time work rather than five days a week, I might be willing to tolerate a longer commute, but for now I think I'm going to stay put.

 

[Sun456]

I'm a big fan of short commutes. Plus you'll add years to your life with the bicycling exercise. I say, go for it! I noticed with the new location you could pick up extra work or maybe try out your semi-retirement jobs. This is an added bonus. In terms of the mortgage vs. savings I would keep the savings and get a small mortgage that you then work to pay off.

 

[pixelville]

We had moved from a 30-45 min commute each to a 5-10 min commute years ago and never once regretted it. Our only regret was that we didn't do it earlier. Quality of life and time are much more important. Isn't that why you are thinking of FIRE at an early age?It also appears this new location will give you more flexibility with job opportunities. 45K will not be a deal-breaker in the long run (for all your know you will have a higher profit if and when you decide to sell this one!).
If this is a townhouse make sure you account for any association type fees.


If you like the new place and location, I would say go for it.

 

[rodi]

I'm a big fan of short commutes too.
The only concern I see is the possible HOA type costs that will come with town home living.
That's a bill you're currently not paying (I assume) on your 1.5 acre ranch.

 

[Andre1969]

Sadly, HOA fees seem to be a way of life even with single family homes. There's a community just up the street from me, that currently has a home for sale. HOA fee is listed at $78 per month. Doesn't sound too terrible, but it definitely adds up over time.

I think their HOA fee covers sidewalks, curbs, and the streets. Those are items that would normally be covered by the county, and paid in your property taxes, but at least then you could write it off!

 

[Meadbh]

My experience with moving from a SFH to a condo has been a significant decrease in monthly housing costs. Heating and cooling are included in the condo fees, as is snow clearing, landscaping, etc. There is of course the risk of an increase or special assessment, but as I am on the board and involved in the financial decisions there is little risk of being blindsided and we are getting a reserve fund study done as we speak. SFHs also need "special assessments" for big ticket items like a new roof.

 

[Too young to work]

This is the only community I know of in the area that doesn't have an hoa or condo fee, so that is a plus. The only thing that slowed us was the money, but the more I think about it, the more I tell myself I'm buying my time. Bills seem like they would be pretty comparable overall.

Thanks for all the thoughts, definitely good to hear other opinions.

 

[Delawaredave5]

I would not move to reduce a 30 minute commute. I would not move to be closer to a company - people change jobs and companies too often (and getting faster).

It really isn't "an extra hour" a day. The car ride is planning and "decompression" time coming home from work.

Seems like a lot of change, expense, and risk.

Live in the house and neighborhood you like.

 

[obgyn65]

I agree with this.

I would not move to reduce a 30 minute commute. .

 

[soupcxan]

I would make this move in a heartbeat. The $45k is not an expense, it is a capital investment - you get it back when you sell the house, so the incremental cost of making this move is much less than $45k. You are freaking yourself out over a little bit higher interest expense, insurance, and taxes. Chump change over the course of your careers. Time spent commuting is 95% wasted. Studies show that a shorter commute contributes much more to happiness than extra income. Just do it.

The people telling you to sit tight are being penny-wise and pound-foolish.

 

[Too young to work]

Just do it.

The people telling you to sit tight are being penny-wise and pound-foolish.

I have a feeling you may be right. They also don't know the entire situation. As much as I posted there is so much more.

Based purely on neighborhood, we would definitely move. Our neighbors suck, they aren't friendly, there aren't parks nearby, there's nowhere to take the dog for a walk as we're on a main road, and we live fairly from family and friends. We love the house for the house, not the outside except that the privacy is great. The new neighborhood seems to be a huge upgrade, minus the privacy.

I think if we moved and we died a year later, we would be happy we moved. I think that makes up our minds.

 

[NW-Bound]

I am impressed that at the age of 27 and 28, your home equity and retirement already add up to 1/2 mil. I made pretty good money at that age, and still did not have the same money back then.

So, I think you can manage the financial aspect of this move, whichever way you want to do it. The main thing is to be sure that you would be happier with this move. The additional cost is not that much, and can be financed if necessary.

 

[Rich]

You folks are doing great, especially considering your age. Quality of life seems to be the question here. I can only share my experience. For nearly twenty years I commuted over 50 miles, one way, to work. Depending on where I was assigned (NYPD) the one way commute took between 1 hours and 10 minutes to (are you ready for this) 2 hours and forty-five minutes (I had to spend several nights a week at a relative's home in Brooklyn to make that one work!). Oh, the last commute was from upstate NY to Floyd Bennett Field in Brooklyn, the Aviation Unit airbase (helicopter pilot).

My next, and last, twenty years of work I lived 1.5 miles from the office. Home for lunch or to say "hi" to the wife. In good weather I biked (showered and changed at the police station). Sure was nice.

Best of luck with your choice. Money is important, but there are other factors to consider.

Rich