What’s the max I should spend on a home

[HI Bill]

The OP's question comes down to a few things, and to me, it's more of a logic/decision tree that needs to be explored, rather than a fixed percentage of assets.

Here's my thought process:

1. What is your priority in retirement? Travel, nice home, nice toys, expensive hobbies? Is a nicer home more important to you than spending in other areas?
   
2. Develop a series of budgets, preferably in a spreadsheet. Each column should have all of the expenses listed for a housing and location choice.
   
3. Consider property taxes, home maintenance, HOA fees, insurance, water, sewer, trash, electricity, gas, yard costs, pool costs, etc., in your housing budget. I bought a home with a $3K mortgage, but didn't originally count on spending $4.5K monthly for the entire housing expense. Turns out, a $1K association fee on a condo is cheaper than the costs to insure and maintain a house, at least in Hawaii.
   
4. Given the really low interest rates, consider a mortgage, especially due to your low taxable investment percentage.
   
5. Look at your WR, and your accessible assets. Assuming your home is the priority (over travel), and your overall budget is $XX,XXX, then you can easily calculate the most you would be able to spend on a home (the downpayment amount, assuming you decide it's okay to finance).

I just did this in October last year. We decided to put 50% down, and because we hadn't sold our previous place, the tax bite on the distributions needed to do this was pretty big. FWIW, our total assets are about the same as yours, and we bought a $1M house. This cut into our planned travel spending, but given COVID, we thought it was worth it.

[Poopycat]

Quote:

Originally Posted by RobbieB And if you put down say 50%, you will find it easier to get the loan too!

Good point. I’m also working right now, so I guess I could show an income stream even though that income stream would go away once I move. But the lender wouldn’t know that. Doesn’t seem right to be deceptive though.

[Poopycat]

Quote:

Originally Posted by HI Bill The OP's question comes down to a few things, and to me, it's more of a logic/decision tree that needs to be explored, rather than a fixed percentage of assets. Here's my thought process: What is your priority in retirement? Travel, nice home, nice toys, expensive hobbies? Is a nicer home more important to you than spending in other areas? Develop a series of budgets, preferably in a spreadsheet. Each column should have all of the expenses listed for a housing and location choice. Consider property taxes, home maintenance, HOA fees, insurance, water, sewer, trash, electricity, gas, yard costs, pool costs, etc., in your housing budget. I bought a home with a $3K mortgage, but didn't originally count on spending $4.5K monthly for the entire housing expense. Turns out, a $1K association fee on a condo is cheaper than the costs to insure and maintain a house, at least in Hawaii. Given the really low interest rates, consider a mortgage, especially due to your low taxable investment percentage. Look at your WR, and your accessible assets. Assuming your home is the priority (over travel), and your overall budget is $XX,XXX, then you can easily calculate the most you would be able to spend on a home (the downpayment amount, assuming you decide it's okay to finance). I just did this in October last year. We decided to put 50% down, and because we hadn't sold our previous place, the tax bite on the distributions needed to do this was pretty big. FWIW, our total assets are about the same as yours, and we bought a $1M house. This cut into our planned travel spending, but given COVID, we thought it was worth it.

I like this method. Much better than the “I guess I could spend that much” method.

[Poopycat]

Quote:

Originally Posted by Ramen It is harder but doable. You just have to find the right lender. A local independent bank might be best. I recently considered buying and went through this. Decided to rent instead, but if I ever want to buy, I'll need to pay cash or get an asset-pegged loan. Generally you have to put more money down. As for your original question, I too have pondered how much to spend on housing and concluded what other folks have said above: that it's more important to live in a place you like than to find the cheapest option. I am new to FIRE at 53, and I will be spending a whopping proportion of my total annual outflow on housing (the rest of my expenses are low). But everything should come in at or below 3% WR, so I'm just going to try to enjoy life and not tie myself down to spending pie charts. This first year is going be kind of a test run anyway. I'll adjust next year if needed -- and/or go back to work if I get restless.

Sounds like we are in a similar position (although I have no intention of returning to work once I reach June 29, 2022 )

I am comforted by the idea that I can always sell and try somewhere else if my top choice didn’t work out due to expense. It would be a pain to relocate again but I’ve relocated several times before so I’m used to it. And it’s not like I’m buying magic beans, or chocolate or something perishable. It’s still my asset; I won’t have thrown the money away never to see it return.