EvrClrx311
Full time employment: Posting here.
- Joined
- Feb 8, 2012
- Messages
- 648
I'm sure I am just by asking the question. I've had a tendency to overextend myself at various points in my life. After thinking more seriously about FIRE I'm wondering if this is a bit too much this time:
Job: I love what I do, and wouldn't mind continue doing it until I'm in my 50s (I'm turning 31 next week). There has always been a lot of stability and growth in my area of expertise (computers and engineering) and despite the down economy my salary has grown about 75% in the last 8 years. Never had a year without at least a 5% raise. I'm up about 30% in the last 2.
House: DW and I bought our current house in 2005 on stated paperwork. Actually had it built while we were in our final semester at school only putting down 5% that was gifted from a grandparent. My oh my how the lending rules have changed since then. I look back and wonder what the banks were doing giving us $490,000 without actual jobs at the time to build a house. Luckily because of my job, we were never at risk. We were severely underwater at one point (about $150K), watching everyone else walk away from their debt obligations, but we kept on paying. Accelerating payments just for the peace of mind knowing we didn't owe more on the house than it was worth. Fast forward to today and we're at a point now where our house is worth $450,000 and mortgage is $358,000 (yay equity!).
Situation: My grandmother in law has done very well for herself and is trying to tempt her grandchildren into becoming homeowners. We already own a home, but she doesn't think it fair to leave DW and I out in her quest to assist the family. She is offering us $100,000 if we upgrade in house (we asked if we could just use it to pay down our mortgage... nope). DW and I were getting a little cramped in our 2,000 sq ft townhouse with 2 kids and a 3rd planned soon, but we weren't seriously considering moving for another 2-3 years because we wanted 20% to put down on our next home that we planned to move into and keep for 30 years till retirement.
This gift allows us to make that move now. Rates are so low, that we can keep our DTI ratio under 40% and afford to build our dream home about 10 miles from where we currently live in a great community (really our dream set-up)... I just can't believe I'd be spending $850,000 on a house when I make about $150,000 a year. DW stays at home, and we plan on her to start working again when our youngest is in school 6 or so years from now.
I remember feeling the pinch 5 years ago of my mortgage taking up half of my paycheck, and although my paychecks are substantially higher now... with kids in the mix it might feel about the same again. $3,800 going to mortgage/escrow leaving about $4,000 for everything else.
Through this all we've always set aside max to 401K, so that $4,000 will probably be more like $2,600 (the larger tax write-off will probably bring that back up to $3K). The 401K account is about $200K today.
Is a house a good investment right now? Rates are extremely low... prices are still down and starting to rise. I know you pay a premium to build, but we're ok with that in order to get into this community that we've fallen in love with. I struggle with the trade-off between feeling pressured that this is the time to move (part grandma, part the markets, part fear rates are going to go up in 2-3 years)... vs us being in a situation today where we can really bank A LOT of money if we stayed in our current house. We make way more than we spend at the moment, moving to this house will bring us back down to spending most of what we make.
Is it smart to devote so much of our financial future into this house? Scarey to go from a $350K mortgage to about $625K, even if that payments are only going to go up about 50% a month (twice the house for just 50% more in payment). We would bring about $225,000 to closing on the house. $100K from GMa, about $75K from sale of house, the rest from our $80K in taxable savings/investments.
Any thoughts or advice from others who may have been faced with something like this in the past or present. Not sure I'd have given it a second thought a year ago before joining this board, I would have done this in a heartbeat. Now I'm wondering what ramifications it might potentially have on my ability to become FI.
Job: I love what I do, and wouldn't mind continue doing it until I'm in my 50s (I'm turning 31 next week). There has always been a lot of stability and growth in my area of expertise (computers and engineering) and despite the down economy my salary has grown about 75% in the last 8 years. Never had a year without at least a 5% raise. I'm up about 30% in the last 2.
House: DW and I bought our current house in 2005 on stated paperwork. Actually had it built while we were in our final semester at school only putting down 5% that was gifted from a grandparent. My oh my how the lending rules have changed since then. I look back and wonder what the banks were doing giving us $490,000 without actual jobs at the time to build a house. Luckily because of my job, we were never at risk. We were severely underwater at one point (about $150K), watching everyone else walk away from their debt obligations, but we kept on paying. Accelerating payments just for the peace of mind knowing we didn't owe more on the house than it was worth. Fast forward to today and we're at a point now where our house is worth $450,000 and mortgage is $358,000 (yay equity!).
Situation: My grandmother in law has done very well for herself and is trying to tempt her grandchildren into becoming homeowners. We already own a home, but she doesn't think it fair to leave DW and I out in her quest to assist the family. She is offering us $100,000 if we upgrade in house (we asked if we could just use it to pay down our mortgage... nope). DW and I were getting a little cramped in our 2,000 sq ft townhouse with 2 kids and a 3rd planned soon, but we weren't seriously considering moving for another 2-3 years because we wanted 20% to put down on our next home that we planned to move into and keep for 30 years till retirement.
This gift allows us to make that move now. Rates are so low, that we can keep our DTI ratio under 40% and afford to build our dream home about 10 miles from where we currently live in a great community (really our dream set-up)... I just can't believe I'd be spending $850,000 on a house when I make about $150,000 a year. DW stays at home, and we plan on her to start working again when our youngest is in school 6 or so years from now.
I remember feeling the pinch 5 years ago of my mortgage taking up half of my paycheck, and although my paychecks are substantially higher now... with kids in the mix it might feel about the same again. $3,800 going to mortgage/escrow leaving about $4,000 for everything else.
Through this all we've always set aside max to 401K, so that $4,000 will probably be more like $2,600 (the larger tax write-off will probably bring that back up to $3K). The 401K account is about $200K today.
Is a house a good investment right now? Rates are extremely low... prices are still down and starting to rise. I know you pay a premium to build, but we're ok with that in order to get into this community that we've fallen in love with. I struggle with the trade-off between feeling pressured that this is the time to move (part grandma, part the markets, part fear rates are going to go up in 2-3 years)... vs us being in a situation today where we can really bank A LOT of money if we stayed in our current house. We make way more than we spend at the moment, moving to this house will bring us back down to spending most of what we make.
Is it smart to devote so much of our financial future into this house? Scarey to go from a $350K mortgage to about $625K, even if that payments are only going to go up about 50% a month (twice the house for just 50% more in payment). We would bring about $225,000 to closing on the house. $100K from GMa, about $75K from sale of house, the rest from our $80K in taxable savings/investments.
Any thoughts or advice from others who may have been faced with something like this in the past or present. Not sure I'd have given it a second thought a year ago before joining this board, I would have done this in a heartbeat. Now I'm wondering what ramifications it might potentially have on my ability to become FI.
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