Down payment size, would you do 50%

[Anonymous]

I’m 30. I have 200k equity in my TH, 250k in brokerage, 40k in cash, 330k in 401k/IRA/HSA’s. Annual income is low 300k’s. I want to buy a single family home because we’re pregnant with our second child but the monthly payment on a 1M house

[Anonymous]

OP again I’m on my phone and accidentally posted too early with a mistype.

The monthly payment would be too large on a 1M house with 20% down for my taste. I was thinking of liquidating my brokerage to combine with my current equity to approach 500k cash down payment. Capital gains tax would only be about 5k because my cost basis is high. Would you sell all your stocks to help pay for a house in my situation?

[Anonymous]

Do 30%

[Anonymous]

No I would not sell all of my brokerage. You can easily afford $750k on $300k.

[Anonymous]

This was us this past summer. Similar stats, but more cash, late 30s and slightly higher income. We ended up holding onto our house to rent it and not touching the equity and then used most of our cash and liquidated investments to get to about $475k in a down payment and transaction fees towards a $1.1m house. On some level, I regret it and wish we held onto more investments. I feel like we have to start all over again.

[Anonymous]

Money is fungible. If you put less into the down payment, you'll have more left to make monthly payments if you need to, if all else is equal. So putting less down gives you more flexibility.

Why all else is not equal: The interest rate on the loan might (or might not) differ. The expected return on your brokerage investments will be higher but riskier than the savings from a higher down payment. That is, your overall portfolio will be different. The appropriate choice is a matter of your risk/return preferences.

Psychologically, it might also be different. It might be harder to save if you have money in the brokerage rather than tied up in the house. Or you might feel more comfortable. There is no right/wrong answer on the psychological side; you just have to decide.

[Anonymous]

Get them to price the loan at different down payment percentages.

I actually found that a 40-50% downpayment can have a slightly higher interest rate than a 30% downpayment on a 30Y loan because the bank makes less money off you. 30% or 50% downpayment has very similar credit risk to the bank; essentially 0% chance of default. So the bank needs to make its money, either through the rate or a larger monthly interest payment (because you borrowed more).

That said, every extra dollar of downpayment you toss at the house is a guaranteed annual return of 7% over 30 years. That's a fantastic risk free return on investment.

[Anonymous]

Where is all your money going? You don’t have huge savings. Buy a cheaper house. 200k down.

[Anonymous]

OP, we took out a loan with a 20% down payment and then later decided to pay off part of the loan with savings. We had to "recast" our loan to drop the amount of the monthly payment, but didn't have to refinance. We ultimately put down 40% and are happy with that choice. Check to see if your mortgage would allow you to recast, some do and some don't.

[Anonymous]

Anonymous wrote:Where is all your money going? You don’t have huge savings. Buy a cheaper house. 200k down.

Because I’m only 30 and don’t have any inheritance like most people here, had student loans (now paid off), and haven’t been making our income for that long. We also just bought a new 35k car in cash because we only had a single 10 year old Corolla. Now we have 2 Japanese economy cars.

[Anonymous]

This is not fun enough for the usual

[Anonymous]

Anonymous wrote:OP again I’m on my phone and accidentally posted too early with a mistype.

The monthly payment would be too large on a 1M house with 20% down for my taste. I was thinking of liquidating my brokerage to combine with my current equity to approach 500k cash down payment. Capital gains tax would only be about 5k because my cost basis is high. Would you sell all your stocks to help pay for a house in my situation?

Why is the cost basis so high when almost everything went up 100% last year? When did you buy and what did you buy? Maybe it's yet to have its run(small cap). My one stock went up 15% just today. This is not the time to empty your brokerage. If any, revisit your investment strategy.
Why have a lifestyle creep before baby number two? The baby can't tell the difference between townhouse and single family house. Also, who buys a car, cash or not, before they want to buy a million dollar house.

[Anonymous]

That’s what we did. We’re dual feds. We saved one income completely while saving for a downpayment and we put down about 500k (4 years saving plus we sold a tiny condo). We couldn’t afford the monthly payments when we were only putting down 20%. Easy to save before kids, hard as hell when you’re paying 2-4k a month in daycare.

[Anonymous]

I would put an extra $200K down. Interest rates are high and the stock market is up so it makes sense to sell stock for guaranteed return.

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP again I’m on my phone and accidentally posted too early with a mistype.

The monthly payment would be too large on a 1M house with 20% down for my taste. I was thinking of liquidating my brokerage to combine with my current equity to approach 500k cash down payment. Capital gains tax would only be about 5k because my cost basis is high. Would you sell all your stocks to help pay for a house in my situation?

Why is the cost basis so high when almost everything went up 100% last year? When did you buy and what did you buy? Maybe it's yet to have its run(small cap). My one stock went up 15% just today. This is not the time to empty your brokerage. If any, revisit your investment strategy.
Why have a lifestyle creep before baby number two? The baby can't tell the difference between townhouse and single family house. Also, who buys a car, cash or not, before they want to buy a million dollar house.

Admittedly I’ve been stupid with investing by allocating too much to international which has underperformed, and am too active of a trader trying to time dips so I’m only up a total 30k. I mostly just buy Vanguard total world ETF.

We wanted/needed a second car because having one has been a large inconvenience, we don’t live near good public transit and I’m gone from the house 8+ hours a day and my wife is stuck. Plus we wanted an SUV sized second vehicle.