Did you buy a house that stretched your budget? Was it worth it?
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Anonymous
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DW and I are looking at homes. We found one that we really love that is in a good school district. We have 2 kids but no daycare costs (thanks to 2 sets of young, retired and local grandparents!). We have enough for the down payment, but would need to save aggressively to build back an emergency fund. It would stretch our budget a bit for now, but expect our salaries will increase with time (I'm 33, DW is 33). Instead of saving $7k per month (post-retirement), we'd be saving $3.5k a month. I suppose if we bought a smaller house, we'd be saving closer to $4.5k a month, but we would probably move again in 5-10 years to a bigger home.
So, looking for experience (positive and negative) of those who stretched their budget a bit to get the nicer house. Were you able to tighten the budget a bit for the first few years? Was it worth it? FWIW, we don't plan to ever leave the area (family and careers are DC-based) and live in a very small started home now (900 sq feet) and need more space. |
Anonymous
| I'm confused--you're currently putting $7,000/month into savings (not including retirement contributions) and are concerned that cutting it back to only $3,500/month is risky? |
Anonymous
| If you would still be saving $3500 a month, I think that you could comfortably afford the house. If you are doing a downpayment, one strategy would be to get a HELOC set up for emergencies. |
Anonymous
+1. Jesus. |
Anonymous
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Could your parents bail you out if you needed money in an emergency?
Hope many years would it feel tight? Do you commit it this being your "forever" home? We did this with a mortgage that was over 50% of our monthly take home, but had savings and only felt the pain for a year or so. It didn't change our lives drastically to stretch so no one felt resentful |
Anonymous
| I don't think only saving $42,000 cash per year outside of retirement is the commonly understood definition of a stretched budget, unless you bring home a million a year or something. You'll obviously be financially comfortable either way. |
Anonymous
But the question is if they are really saving this amount. Does OP mean free cash flow or savings? As in does the savings amount stated already take into account car repairs, vacations, furniture, unexpected expenses, clothing, hair cuts and color, birthday gifts etc? Or is op saying that's the amount leftover after the mortgage, childcare, food, retirement etc. there is a huge difference. I expect it's the later or else op wouldn't be remotely concerned about the larger mortgage |
Anonymous
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I assume your monthly savings will go down regardless when you move into a larger house, the real difference you should be focused on is the impact on your savings between the two purchases prices.
Also, don't underestimate the impact on your kids of moving once they have started school. If they are well settled then moving later can be more of an upheaval than you anticipate now. |
Anonymous
| Yes, we did, had only 10K left in our emergency fund after the purchase (so obviously riskier than your situation). But we did think it was worth it, since we wanted this to be our last move. With one still in day care, we are working on building it back up, and will do so more aggressively once we're free of that 2k monthly expense. |
Anonymous
| We did this to access a particular ES and MS for my smart, but not studious older DC. So it was worth it for those years. But it was not worth it for HS and we have since moved and put younger DC in private. |
Anonymous
| What percentage of your net take home pay will the mortgage be? |
Anonymous
| OP here - the nicer home will be 38% of our net take home pay (after retirement, healthcare, etc). |
Anonymous
After retirement, healthcare, etc. Yoy. You are about 10 miles ahead of almost all home buyers out there. Enjoy. Crack open a spreadsheet and write up a budget. |
Anonymous
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It is worth it for us.
BUT We are frugal folk who don't care about material things. We invest in our children's education (good public school that caters to special needs, therapies for our SN child, enrichments, etc), we invest in real estate, and we have international travel expenses to visit our families abroad. This leaves exactly nothing left over for "consumables" like cable or eating out. We have explained to the kids that this is not the usual American lifestyle of their rich friends or the one portrayed on TV. However, this is the best we can do on our budget and with our priorities. With 2 kids, that's how we manage to live in a cute house in Bethesda on a 120K income. |
Anonymous
| This isn't stretching anything |