$1.5 million home - what % down?

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steadyeddie8
Posts: 9
Joined: Wed May 31, 2017 7:59 pm

$1.5 million home - what % down?

Post by steadyeddie8 »

Hello --

Our plan is to purchase a ~$1.5MM home in the near future with a 30-year-fixed rate loan at ~2.75%. I'm torn on how much to put down (hence, the unnecessarily large cash position that has been sitting on the sidelines for the last few months). We hope this will be at least a 10 year, if not 20+ year, home.

Of course, I think we could beat 2.75% in the market over a decade or two but a $1.2MM loan also feels hefty from a cash flow perspective on top of property taxes (close to $2k/month) and insurance. That said, I obviously like the idea of more liquidity than less as we adjust to homeownership so am curious what most would recommend at this point.

Background:

HCOL (obviously) and not leaving the area for multiple reasons, top public school district for our 2 young kids, mid-30s, will need $35-$40k cash just for closing costs

With 20% down, I estimate $6,980k/month PITI, plus utilities...but allows us to keep ~$450k liquid.
With 25% down, I estimate $6,675/month PITI, plus utilities...~$370k liquid
With 30% down, I estimate $6,370/month PITI, plus utilities...~$295k liquid

Income = $495k
  • $315k base + $180k bonus - likely to increase in the next few years, possibly considerably
Assets = $1.635MM
  • $550k cash
  • $235k equities
  • $800k 401ks, IRAs, HSA (almost all equities)
  • $50k rental property equity
Debt = $48k, all scheduled to be paid off by 2024
  • $18k car loan
  • $30k student loans
Do we just stick with 20% down because the monthly is really not that different and we'll clear up some cash flow from the other debts being paid off in 3 years or less anyway?

Thanks in advance.
jsapiandante
Posts: 188
Joined: Thu Jul 30, 2015 5:58 pm

Re: $1.5 million home - what % down?

Post by jsapiandante »

You're going to get a wide range of answers here. If you like the idea of more liquidity, then putting the least amount of down payment would be the obvious choice. You can always just throw extra payments at the mortgage if you want to accelerate but can dial back down if needed. I, personally, would prefer to be FI first before putting any extra money towards the mortgage.
grok87
Posts: 9455
Joined: Tue Feb 27, 2007 9:00 pm

Re: $1.5 million home - what % down?

Post by grok87 »

steadyeddie8 wrote: Mon Apr 12, 2021 1:20 pm Hello --

Our plan is to purchase a ~$1.5MM home in the near future with a 30-year-fixed rate loan at ~2.75%. I'm torn on how much to put down (hence, the unnecessarily large cash position that has been sitting on the sidelines for the last few months). We hope this will be at least a 10 year, if not 20+ year, home.

Of course, I think we could beat 2.75% in the market over a decade or two but a $1.2MM loan also feels hefty from a cash flow perspective on top of property taxes (close to $2k/month) and insurance. That said, I obviously like the idea of more liquidity than less as we adjust to homeownership so am curious what most would recommend at this point.

Background:

HCOL (obviously) and not leaving the area for multiple reasons, top public school district for our 2 young kids, mid-30s, will need $35-$40k cash just for closing costs

With 20% down, I estimate $6,980k/month PITI, plus utilities...but allows us to keep ~$450k liquid.
With 25% down, I estimate $6,675/month PITI, plus utilities...~$370k liquid
With 30% down, I estimate $6,370/month PITI, plus utilities...~$295k liquid

Income = $495k
  • $315k base + $180k bonus - likely to increase in the next few years, possibly considerably
Assets = $1.635MM
  • $550k cash
  • $235k equities
  • $800k 401ks, IRAs, HSA (almost all equities)
  • $50k rental property equity
Debt = $48k, all scheduled to be paid off by 2024
  • $18k car loan
  • $30k student loans
Do we just stick with 20% down because the monthly is really not that different and we'll clear up some cash flow from the other debts being paid off in 3 years or less anyway?

Thanks in advance.
It’s a tricky one. It might to think it through by asking what the ideal mortgage would be for your situation- not that this would be available. My answer would be a 750k mortgage that is interest only for say 10 years. Since that is the max amount that is deductible
RIP Mr. Bogle.
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JoeRetire
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Joined: Tue Jan 16, 2018 2:44 pm

Re: $1.5 million home - what % down?

Post by JoeRetire »

steadyeddie8 wrote: Mon Apr 12, 2021 1:20 pm Do we just stick with 20% down
Yes. This.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
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hand
Posts: 1625
Joined: Sun May 17, 2009 8:42 pm

Re: $1.5 million home - what % down?

Post by hand »

30 year fixed rate at 2.75% - back the truck up, borrow as much as possible. As long as there is no prepayment penalty, you can prepay (and likely recast to reduce payments) if you decide this was the wrong approach at some time in the future.
rage_phish
Posts: 279
Joined: Thu Jan 31, 2019 4:27 pm

Re: $1.5 million home - what % down?

Post by rage_phish »

we put down a significantly larger down payment than 20%. And it's the reason our offer was accepted over the other 2 offers at the same price. If you are in a highly competitive market (which im guessing your are), that might be worth considering in your decision making


Also, I'm jealous of that rate, we weren't ale to get below 3% without paying significantly for it.
rgs92
Posts: 2907
Joined: Mon Mar 02, 2009 8:00 pm

Re: $1.5 million home - what % down?

Post by rgs92 »

I didn't know such low rate on a jumbo loan was available. Interesting. I have not found anything close to that in my searching.
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JoeRetire
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Joined: Tue Jan 16, 2018 2:44 pm

Re: $1.5 million home - what % down?

Post by JoeRetire »

rage_phish wrote: Tue Apr 13, 2021 11:40 am we put down a significantly larger down payment than 20%. And it's the reason our offer was accepted over the other 2 offers at the same price.
Why would the seller care how much you put down?
They get paid the entire sales price at closing.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
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