Can I afford 650k house?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
TarHeel2002
Posts: 277
Joined: Sun Jun 17, 2012 2:14 pm

Can I afford 650k house?

Post by TarHeel2002 »

41 y.o. married 3 kids (10, 8, 2)

1.2 million investments / retirement
145k 529 funds

Annual income 250-275k

Currently saving 60-70k per year for retirement plus 18k year for college

Equity in current house about 300k

Current house payment is very low..$577 month. Entertaining buying this new home for added space and more desirable location…but generally we are happy where we are at. Property taxes significantly higher too at this new location as it’s in the city limits. Extra 10-12k per year in property taxes.

Not sure if it’s worth rocking the boat over this one. We don’t love the new house we’re looking at..but it does have some advantages. It just popped up on the market so we had to go look at it
User avatar
rocket354
Posts: 432
Joined: Mon Dec 14, 2015 12:31 pm

Re: Can I afford 650k house?

Post by rocket354 »

Yes, you can afford it.

Only you can answer whether you should buy it. It will be considerably more expensive than your current place, not just in mortgage (P&I), but taxes, as you noted, and insurance, and maintenance and repairs, and, likely, utilities. All those additional costs have to come from somewhere. So your retirement and/or college savings amounts will likely take a hit, or another large expense of yours will (or all of the above).

Is having to work a few extra years, and/or having a less lavish retirement, and/or having the kids take out student loans, worth it? Especially since it sounds like you're perfectly ok where you're at?

Only you can answer that. Everyone values these things differently.
Grt2bOutdoors
Posts: 23905
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Can I afford 650k house?

Post by Grt2bOutdoors »

Look at your spending and savings today. Can you come up with an additional $10-12k while continuing with your savings rate? Are you okay with adding $6k per year to 529 plan? Bigger house - bigger maintenance expenses.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
TJat
Posts: 160
Joined: Tue May 04, 2021 6:51 am

Re: Can I afford 650k house?

Post by TJat »

Sure you can. As with many, you can afford most anything but not everything. You seem to be perfectly happy where you are, not sure why you’d entertain spending so much more for a house you’re just “meh” about.
Topic Author
TarHeel2002
Posts: 277
Joined: Sun Jun 17, 2012 2:14 pm

Re: Can I afford 650k house?

Post by TarHeel2002 »

Thank you for the replies. Our gut was telling us not to do this but it felt good to at least explore the option and see the new house. We are pretty darn happy in our current home. Really appreciate the feedback …it definitely helps. :sharebeer
User avatar
Nate79
Posts: 7301
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: Can I afford 650k house?

Post by Nate79 »

Could you afford the mortgage and expenses? Yes, easily. The question of should you is complicated. From the personal side is that a house you want to live in even knowing it will cost you a lot of money? From the financial side what are your goals and how do you plan to reach them? For example if you want to retire by 20XX and you need to save XX per year at a market return of YY% how many extra years would you need to work to now reach the goal considering the much higher expense of the new house?
Olemiss540
Posts: 1700
Joined: Fri Aug 18, 2017 8:46 pm

Re: Can I afford 650k house?

Post by Olemiss540 »

Very easy yes. Unless you have a goal of FI in the next 5 years.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.
User avatar
leeks
Posts: 1152
Joined: Thu Apr 07, 2011 4:33 pm
Location: virginia

Re: Can I afford 650k house?

Post by leeks »

TarHeel2002 wrote: Sun Jun 13, 2021 2:16 pm We don’t love the new house we’re looking at..but it does have some advantages.
Yes you can afford a more expensive house. But this one doesn't sound like the one you should get.

Take your time and wait until one you do love is on the market (or one you see the potential to remodel into something you love). Maybe next year will offer greater supply if you find nothing loveable this year. Or maybe you can put an addition on the house you have.
neverpanic
Posts: 839
Joined: Sun May 10, 2020 12:26 am

Re: Can I afford 650k house?

Post by neverpanic »

You can afford it.

You mentioned "more desirable location"? Does the school district play into your decision at all?
I am not a financial professional or guru. I'm a schmuck who got lucky 10 times. Such is the life of the trader.
onourway
Posts: 3023
Joined: Thu Dec 08, 2016 3:39 pm

Re: Can I afford 650k house?

Post by onourway »

Similar ages, kids, incomes, etc. We made the decision last year to buy a house in the $500k range, but high taxes, lots of maintenance, after nearly two decades in a small place that we also loved. So far we are not regretting the decision. This was a choice to spend a bit more now while the kids are of an age that we will all appreciate it rather than letting us retire a bit earlier and/or a bit wealthier. On the other hand we have a bit more saved than you and had been looking on and off for the better part of a decade and found THE house. With interest rates so low, we made the decision to make a 20% down payment and give our savings a boost with the proceeds from the sale of our previous home. The increased liquidity has really improved our ability to sleep well at night, despite the comparatively large mortgage and maintenance costs.
User avatar
JonnyDVM
Posts: 2999
Joined: Wed Feb 12, 2014 6:51 pm
Location: Atlanta, GA

Re: Can I afford 650k house?

Post by JonnyDVM »

Yes, but it sounds like you don’t want it and want us to tell you no.

Well I’m not telling you no. You can easily afford it. I definitely wouldn’t make such a life altering decision without actually liking the house though. So if you don’t like it, don’t buy it.
I’d trade it all for a little more | -C Montgomery Burns
anoop
Posts: 2564
Joined: Tue Mar 04, 2014 1:33 am

Re: Can I afford 650k house?

Post by anoop »

TarHeel2002 wrote: Sun Jun 13, 2021 2:16 pm Not sure if it’s worth rocking the boat over this one. We don’t love the new house we’re looking at..but it does have some advantages. It just popped up on the market so we had to go look at it
This is the issue, not affordability. Trust your gut. It seems like your gut isn't too excited about it.
renue74
Posts: 1888
Joined: Tue Apr 07, 2015 7:24 pm

Re: Can I afford 650k house?

Post by renue74 »

I bought a $200K house in 2002 and lived in it for 18 years. Through some personal/marriage things that happened, we ended up moving/upgrading to a $700K house earlier this year.

I've never been a "house" or "car" person and the house feels like I'm house sitting for somebody else. It's a mansion compared to my old house....but slowly, I've learned to like it.

As others have said, you have to trust your gut. Personally, I'm still not in love with my new house....but everybody else I know loves its, including my wife. It is an asset and I'm told my realtor that it's gone up in value $150K in 6 months....so now I'm trying to convince my wife to move again.....but no such luck.

Think about it really hard. It's not always better to move.
Topic Author
TarHeel2002
Posts: 277
Joined: Sun Jun 17, 2012 2:14 pm

Re: Can I afford 650k house?

Post by TarHeel2002 »

neverpanic wrote: Sun Jun 13, 2021 7:53 pm You can afford it.

You mentioned "more desirable location"? Does the school district play into your decision at all?
No …school districts are the same..so no difference there.
makingmistakes
Posts: 161
Joined: Sun Jan 19, 2020 7:59 am

Re: Can I afford 650k house?

Post by makingmistakes »

TJat wrote: Sun Jun 13, 2021 2:31 pm Sure you can. As with many, you can afford most anything but not everything. You seem to be perfectly happy where you are, not sure why you’d entertain spending so much more for a house you’re just “meh” about.
Right answer! 😄

If you loved the house, then maybe. Don’t love the house, no way.
Outer Marker
Posts: 1980
Joined: Sun Mar 08, 2009 8:01 am

Re: Can I afford 650k house?

Post by Outer Marker »

TarHeel2002 wrote: Sun Jun 13, 2021 2:16 pm Extra 10-12k per year in property taxes.
Really? That seems excessive. I live in a very high tax county and my total property taxes on a $1.2M house are around $10k. It's hard to believe your incremental tax moving from a 400 ish house to a 650 one would be that much more. If true, that would be a deal killer for me, but I'd investigate it more carefully.

That said, I haven't regretted any of my housing purchases. I look at it primarily as a consumption item - which I enjoy every day. Though, quite frankly, as "investments" they have done very well.
EddyB
Posts: 1632
Joined: Fri May 24, 2013 3:43 pm

Re: Can I afford 650k house?

Post by EddyB »

Outer Marker wrote: Mon Jun 14, 2021 7:16 am
TarHeel2002 wrote: Sun Jun 13, 2021 2:16 pm Extra 10-12k per year in property taxes.
Really? That seems excessive. I live in a very high tax county and my total property taxes on a $1.2M house are around $10k. It's hard to believe your incremental tax moving from a 400 ish house to a 650 one would be that much more. If true, that would be a deal killer for me, but I'd investigate it more carefully.

That said, I haven't regretted any of my housing purchases. I look at it primarily as a consumption item - which I enjoy every day. Though, quite frankly, as "investments" they have done very well.
One more reason not to regret your housing purchase: Your tax rate appears to be below average. “Nationwide, the effective property tax rate is 1.1% of the average home value.” https://www.usatoday.com/story/money/20 ... 111375916/

But the incremental jump for the OP seems like a real negative, if accurate.
ImUrHuckleberry
Posts: 633
Joined: Sat Apr 15, 2017 7:44 am

Re: Can I afford 650k house?

Post by ImUrHuckleberry »

Outer Marker wrote: Mon Jun 14, 2021 7:16 am
TarHeel2002 wrote: Sun Jun 13, 2021 2:16 pm Extra 10-12k per year in property taxes.
Really? That seems excessive. I live in a very high tax county and my total property taxes on a $1.2M house are around $10k. It's hard to believe your incremental tax moving from a 400 ish house to a 650 one would be that much more. If true, that would be a deal killer for me, but I'd investigate it more carefully.

That said, I haven't regretted any of my housing purchases. I look at it primarily as a consumption item - which I enjoy every day. Though, quite frankly, as "investments" they have done very well.
Try NH. I pay ~ $6000 on a $250k house, and still pay MA state income tax on top of it.
jharkin
Posts: 2825
Joined: Mon Mar 28, 2016 7:14 am
Location: Boston suburbs

Re: Can I afford 650k house?

Post by jharkin »

Outer Marker wrote: Mon Jun 14, 2021 7:16 am

Really? That seems excessive. I live in a very high tax county and my total property taxes on a $1.2M house are around $10k. It's hard to believe your incremental tax moving from a 400 ish house to a 650 one would be that much more. If true, that would be a deal killer for me, but I'd investigate it more carefully.
Your taxes sound LOW to me. My house would probably sell for 900k tomorrow and has a tax value of around 650 and I pay 11-12k a year in property tax. A 1.2M in my neighborhood would be a 20k tax bill. In a really high tax like NJ it would be even worse.

Look at the OPs current house payment, its only $600!! not surprising at all to have a big tax jump on such a big increase in value.


FWIW I agree with the concensus they can easily afford it.
Topic Author
TarHeel2002
Posts: 277
Joined: Sun Jun 17, 2012 2:14 pm

Re: Can I afford 650k house?

Post by TarHeel2002 »

Our property taxes are pretty low here. We are outside the city limits in a township and we also purchased this property for about 190k 14 years ago. We’ve put about 160k into the house over the years and the property is now probably worth about 450-500k. It’s lakefront and has appreciated some as well. Property taxes here haven’t kept pace with the home value increases. My property taxes are about $2900.

If we purchase this other house the current taxes are about $8400 but that’s based on an SEV of 192k. The taxes would be reassessed on a new SEV of 325k. So I take $8400 x (325/192) and come up with about $14,200 for annual taxes. Our city seems high when compared to other places ..not sure why. My guess is that my tax bill would’ve jumped from $2900 to $14,200 overnight. Definitely a deal killer now that I look at it. Thank you
User avatar
JonnyDVM
Posts: 2999
Joined: Wed Feb 12, 2014 6:51 pm
Location: Atlanta, GA

Re: Can I afford 650k house?

Post by JonnyDVM »

Waaaaaaait. Is this something your spouse really wants but you’re cool on ?
I’d trade it all for a little more | -C Montgomery Burns
Topic Author
TarHeel2002
Posts: 277
Joined: Sun Jun 17, 2012 2:14 pm

Re: Can I afford 650k house?

Post by TarHeel2002 »

Nah …she isn’t too keen on it either really. We were both kinda “meh” about the house but it’s in a desirable location and does have some nice features that our current home doesn’t have.
Katietsu
Posts: 5101
Joined: Sun Sep 22, 2013 1:48 am

Re: Can I afford 650k house?

Post by Katietsu »

TarHeel2002 wrote: Mon Jun 14, 2021 1:47 pm Nah …she isn’t too keen on it either really. We were both kinda “meh” about the house but it’s in a desirable location and does have some nice features that our current home doesn’t have.
Sounds like you are caught up in all the focus on real estate and FOMO right now. If I were you, I would feel grateful that I could stay out of the feeding frenzy of today's real estate market.
TJat
Posts: 160
Joined: Tue May 04, 2021 6:51 am

Re: Can I afford 650k house?

Post by TJat »

TarHeel2002 wrote: Mon Jun 14, 2021 12:39 pm Our property taxes are pretty low here. We are outside the city limits in a township and we also purchased this property for about 190k 14 years ago. We’ve put about 160k into the house over the years and the property is now probably worth about 450-500k. It’s lakefront and has appreciated some as well. Property taxes here haven’t kept pace with the home value increases. My property taxes are about $2900.

If we purchase this other house the current taxes are about $8400 but that’s based on an SEV of 192k. The taxes would be reassessed on a new SEV of 325k. So I take $8400 x (325/192) and come up with about $14,200 for annual taxes. Our city seems high when compared to other places ..not sure why. My guess is that my tax bill would’ve jumped from $2900 to $14,200 overnight. Definitely a deal killer now that I look at it. Thank you
A lakehouse in a low tax area??? Let me know if you’re selling :)
iamlucky13
Posts: 2509
Joined: Sat Mar 04, 2017 5:28 pm
Location: Western Washington

Re: Can I afford 650k house?

Post by iamlucky13 »

TarHeel2002 wrote: Sun Jun 13, 2021 2:16 pm Not sure if it’s worth rocking the boat over this one. We don’t love the new house we’re looking at..but it does have some advantages. It just popped up on the market so we had to go look at it
If you're not very interested in the specific home, but are interested in a new place at some point, focus more on determining what you want your budget to be for now than on a specific house. Than casually watch and see what kind of options come up over the long term.

It looks to me like affording it should be fairly easy, unless your long term financial plan really depends on your current ~30% savings rate or some of the other expenses that weren't mentioned, but if you're happy with your current place, and feeling ambivalent about the advantages you see in the new place, then don't force it.
esqu1re
Posts: 37
Joined: Fri Aug 28, 2020 7:41 am

Re: Can I afford 650k house?

Post by esqu1re »

Why not buy the house you really want? (You can afford an even pricier home--no need to settle)
esqu1re
Posts: 37
Joined: Fri Aug 28, 2020 7:41 am

Re: Can I afford 650k house?

Post by esqu1re »

Why not buy the house you really want? (You can afford an even pricier home--no need to settle)
Post Reply