Original Post
I am considering moving my family from an HCOL area to a VHCOL area, taking out a mortgage in the process, and am seeking the collective wisdom and advice of this forum about whether such a move is a good idea.
Background Info and Current Expenses:
- Partner and I are in our upper thirties with stable jobs.
- We have three kids, all under the age of five, and do not plan to have any more. All kids are currently in private school/day care, at a total cost of about $85k/year.
- We now live in a smaller place in a HCOL area but want to move to a larger place in a VHCOL area. We believe the move will substantially increase our family’s quality of life.
- HHI is currently about $375k/year gross, but will likely soon drop to about $325k–$350k/year gross in order to obtain better work-life balance.
- We max out three tax-advantaged retirement accounts every year and also receive from one employer an additional annual retirement account contribution of about $20k–$25k, so are currently putting approximately $80k/year into those accounts. (I did not include that $20k–$25k employer contribution in our HHI.) We will continue to max out the contributions even if our HHI drops.
- We contribute $1k per kid per month into 529s, for a total contribution of $3k/month.
- We do not have a mortgage and could probably sell our current place for about $1.36M.
- Collectively, tax-advantaged retirement accounts currently total about $1.1M.
- 529 balances total about $165k. We plan to use the 529 funds for college and graduate education starting in about thirteen years.
- Other cash: about $50k.
- $70k remaining on an auto loan at 1.99% to be paid over the next 4.5 years (~$1,350/month).
- All credit card balances paid off fully every month.
- No other debt.
- A slightly larger house in the VHCOL area we are considering will likely be about $2M. Although generally averse to debt, we feel that taking out a mortgage could be worth it in order to obtain the better quality of life offered by the VHCOL area.
- Property taxes and home maintenance in the VHCOL area would be more or less the same as what we currently pay.
- We plan to put our kids in public school upon moving to the VHCOL area, which over time would free up the $85k/year that we currently spend on private school/day care. These funds would be reallocated to the monthly mortgage payment. The oldest child would start public school immediately upon moving the VHCOL; the remaining two would join in the next two to four years.
1. Assuming a $2M house in the VHCOL area, do you think we can afford this move?
2. If yes, how much would you finance?
3. Along the same lines as question 2, would you divert any of the proceeds from selling the current place to paying off the auto loan and/or augmenting current cash holdings?
4. Would you make this move if you were in my shoes, and why or why not?
Thanks in advance for your advice.
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Two-Year Update
Thought I would provide an update to my original post. We ended up making the move to the VHCOL area and could not be happier from a quality-of-life perspective, even though there have been a few things that have not gone according to plan:
1. Due to a confluence of factors, we have pretty much given up (at least in the short term) on buying a house. Between higher interest rates and housing prices, as well as lack of inventory, it seems financially unwise for us to buy a house right now, even though we are very happy with the particular part of the VHCOL area in which we decided to rent. To generalize, if we were to buy the home we currently rent, our monthly housing expense would roughly double. It's just not realistic right now. Moreover, the home we currently rent is not anything special and would likely require several hundred thousand dollars in renovations in order to modernize it. This, of course, has resulted in a tremendous (for us) amount of liquidity, which I have also grown accustomed to. The more I think about it, the harder I am finding it to part with that liquidity just to own rather than rent. I simply do not want to own here bad enough, even though I am fairly certain we will remain in this area for many years. For that reason, I am also starting to wonder whether we will be lifelong renters going forward, which is something I never imagined after owning our place in the HCOL area from which we moved.
2. We chose the particular part of this VCHOL area in part based on the great reputation of its public schools. Our experience so far, which is admittedly limited to one-and-a-half years of public school for only one child, has left us less than impressed. The issue is mainly large class size, which results in less attention on any one particular student, including our child. Consequently, we are again considering private schools (surprise!), which will come along with much smaller class size and more abundant resources. While this dilemma somewhat undermines our original reasons for moving to the VHCOL area in the first place, the financial implications of switching back to private (likely through high school) do not seem as daunting given the liquidity mentioned in point 1 above. If the tradeoff is sending all our kids to private school in exchange for renting rather than owning, we are OK with that.
So, despite these two issues, we would no doubt make the choice we made again. Our work-life balance is essentially excellent, and we relish daily the improved quality of life this location provides.
On the financial side of things, not too much has changed. We continue to fund our 529s, which I know was somewhat a hot-button issue after my original post, and have about $225k therein as of today. We now have no debt due to eliminating the car loan. Our net worth is roughly the same as before we made the move due to the recent downturn (as it seems is the case for most on this forum), even if we have managed to accumulate more assets within our tax-advantaged accounts in the meantime. I am somewhat optimistic about market returns in the near future. Slow and steady wins the race, I suppose.
To make this actionable, any feedback (e.g., what to do with the major liquidity in taxable, a good chunk of which is currently in TQQQ (gasp!); being lifelong renters; going back down the private school path, etc.) would be greatly appreciated.