My wife (31) and I (37) are expecting our second child this summer and are looking for a larger home closer to better schools. We've decided on homes in the $450-500k ball park. Our current home is worth about $275k with an outstanding mortgage of $107k @ 2.6% for another 13 years. Our plan is hang on to this home as a rental which should bring in about 1.5x what we currently pay for mortgage, insurance, and taxes.
Overview:
Combined gross income $215k
Yearly investments: max his 401k, her 457, her 403b (Roth), his and her Roth IRAs, and family HSA
Cash: $25k
Taxable brokerage account: $290k
Retirement accounts: $600k
My question is about the best option for coming up with a 20% down payment on the new home and I'm currently debating the following options (certainly open to others that are out there):
1. Sell ~$100k from the brokerage account. I loss harvested on this account in 2020 and it has about doubled since then, so the sell would yield a capital gain of ~$50k. I'd be on the hook for a tax bill of 15% ($7500), but suppose I could switch my wife's 403b contribution to traditional for the year to reduce our taxable income. Side question: if going this route, does this sell add to our gross income to push us over the limit to directly contribute to our Roth IRAs?
2. Home equity loan or HELOC. I only understand the basics of how these work. They seem like an enticing way to come up with the money, but am I missing something?
Thanks in advance for the advice!
Home Down Payment
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- Posts: 3
- Joined: Wed Dec 29, 2021 9:40 pm
Re: Home Down Payment
Can you get a loan from your brokerage with your stocks as collateral?
Re: Home Down Payment
You can also refinance your current home. Pull cash out. And then buy you new home.
Interest on rental property will be tax deductible.
Interest on rental property will be tax deductible.
Re: Home Down Payment
My brokerage account is with Vanguard. I didn’t realize there would be an option to get a loan, but definitely something I can look into.
I did leave off the option of a cash out refi, but maybe I should explore this route further especially considering interest would be tax deductible. My initial thought was that a refi would likely cost me a few thousand dollars and rates have gone up.
Is it correct to assume interest paid on a HELOC would also be tax deductible?
I did leave off the option of a cash out refi, but maybe I should explore this route further especially considering interest would be tax deductible. My initial thought was that a refi would likely cost me a few thousand dollars and rates have gone up.
Is it correct to assume interest paid on a HELOC would also be tax deductible?