Purchase makes sense?

[BlueMonday]

We are thinking about buying a new house, but not sure if it makes sense. We currently own a very comfortable 3600 sq ft house, tiny lot, 15 minutes from work. Value ~1.1M, remaining mortgage 300k.

Family, (48,47,13,11) would like a bigger lot, pool, etc.

Looking at houses in the 1.7M range, about 10 minutes further from work (so 25 min commute).

Savings: 2M in retirement/non-retirement accounts including $250k 529 plans.

Income: 600k, pretty stable, no debt other than above mortgage.

Is this reasonable? It seems like a lot to me, but it seems manageable. Looking to others for either reassurance or to tell me I'm crazy to do this.

 

Thanks!

 

[Craigy]

Sounds reasonable to me, especially if you roll your equity into the next one.

Would you be happy with the commute?  That's the biggest concern I'd have.

[Hatton]

Are you sure you want a bigger lot as you hit your 50s?  More yard work.  The kids will be off to college soon.  Most people quickly tire of pools.

[BlueMonday]

Commute - I may have overstated it, the commute would go from 15 minutes to 20 minutes. I'm not too worried about that.

Bigger lot, pool - Crap, I really am almost 50! Still have 6 years before kids go off to college, but you're right, that will go by fast. Good points, though. I'm more interested in the financial aspects than the practical aspects. There are a lot of things about houses in this price range that are illogical - wine rooms, media rooms, etc...

 

 

 

 

[childay]

I'm guessing you're in a relatively HCOL area?

I wouldn't do it but the last thing I want is a pool!

[ENT Doc]

BlueMonday wrote:

Commute – I may have overstated it, the commute would go from 15 minutes to 20 minutes. I’m not too worried about that.

Bigger lot, pool – Crap, I really am almost 50! Still have 6 years before kids go off to college, but you’re right, that will go by fast. Good points, though. I’m more interested in the financial aspects than the practical aspects. There are a lot of things about houses in this price range that are illogical – wine rooms, media rooms, etc…

 

 

 

 

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Upgrading to a more expensive home rarely makes financial sense.  You're putting more equity into a poorly performing asset with significant opportunity costs.  As smartly noted by hatton, do you really want more space at this point with kids leaving soon?  That's a heck of a lot of space now (3600 sq ft).  Presumably you've only got 10-15 years until retirement.  If anything I'd be focusing on putting more towards retirement.  I'd also be focusing on purchasing a SMALLER home in the medium term.

[Sneezy]

I moved from a very large (4500 sqft) house in a LCOL area to a 3000 sq ft town house in a HCOL area with kids a similar age

We are much happier in the new place.  In the old house, everyone scattered to their own place (we had kitchen, dining room, library, TV room, living room and finished basement).  Here we mostly congregate in the combined kitchen/dining room/living room but the kids can of to their bedroom or the basement if they want to get away

7 years later with 1 in college and the other gone a lot (like many teens) it feels a lot more livable for the 2 of us

Your mileage may vary

[DMFA]

A primary residence should be seen as a liability, not an asset, regardless of your equity portion. It's not giving you money, it's taking it from you.

If you are happy to spend more money and/or more time and effort for a bigger house, then go for it if you can handle the financial blow. But it's not ever really going to be a good *financial* idea, regardless of how rosy your picture may be.

[Zaphod]

I love/hate my pool. You have to know what you're getting into with a pool. Worth it if somewhere nice or you like to swim.

[janettebournes]

BlueMonday wrote:

Commute – I may have overstated it, the commute would go from 15 minutes to 20 minutes. I’m not too worried about that.

Bigger lot, pool – Crap, I really am almost 50! Still have 6 years before kids go off to college, but you’re right, that will go by fast. Good points, though. I’m more interested in the financial aspects than the practical aspects. There are a lot of things about houses in this price range that are illogical – wine rooms, media rooms, etc…

 

 

 

 

Click to expand...

I think financially you should be fine, assuming you are rolling the equity in your current home into the next one, you still aren't looking at a mortgage that is > 2x your income.

I think the time to move on this would be soon though. Presumably, the point of a bigger home is for the family to enjoy it. After a couple more years, as others have noted, I'm not sure you'll want a house that big if the kids are away at college.

[hightower]

You'd be increasing your debt.  You'd be increasing your mortgage from 300k to at least 900k (assuming you put 800k down).
Do you really want 600k more debt?  If you're cool with that, that's totally fine.  You can technically afford that kind of a mortgage with your income. Just have to make sure you're thinking about what you'd be walking into retirement with.

Personally, I'd rather stay put.  You have an insane amount of equity right now and the last of that 300k mortgage will be gone long before you retire.  You're sitting in a pretty nice spot rn.  Just make sure the house is really worth it to be giving up that kind of scenario.  You'll be paying off a mortgage for a lot longer in situation #2.

[VagabondMD]

I almost pulled the trigger on upgrading my home about eight years ago. My income is higher, and my upgrade would have been from about $750k to $1.2M. I was under a lot of pressure from my wife to move on up. Ultimately, I said no (after saying yes), and we did some remodeling instead and quickly paid off the house.

It was the single best financial decision I ever made.  I am 51 years old and live in a paid off house that is worth about $950k. It's more house than I need, and with my son peeling off to college this year and a rising sophomore in high school, the last thing I want is more space, more crap, and more financial commitment.

[Hank]

Is the public high school that much better?  Will it get your kids into Yale instead of Brown?  Will it get them into Cornell instead of SUNY Stonybrook or UC Irvine?  If not, I don't think it's worth it to take on that much more debt to swap houses.

Buy a hot tub, add a deck and a nice built-in outdoor grill if you don't already have one, and perhaps undertake a moderate kitchen remodel.  You don't need a dedicated room for a wine cellar. You can get a free standing refrigerated wine cellar/cooler from Costco and stick it in the garage if need be.   Get a good quality front projector for nighttime (they're cheaper than you think) and a 65" or 77" LG OLED display for daytime use.  These are the little splurges that you readily can afford on $300K annual income, much less $600K annual income.  You don't need to change houses to enjoy a nice glass of wine, movie night at home, and turning into a prune out in heated water out in the back yard.

Don't pay 6% of $1.7M and take on another $600K in debt to have more yard to mow and more square footage to dust and vacuum.

[Wiscoblue]

A bigger house will not only lead to higher mortgage, you will pay more in property taxes. Plus the expenses on pool maintenance and the extra yard maintenance. I was living (happily) in a $250k house in the Midwest but then moved to a $600k house just a few blocks away. Large pool, bigger yard and double the taxes. It was NOT the smartest financial move I've made. Snooty neighbors to boot!

[q-school]

it makes sense if you and your wife want it.

you can afford it.

it will lower your ability to save for an even huger retirement, but it looks like you are already good at saving.  do you have a strong(er) desire to retire super young or a stronger desire to move into a house that fits your desired lifestyle?

you don't have to stay there forever.  will the house appreciate?   will it be easy to sell?

why would you ask on this board?  the predominant attitude is that financial independence is the number one priority, possibly second only to related retire early goal.