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re: Percentage of net worth "invested" as equity in your primary residence?
Posted on 1/15/14 at 10:49 am to LSU Jonno
Posted on 1/15/14 at 10:49 am to LSU Jonno
Can you post more specific numbers?
As a portion of my net worth, my primary residence represents 10%.
However, I'm not sure what that has to do with anything.
Why not continue to live your current lifestyle and let that money grow in investments? I'm not trying to jump on you here but your mindset is very financially immature.
As a portion of my net worth, my primary residence represents 10%.
However, I'm not sure what that has to do with anything.
Why not continue to live your current lifestyle and let that money grow in investments? I'm not trying to jump on you here but your mindset is very financially immature.
This post was edited on 1/15/14 at 10:50 am
2
Posted on 1/15/14 at 10:58 am to I Love Bama
quote:
I'm not trying to jump on you here but your mindset is very financially immature.
ILB, let's not do the typical money board thing. He's not talking about buying depreciating assets or whatever.
I led with the "invest" - delayed instant gratification - however, if you're going to overspend on anything, it should be the home - that part I do agree with, although the amount of overspending should be slight.
Going with 15-year mortgages builds in a conservative bias against overspending - which is why I recommend those for most people. It is a built-in conservative bias, with built-in discipline. In an extreme bind, one can always take equity out, and extend the loan terms - from a 15 - in a 30, there will be little equity (beyond the downpayment) for years and years, and if you cannot afford the 30-year note - you cannot afford the house - so you're selling at a loss (which you can't afford) or in foreclosure (which is worse).
However, he seems to be fairly financially stable - I would still invest it and increase his income - permanently - as you would - but we should also answer his underlying question.
I don't see a cap as to how much liquidity you should give up in equity in your home - with HELOC and other vehicles, I feel this is a false distinction. If you own the house outright, you can be investing your house note every month, DCA. A person who does that is wealthy, regardless of what the min/maxers tell me about free money.
Posted on 1/15/14 at 12:47 pm to I Love Bama
All of this is good stuff.
Exactly the kind of debate I was hoping for.
Some replies:
I'm phrasing the question this way because I have more assets than someone my age and in my salary range would normally have. My thought is I can "afford" a higher priced house than my salary allows by putting a larger down payment down than I normally would, thereby reducing my mortgage payment down to a level that fits into my budget.
Let me give you an example. Let's say I had $50k of equity in my current house, and my net worth was $2mil. That would mean that I only had 2.5% of my net worth in my current house. If most people live comfortably with 10% as equity that means I could purchase a much nicer/larger house and retain my same, small mortgage payment.
My deadline to move is about 3.5 years. Part of the reason to move is to get into a better school system.
I haven't decided yet if I want to sell or rent my current house. It's 1900 sqft, 4 bedroom. Could probably generate $1200/mo rent. Rental market is great in my location.
Exactly the kind of debate I was hoping for.
Some replies:
quote:
As a portion of my net worth, my primary residence represents 10%.
However, I'm not sure what that has to do with anything.
I'm phrasing the question this way because I have more assets than someone my age and in my salary range would normally have. My thought is I can "afford" a higher priced house than my salary allows by putting a larger down payment down than I normally would, thereby reducing my mortgage payment down to a level that fits into my budget.
Let me give you an example. Let's say I had $50k of equity in my current house, and my net worth was $2mil. That would mean that I only had 2.5% of my net worth in my current house. If most people live comfortably with 10% as equity that means I could purchase a much nicer/larger house and retain my same, small mortgage payment.
quote:Well aware of this. In fact, defense has been cut...7% by sequestration for almost a year now...As has NASA's budget another large part of the economy here. Having said that, I might wait to see what the 2016 administration looks like, and by then we'll know more about NASA's Space Launch System's long term outlook as well.
You live in Huntsville, Alabama which is basically subsidized by the government in terms of what is growing the local economy. If the national government cuts defense spending, your $500,000 house just went to $250,000.
My deadline to move is about 3.5 years. Part of the reason to move is to get into a better school system.
quote:I work for the government. If I lose my job, there will be no market for rentals because if I'm out of work lots of others will be as well. Plus, my current house would be perfect to turn into a rental, my next potential house would probably be too expensive to turn into a rental.
I'm all for buying a home that you could be turned into a rental if he lost his job.
I haven't decided yet if I want to sell or rent my current house. It's 1900 sqft, 4 bedroom. Could probably generate $1200/mo rent. Rental market is great in my location.
This post was edited on 1/15/14 at 12:49 pm
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