[quote=esmith]
520K mortgage at 6.25% (you can get 6.00% without points, but let’s be conservative)
Interest $2708
Principal $493
Insurance $50
Property tax $921 (tax rate 1.7% including Mello Roos)
HOA say $100
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total housing $4272/month. And only $2800-2900 of that is “effective rent”, the rest is tax deduction and principal payments.
At some point the house will start to appreciate with inflation. Normal monthly appreciation of a 650K house is around $1600/month.
130K income is take-home pay around $9000 after social security, medicare, etc. (married, 2 dependents). You have almost 5 grand per month left on food, utilities, clothing, entertainment. Not too shabby. Besides, incomes tend to rise and housing payments are fixed for 30 years.
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$130K is take-home pay under $7.5K/month after taxes and $10K in 401k, assuming generous employee match, married, 2 dependents w/ standard deduction, $0 for wifey’s IRA and employee covered insurance. Your marginal rate is 25%, but since you itemize you forfeit your standard deduction and assuming you cheat by claiming MR your “effective rent” is closer to $3.5K.
Your fixed monthly expenses are:
$3500 “effective rent”
$500 principal
$100 HOA
$300 cable, phone, misc utilities
$600 car payment (entry level sedan and minivan)
$500 food
$300 gas & car maintenance
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$5800
You are left with $1700/month to cover medical bills (two kids – what are the chances at least one will need braces?), landscaping, clothing, electronics, furniture for your new house, vacation, preschool/school supplies, birthday parties… you will be able to set asside few hundreds/month, if that, to recover your $130K downpayment.
I am not saying it is impossible, but it sounds very risky and the engineering types with a spouse and two kids, that you count on, are usually risk-aware and rarely accept prayer as a convincing risk mitigation plan.
