Trojan, sorry, I didn’t mean to be obtuse. What I was getting at is that it might be helpful to assess how much you can afford to pay for a home based not on monthly mortgage payments, but rather how much the purchase price is versus your lifetime income and outgo.
For example, if you applied this method using these assumptions (that I just made up):
1. Income (net of taxes and other deductions) = $120K+37K = $157K
2. Expenses (excluding non-expense items such as savings) = $70K.
3. Number of years you’re OK with committing to working at $120K job = 15.
4. Number of years after you’ve quit working the $120K job at which you’re prepared to run out of cash in your old age = 90 – (42+15) = 33
The you’d get total lifetime savings = 15 x 157 + 33 x 37 – (15+33) x 70 = $216K.
So if you have no other things you want to save for, then you can afford about $200K for a home. Plug in the numbers you think are appropriate. It’s just a way to strip out all the “noise” from complicated assumptions about interest and other investment income and inflation. I hope this helps as an alternative view.
