We’ve got the bids in, the loan is approved, and we’re just waiting to sign. However, everyone around me—including my wife—thinks we should back out. I’m the only one who still wants to go through with it.
Here’s our situation: we’re planning to sell our current house (only $40K left on the mortgage) and use the proceeds to cover some construction costs. The land is fully paid off. After everything, we’re looking at financing $600K. Our combined pre-tax income is $220K, and the monthly payment for the mortgage, insurance, and taxes will be $5,000 on a 30-year loan. Our post-tax take-home pay is $10K, meaning 50% of our income will go toward the house. The other 50% would be left for savings, food, utilities, and other expenses.
Am I crazy for thinking this is not only doable but comfortable? I know people who make less than us buying $500K-$600K homes without issue. My wife is worried about job security. My parents think it’s foolish to go from almost having our house paid off to a 30-year loan. My friends think we’re risking too much financially.
The construction loan has a 7% rate, but I could bring it down to 6-6.125% if I move some money around. It’s a 7-year ARM.
Thoughts? Are we making a mistake?
We have no other debts except the current mortgage. No kids yet but considering one in two years.
Thanks for the feedback. Maybe I am being overly optimistic.
@Zephyr
No, 50% of combined income is the same whether split or not. If both make $1,000, that’s $2,000 total. 50% of $2,000 is $1,000, not 25% per person.
Charlie said: @Zephyr
No, 50% of combined income is the same whether split or not. If both make $1,000, that’s $2,000 total. 50% of $2,000 is $1,000, not 25% per person.
@Whitney
We’re in the same boat. Working from home makes a big house feel worth it. We spend so much time here that it’s an investment in our daily comfort.
You’re financing $600K, not buying a $600K home. This likely means you’re building a home worth $800K+. Your mortgage, taxes, and insurance will all be much higher than others financing $400K-$450K for similarly priced homes.
What’s wrong with your current house? Pay it off and enjoy life mortgage-free for a while. Your wife clearly doesn’t want the added stress. That alone should give you pause.
This might be normal in areas like Manhattan but not elsewhere. If you don’t have other debts, you could manage it. But keep in mind, high incomes don’t mean high financial flexibility if most of it goes toward housing.
It’s doable, but you’ll have to give up a lot—no fancy cars, private schools, or early retirement. If you’re okay with those trade-offs, it could work.