Home Purchase Situation - Need Suggestions

Apple ApplePie!
Jul 20 71 Comments

I just moved to Austin from Bay and looking to purchase home for living.

Found one for 350K. I have 300K cash in Online Savings account and close $500K vested / $300 unvested stocks from my employer.

I did a prequal for Mortgage just to check my credit and i’m qualified for 3% interest for 15 years term.

For my situation, should I sell $75K worth of vested Apple stocks to purchase the house by Cash (and to keep $25K as cash for emergency fund)? Or Go for Mortgage, may be with 20% to 40% downpayment and try to invest rest in Market to produce good returns to beat the Mortgage interest liability and produce additonal dividend/coupon (if i’m lucky considering the bull run)?

thanks!

TC: 275K (150K base + 125K rsu, bonus yearly avg.)

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TOP 71 Comments
  • PayPal
    🐲ninja

    PayPal

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    Google
    🐲ninjamore
    Buy 2 houses both with 20-30% down payment to get best interest rate. Rent out one to generate income plus build equity. When you get bank money at cheap interest rate, take advantage. Putting all/majority in house means not prepared for housing market crash. With $$ handy, buy more properties if/when crash happens. Key is to diversify and be prepared for both upward and downward economies. Good luck!
    Jul 21 4
    • Akamai Technologies blad
      What he said works too
      Jul 21
    • Apple ApplePie!
      OP
      Thanks. Out of box thinking! With busy work schedule and being a first time home buyer, it’s too aggressive for me to figure out another house in parallel and set these up. I would rather try my luck on a Index fund and aim to cover the monthly payments by an equivalent yearly return — less effort. But again, with market so high right now it’s more probable to lose money in short term than gain any.
      Jul 21
    • LinkedIn bbbdifhchd
      Maybe buy a duplex? Or some other small multi family? Live in one unit, rent the others (which would be right next door - least effort). A.K.A "house hacking"
      Jul 21
    • Apple ApplePie!
      OP
      Yep, this is suitable in Bay. If you do this in Austin, you are really really frugal. At $350K, I’m eyeing for a single family home with 2400 sq ft build up area and 6500 lot in a good school zone.
      Jul 21
  • Uber john_list
    So you have 500k vested stock in Apple that you haven’t sold? Why not sell and diversify in the market?
    Jul 20 3
    • Apple ApplePie!
      OP
      Yes Sir, December’s crash is an eye opener. Planning to diversify in VTSAX and VBLTX - Simple path to wealth.
      Jul 20
    • Uber john_list
      Gotcha. Yeah I would at least take a portion out of apple, but sounds like you rode the bull market so props on that.

      Interesting thread and it’s crazy how easy it is to buy a house in Austin. In all seriousness though I would pay someone who specializes in this to lay out the numbers and pros and cons. They might have info you aren’t considering. People on blind certainly don’t know anything about finance lol
      Jul 20
    • Apple ApplePie!
      OP
      Yep, Indeed! But I’m kinda addicted to seek suggestions in Blind at 3 AM. Lol :) Jokes apart, I have gotten some solid enlightening replies from anonymous gurus right here in Blind, but it’s definitely rare!
      Jul 20
  • Facebook BeingCoder
    $300k in savings. If not hysa you've already been losing money.
    Jul 20 7
    • Apple ApplePie!
      OP
      Yes but it’s “expected” not guaranteed. With panic around Recession looming in the near or at least 2 year timeline, is it safe to invest lump sum in stock market right now?
      Jul 20
    • Who pays 2.56%?
      Jul 20
    • Facebook BeingCoder
      If recession is looming in 2 year timeline then expect to lose your job with unvested stocks.
      Jul 20
    • Apple ApplePie!
      OP
      Well, I’m confident on my job or at least do something to survive such real bad situations.
      Jul 20
    • Apple ApplePie!
      OP
      @cafe-latte, Checkout WealthFront online savings. If you want to stick to reputed ones, checkout Citibank and Marcus.
      Jul 20
  • Intuit KijRg29
    Always take a mortgage. Use the banks money at 3%. Put your savings in an index fund for 6-10% IRR. speaking from experience.
    Jul 20 3
    • Facebook BeingCoder
      But OP thinks there is going to be a market crash.
      Jul 20
    • Value of house will go down in crash too.
      Jul 20
    • Apple ApplePie!
      OP
      Right but value of house going down and paying a constant 3% interest is even worse isn’t?
      Jul 20
  • Wayfair bnKI45
    You are very exposed to apple, working at a company and having the bulk of your investment in the same company is very risky. If I was you I would look to start selling your apple stock and buying a low fee index fund regardless of what you do with the mortgage.

    Having said that 3% is so low you might just want to go ahead and get the mortgage and the interest deduction. Either way you are doing great
    Jul 21 5
    • Apple ApplePie!
      OP
      Thanks. After getting serious about investments since December crash/correction and reading couple of good books, I’m totally prepared now to diversify and depend on low cost index funds. The way I see paying all Cash is kinda diversification too as buying mortgage and investing the rest in stock will keep all my investment money on just one asset. I get that I could try other assets but for newbie like me I think it’s simpler to stick to index stock/bond funds. Either way, I’m going to sell off all my apple shares and move them wisely to low cost vanguard funds before this year.
      Jul 21
    • Wayfair bnKI45
      Yes putting money towards your mortgage will increase your diversification but don't think of your home as an investment or it can stress you out needlessly. I would think about how you want to sell off your apple stock - make sure you are paying long term rather than short term capital gains tax. Also does California tax capital gains? If so maybe wait until you are a full year resident of TX to sell
      Jul 21
    • Apple ApplePie!
      OP
      I didn’t know about this! I moved on Mid of Jan this year. Does it mean I will need to pay capital gains tax for CA when I sell shares while in TX?!!
      Jul 21
    • Wayfair bnKI45
      I'm not an expert on taxes and not even sure CA taxes capital gains. It will only be on the gains anyway (as in price increase since each batch of shares vested). For that amount it's probably worth doing some research or talking to an accountant / financial planner
      Jul 21
    • Apple ApplePie!
      OP
      Sure, I will ask a tax professional but just sharing what I had learnt before — CA taxes capital gains just like ordinary income, thus highest in the country. Anyone who works more than 6 weeks in the state needs to pay income taxes on the worked days. Anyone who stays more than 9 months, is considered a resident and taxed on all income. Except for real estate sale, other assets sale after moving out of CA and if being away more than 9 months will not be taxed.
      Jul 21
  • Amazon MYEX83
    Buy the house for cash and get a better deal on the house. A mortgage you either give the money to the bank or the government so why not just own your house and have no payment...
    Jul 20 3
    • Apple ApplePie!
      OP
      Ok the first one to suggest for Cash purchase. Why did you gave up on the mortgage alternative if the same money can be invested in stock. Trying play devil’s advocate here to get more info to support cash purchase. Btw, how much better deal can be bought with a cash purchase?
      Jul 20
    • LinkedIn bbbdifhchd
      I'd buy all cash for piece of mind - not worrying about losing your job (well, worrying less) and/or being under water on the house
      Jul 21
    • Apple ApplePie!
      OP
      That for sure gives peace of mind as no strings are attached.
      Jul 21
  • LinkedIn / Eng CXgR77
    I would give $200k down and have a low mortgage payment. You may benefit from the interest paid at tax time. Just ensure that you don't have a penalty for paying off your mortgage early in case you can do that in the future.
    Jul 20 3
    • Apple ApplePie!
      OP
      With $24K standard deduction, even taking $300K mortgage will result in just 9K interest annually at 3%, + 9K property tax doesn’t beat 24K standard deduction. So I don’t see a tax advantage on taking mortgage at least for my situation. Do you still see any benefit to take this route of paying $200K down and try investing the remainder at market?
      Jul 20
    • LinkedIn / Eng CXgR77
      Having a very low mortgage payment is easier to pay in case you loose your job. Check out this article to help you decide. https://www.doughroller.net/mortgages/5-reasons-never-to-pay-off-a-mortgage-early/
      Jul 21
    • Apple ApplePie!
      OP
      Thanks for the share. But the article is about whether or not to pay off mortgage early. In my case, I have ample cash and good enough Apple stocks (which I should anyway sell off to diversify) to make the cash for purchase.
      Jul 21
  • New 76574
    Get a mortgage. 3% is a great rate-like inflation will eat up most of it kind of rate. 20% down for the most leverage. As others have stated, we are in an economic peak and having a war chest, not just to weather possible bumps, but more so to take advantage of buying opportunities (both stock and real estate-a good property manager can make things pretty easy). You definitely want to diversify your AAPL holdings.
    Jul 22 0
  • Cadence / Mgmt
    Thanos.

    Cadence Mgmt

    BIO
    .
    Thanos.more
    House in 350k in the bay?? Is it a mobile house?
    Jul 20 5
    • Apple ApplePie!
      OP
      Read the post again...
      Jul 20
    • Cadence / Mgmt
      Thanos.

      Cadence Mgmt

      BIO
      .
      Thanos.more
      Got it... :)
      Jul 20
    • Apple ApplePie!
      OP
      Moving from bay is tempting me to buy house at Austin by cash lol. This would be a standard down payment for a single family home in Bay!
      Jul 20
    • Cadence / Mgmt
      Thanos.

      Cadence Mgmt

      BIO
      .
      Thanos.more
      Oh yeah... i was all puzzled about this 350k house in the bay..
      Where do these gems exist and why dont i have 5 of them :)
      Jul 20
    • Apple ApplePie!
      OP
      Hahaha...
      Jul 20
  • Facebook MYKt61
    Hey cash you can always borrow against the house later if needed in an emergency. given Gmo predictions over the next 10 years of stock returns of about 6% your housing investment should be pretty similar.
    Jul 21 3
    • Apple ApplePie!
      OP
      Thanks! Interesting info about the expected turnaround of 6% from stocks next 10 years. Can you share any pointers or further details on this.
      Jul 21
    • Facebook MYKt61
      Google GMO investments
      Jul 21
    • Apple ApplePie!
      OP
      Just read that. Looks like the last 7 year asset class predictions for US domestic stock were actually lower than the real returns secured. How reliable are their predictions? I understand it’s always a guesstimate but trying know your personal observations.
      Jul 21
  • Amazon TDKU11
    I would just pay cash and have no mortgage. You could save so much money I. The future and not have a looming mortgage payment if your employer ever changes.

    Dave Ramsey all the way
    Jul 21 3
    • Apple ApplePie!
      OP
      Thanks. Lemme google Dave Ramsey!
      Jul 21
    • Wayfair bnKI45
      I wouldn't bother, he's good for people with low income, high debt and living paycheck to paycheck. His advice isn't applicable to you
      Jul 21
    • Apple ApplePie!
      OP
      I see. Thanks for the input.
      Jul 21
  • Akamai Technologies blad
    Since you are asking 😉 at 3am I thought this deserved a reply. What most people don't understand about buying a house is it's all about leverage i.e. you can buy your house of 350k by putting only 75k down (5x leverage). How you decide to use the rest of your money is up to you, pay extra payments of your mortgage Every month/year, contribute to college fund, add more funds to retirement, buy more properties, invest in a dividend portfolio to payoff your mortgage, umm enjoy life
    Jul 21 3
    • Apple ApplePie!
      OP
      Sorry dozed off. 😆 Thanks for the suggestion. I totally understand the leverage part but 1. I have already maxed out on 401k, College funds are good to get started but I can do that with my regular future income savings as I don’t have mortgage debt/monthly payments. 3. Buying parallel properties is too aggressive for my work and conservative thinking being first time home buyer. 4. Market is at high. Sure it relentlessly moves upward with big swings but the question is will I make any money in short term to beat the constant 3% interest that will pay for mortgage, is less likely. I can rather gradually start investing with my monthly savings from income as I don’t have any debt and thereby dollar cost average the market price in the long term.
      Jul 21
    • Akamai Technologies blad
      Ok let me try to counter your points, 1. Are you maxed out on after tax 401k? Lookup mega back door Roth. 2.College funds was just a suggestion but you could do anything else with that. 3. That's fine you buy one home now and keep the cash for when you want to upgrade or whatever else. Remember cash is King and worth more when the market goes down. 4. You could do the same with cash and dollar cost average into your investments. Also I know you keep saying that there is no tax advantage for the mortgage. Why not get a slightly expensive home such that the mortgage interest does give you some tax benefits??
      Jul 21
    • Apple ApplePie!
      OP
      Thanks. Lemme check on #1. The house in subject is way more than what we need in present and near term future and fits perfectly for long term. If I go for bigger house, not that I’m frugal but it will not be really prudent in my perception.
      Jul 21
  • This comment was deleted by original commenter.

    • Amazon TDKU11
      That’s the problem with making so much. When does it end? If someone is happy in a $350k house why should they feel the need to spend $900k?

      Not everyone wants to work forever just to live in excess
      Jul 21
    • Apple ApplePie!
      OP
      Thanks for sharing your opinions. We aren’t really frugal but definitely have our feet on the ground and be prudent about the spending.
      Jul 21
  • Google JimD
    Buy all cash, you are going to have more money in the future anyway. Op, how old are you? Any family?
    Jul 20 2
    • Apple ApplePie!
      OP
      Thanks. I’m 33. Married and have a toddler.
      Jul 20
    • Google JimD
      Great job saving!
      Jul 21
  • Apple / Eng UuDq31
    Also what engineering groups of Apple have presence in Austin ?
    Jul 21 1
    • Apple ApplePie!
      OP
      At present not much other than dev groups within IS&T and Network teams. But more to come in 2 years from now, as new campus is on the cards.
      Jul 21
  • VMware abRQ21
    I would say the answer to this totally depends on how risk averse you are. Investing in a house or index funds, both have risks..but investing in a long term house is considered to be less risky. So i would do the following: 1. keep one year of expenses as emergency fund 2. Put the rest of 300k as down payment and take a loan for 15 years 3.Max out 401k and roth ira 4.max out 529 5.sell a portion of apple stocks every year and start moving it to index funds
    Jul 21 1
    • Apple ApplePie!
      OP
      Thank you. Yes, I need to really think about diversifying into Index funds.
      Jul 21
  • Apple kovm58
    1) Keep 200k down
    2) keep 50k emergency fund always
    3) Go for 15 years loan for 150k, given your situation and being Apple employee you will get 2.75% (Move you vested stock and 100k cash to bofa for interest discount .25% )
    Jul 21 1
    • Apple ApplePie!
      OP
      OK. But with this approach I will end up paying $6K/yr in mortgage interest to start with and ultimately $47K during the entire term. With $24K standard deduction, having 6K of mortgage interest + 9K property tax doesn’t beat 24K standard deduction. So I don’t see a tax advantage on taking mortgage at least for my situation. Is there any other advantage in doing this, which I’m missing?
      Jul 21
  • This comment was deleted by original commenter.

  • Make 20% down payment or little more to avoid mortgage insurance. Deduct the interest in tax return. Keep the rest in liquid assets.
    Jul 20 1
    • Apple ApplePie!
      OP
      With $24K standard deduction, even taking $300K mortgage will result in just 9K interest annually at 3%, + 9K property tax doesn’t beat 24K standard deduction. So I don’t see a tax advantage on taking mortgage at least for my situation. Btw, what do you mean by liquid assets?
      Jul 20
  • How long you been Apple? Apple pays dividend. Why miss out on that? Take mortgage as you can use as deduction for tax purposes
    Jul 20 1
    • Apple ApplePie!
      OP
      With $24K standard deduction, even taking $300K mortgage will result in just 9K interest annually at 3%, + 9K property tax doesn’t beat 24K standard deduction. So I don’t see a tax advantage on taking mortgage at least for my situation.
      Jul 20

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