Currently renting a house along the SF peninsula for $4900/month. Owner doesnt allow us to have any roommates (though initially property manager said we could). Found out that owner will likely increase rent additional $500 at end of lease term in 6 months. Hate that all this money is going out the window. Thinking about pulling some out of 401k for down payment and get own place and not have to deal with renting and fear of big rent increases, or owner selling their home. We’ve had to move 2 times in the last 5 yrs because of these reasons. While I understand its a big hit with the 401k withdraw (10% penalty plus added to taxable income), the amount lost seems to pale next to what we could gain, including $60k/year going to principle instead of rent. Also the amount withdrawn from 401k could be made up in 3 years. Would you buy or keep on renting? TC 275
With that TC and your rent, it seems like you are working for your owner
That’s exactly how I feel :(
5400 a month is equivalent to a 1.1-1.2m mortgage depending on interest rates. You obviously have other expenses ... Let's walk through some numbers: House cost: 1 million 20% down: 200k Other closing costs: 20k (includes some money for furniture and other stuff your SO will need, trust me I know 😄) Mortgage: 800k or ~3500 a month Property tax: 12.5k or ~1.1k a month Insurance: 0.1k a month Maintenance: 0.3-.05k a month (depends on age of home) So that comes up to 5.2k a month. You can deduct all the interest from your taxable income, so that's a credit of about 1k at tax time. Please talk to an accountant, these are ballpark numbers and are not accurate. So you your net cost is ~4.2k ON TOP of the equity you are you building by making the monthly payments. Right now you are just burning the money. At the 5.5k, I seriously would consider buying the house/apartment tomorrow. The biggest challenge is the down payment and closing costs. If you can make that happen, it will be the best decision. I am assuming you can sell about 800 shares of yours and move in by end of March. Don't ever try to timr the purchase. No one can ever predict the right time. It is is only known after the fact. I know people who are mulling this same decision for 5+ years while some of peers are having a blast owning a home in the Bay Area.
Wow, really appreciate such a thorough breakdown. I’m actually thinking of getting a condo at $750k max, and paying 10% down using some of my 401k funds.
Condo might work but remember they have HOA dues that are not tax deductible. Usually in the 300-500 per month or equivalent to another 100k loan. In either case, get cracking call an agent and bank tomorrow and see what your options are
Just a reminder when comparing : ~$4000 a month in an $800k mortgage payments the first year will only result in ~$15k in principal not $60k. A lot goes to interest on that big loan amount. Nevertheless you do have to start that journey someday unless you buy cash. Best of luck deciding.
Greed of homeowners- sad it will all come down crashing
It will never happen - not me but blind says it
Don’t think we will see another dip like 07-08. If we do then everyone on Blind will be asking for referrals.
With this rent you can't save for downpayment. Rent a modest 1 bedroom apt for $2500.
You pay more for rent than I pay for mortgage (on a 1.2M house). If you’re staying in the bay for the long run I’d buy...not saying now is the time to buy, but I would buy property and take advantage of the tax write offs. Move to SJ or East Bay for cheap rent, save money for a down payment, buy a house when you feel it is the right time.
I know, the rent is sooo much!! We keep thinking it could be a mortgage payment. We live frugally so we can actually manage the monthly payments. It’s the down payment that has us in a stump. We thought about finding a cheaper place but it’s really hard. We are limited geographically because we have a son who we need to be close to parents to help us babysit on certain days. Also we want to stay close to our son school. Finally we have 2 dogs that practically cut off a lot of options for us. We moved up from SoCal and had them for 15 years. They’re family to us and we can’t give them up when they’re in their golden years.
You don’t need 20% down to buy a house in the bay. You will have a Private Mortgage Insurance PMI added time monthly to compensate. Which can be taken off once you’ve paid 20% or your home value increases accordingly. I’m going thru the process now. And it looks like my budget is lower than yours.
Hi Apple, is the source of your down payment also from your 401k? Do you mind sharing what your budget is. Are you looking at condos or SFH?
Consider something like ZeroDown? I have a friend who works there if you want an intro.
Try ZeroDown.com - not a mortgage, it’s a new spin on a lease to own program, so you can move into the home you want earlier. You build up to ownership while you live there. (15% over 5 years) https://techcrunch.com/2019/06/11/zero-down/
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If you don’t have savings outside of your 401K for a down payment, you shouldn’t buy. There are a lot of additional expenses that come with ownership that you’re saving by renting.
I have some stocks but comparing whether I should cash them out or 401k, the 401k seems like a better option. I have 3 separate 401ks, and I would just be cashing out the one that is giving the least in return, averaging 7% and last year was only 3%. With my stocks they are giving better returns.
You can rollover the old 401ks into a Roth IRA after paying taxes on pretax 401k, if you have any and trade stocks.