A common rules of thumb in financial planning is to keep the mortgage/rent at 25% of take home pay. This means for a couple with dual engineer income, both quite successful at 200k base each, the amounts should roughly be: * 5k/month * ~1.05M for a 30 year fixed * ~700K for a 15 year fixed Keeping rent below 5k is rather trivial but the mortgages would be less trivial. Both mortgages in these examples would also melt away if they chose to direct the stocks into the mortgage. So that said, do you consider standard bonus rates or public stocks as a part of that? If not, would you carry the mortgage as debt even though you could pay it off from your stocks 2-3 years later?
If the mortgage rate is 4% and returns on your stocks is 8%(avg stock market returns) or more, then no point in paying off mortgage sooner.
I pay off one mortgage early for peace of mind.... if i lose all my $, i can move back into that house as backup
You're failing to risk adjust the return. The 4% return on paying off the debt is risk-free, while you have to accept a substantial amount of risk to get the market return.
this is how you get responsible people earning in the 95th to 99th percentile renting a 1bd condo for years living next to a family of 6 in the same style dwelling and you end up hating your life and wanting to move to Texas and basically retire
Amazon's salary cap makes this nearly impossible. I think it's sound advice, but a very large share of my income is RSU.
Heck no, buy as much as possible.
RSUs are income, of course count that.
Except that they aren't and only a handful of lenders will have the risk tolerance to do so ;)
If it is on W2 and tax returns, my experience is that’s what matters.
Take home 20k (household). Rent 3k. So yes.
I keep it MUCH below!
We try to keep it under 20%, currently at 17%. We only consider our base pay. We’ve learned to live off that very comfortably. The stock is just gravy at this point. We do carry mortgages on some of our investment properties. Partially because someone else is paying for it since the houses are rented and partially because we want the tax deduction for the rentals.
When you say the stock is gravy do you look at it like the 401k, money you don’t have?
Basically, yes. We invest it for the long haul....mostly. We have done a few fun things, paid off debt, etc. The vast majority of it goes to investments so we can retire early and financially independent. We max out our 401ks too, as well as invest a chunk of our base pay each month into investments.
We’re at ~30% if just considering my household base pay (far less from OP’s 400k base combined) and I’d have never bought my place if I didn’t have a RSU cushion. On a side note, I do the math by considering how much I’m paying as mortgage minus the principal to keep myself sane 😂.. that brings it down to ~25%
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I can't afford any house in Bay area in my lifetime, if I don't add stocks with single income 🤦🏽♂️. Just hit the nail hard on many folks like me who think they can afford, but are precariously perched and can't afford.
I said that, and then the 2008-9 bust happenned and I'll bet it will happen again. Just need to have a good nut of down payment ready when it does.
Then may be you should save more and spend less.