The wife (32F) and I (31M) are considering buying in Brooklyn, around $1.25M 2 bed 2 bath. Both L5 faang non-tech, so total household salary is ~$450k. We have no kids (but would like to in the future) and a combined net worth of ~$800k, $250k of which is in 401ks, meaning we have about $550k liquid if you count stocks and mutual funds. 20% on a $1.25M place is $250k, and then the mortgage is $5-$6k monthly, which seems high. How much would you recommend for a down payment to maximize return and quality of life?
20% -25% ... more than 20 only if there is any further benefit in terms of lower interest rate for mortagage.. I doubt it though.
I tested it last year when I was putting down payment. There was no interest rate advantage of putting down more than 20%, but you may want to check with your local mortagage market.
Work with your bank or mortgage broker to find out what gets you the lowest interest rate. In some areas and at certain price points you have to go closer to 26% to get the best rate. I heavily tend toward easier cash flow, though, so if I were in your position I would put 400-450 down because I like the assurance that I could pay the bills if my wife had to stop working or vice-versa.
Advice so far is decently accurate, but can’t take into account your personal situation and priorities. If there is something productive you plan to do with the extra cash, such as investing, then stick to 20%. But if you know you’re not going to do anything else with the extra cash, then it’s not bad to put a bit more in the principal. But always keep enough for a rainy day (or year).
Put more, lower monthly payments and you can get home equity out fairly easily. You don’t need maximum leverage.
which location you are buying the house in? main bay or east bay?
NYC - Brooklyn
Keep your mortgage low enough so that you can pay with 25% of your monthly for 15yr mortgage
I think for a 1.25m with .25m down, I believe mortgage and taxes together would be slightly higher than 6k around a couple of hundreds. So correct me if I’m wrong
depends if you can get a tax abatement, which is pretty common in Brooklyn
20%, ARM
20%
I know this is standard, but any reason it's better than 25% or 30% to lower ongoing mortgage? Stocks are high in value now and I'd like to rent this out eventually, meaning I would want a lower mortgage so monthly costs are offset 5+ years from now
Agree on 20%. Think about it in this way, your mortgage is probably the only opportunity you get for a long-term, low interest rate loan. On the long run stock yield is always going to be higher than your mortgage interest. Hence no point in paying any penny more than 20%.