Yes, it’s irrelevant why he bought the house. But usually such stories involve a change of circumstance, such a a reduction in salary, that change a workable situation into one where the house is unaffordable. In this case, though, the house was never affordable and as I said, he’s seen a nice increase in salary.
If I were you I’d try to make more money (e.g., get a new job, get a second job).
Yeah, I kinda glossed over this part.
OP - do you have any assets you could sell? Maybe dump your car and get a cheap used car? Or an XBox or something?
How about ceasing your retirement funding and dumping any cash savings into the principal?
If you bring home $5000, and $2500 goes to the mortgage, that leaves $2500 for living. Our family’s monthly bill budget is $3500, and that’s for a family of four, and includes our mortgage. Plus, you’ll have your fiance’s money (and I think she should be helping if she’s marrying you and your assets).
You could make a serious dent in five years.
He could make a serious dent in his future wealth, I’ll agree with that. Failing to save and make 10% just to avoid paying interest at 5% is a rough way to make a living.
I haven’t read the thread but my first question is - why the hell did you buy a half million dollar house on 80k a year? HOW did you get a loan for that, to begin with? Did you inherit a massive down payment or something?
Are you in some part of the country where an “average” house runs about 500k or did you buy some enormous 5BR 4BA kinda place? (I live in a major city in the south and even here 500k would buy a huge, gorgeous house in an upscale neighborhood.)
As far as my advice goes - have the girlfriend/fiance/wife get a real job and work for a few years. You’ll enjoy having children more if you’re not worried about finances.
I vote 1) rent your house out to a family looking for the school district while you move to a cheap rental. Or 2) I vote to get roommates at $500 or $600 bucks a month per bedroom. One or two, depending on how big the house is. If you live within 2-3 miles of a college, rent to grad students. Screen them - non smokers, light drinkers, heavy preference given to those in the science/engineering fields (since they’re gone more often/tend to have less drama than those in the humanities). Prohibit overnight guests more than one night/week for them.
-lindsaybluth, in her mid 20’s with two roommates who pay her mortgage and property taxes in full.
Dude, she’ll make nothing, especially in this economy even if she’s super skilled.
If you were living by yourself I’d say get a roommate, but not if you are living with her, since you need alone time at this stage of your relationship.
If you are saving more than the maximum that gets matched for your 401K I might say stop, but saving up to the matching limit is about the best investment you can make. If your rate was good forever, I definitely would not advise paying some off, but since it is going up, if you get out from being underwater you might be able to negotiate a better rate in the future.
Also, can you save more? Weddings don’t have to be very expensive to be good. We had 25 people at ours and it was the biggest wedding in 3 generations.
All in all, though, there are a lot of people in a lot worse shape than you are. Depending on where you live, you might be able to rent out the house, but there are a lot of rentals on the market, and considering the aggravation, the apartment rent you will have to pay, and that you’d want to move back in when you have a kid, it might not be worth it.
I would spend a few hundred and talk to a financial planner. After a discussion and a review of your situation, they are far, far, far better suited to answer your questions than we will be.
I politely disagree. The OP hasn’t said he’s in a 2 bedroom place in a major city and he’s called it a house, not an apartment/condo so I assume he has 3-4 bedrooms. 1 roommate isn’t a burden, especially if you limit them to kitchen access and so forth. There’s probably enough bathrooms of the roommate to have their own. Or he can get a traveling nurse roommate or someone who is a road warrior and not around a lot.
Plus, beggars can’t be choosers (alone time is a luxury, not a need) and this dude needs some extra cash.
When our kids were very young, my wife taught at a school for nannies, so we had a student live with us each term. They did childcare for room and board, and did it pretty much full time at the end of the term, and were mostly very nice. We’re still in touch with some of them. It was still very stressful, and we were glad to see them gone. My wife was the person in charge of placement, so we got first choice also, and she, as the teacher of some of their classes, had a lot more clout than you would have with the average roomie (not that she ever had to use it.). We also had plenty of room. If he was on the verge of bankruptcy, sure I’d say suck it up, but he isn’t. Of course it depends on the person - some people might actually like a stranger in the house, but I sure wouldn’t. We also had been married for over five years at the time - I would have liked it even less when we were newly married.
I’m a financial advisor. OP, please feel free to PM me if you’d like. I would need more info, such as total expenses, debt, area of the country, etc., to really provide any solid advice.
I don’t think you’re in terrible shape, though you may want to tweak a few things.
So… there’s a bottom floor that has 1 bedroom, a bathroom with shower and a nice living room. I could move all my stuff out of it and rent it to someone for probably $800/mo. Thing is, it has no kitchen or laundry facilities. I could buy a mini-fridge and put a microwave on top of it, but they’d be getting their water and washing dishes in the bathroom sink. Is that even legal to rent a place without a kitchen?
You could allow them to come upstairs and use your kitchen, but it might reduce the rent you could get. You might determine the cost of an efficiency kitchen and see if it will pay in increased rent.
I’m puzzled why $3-$3.5K a month seems like not enough left over to live on, assuming you take home $6 or $6.5K. In many places, that kind of income would be enough to support a wife and two kids and you’d do better if the wife was working too. I don’t know if this helps, but I’d stay there and whittle down all other expenses as much as possible. It can be challenging to live on the cheap, but I’ve found it’s a bit easier if you can turn it into a game (“how little can I get away with spending on groceries this week?”). Good luck!
Bri2k
Not a financial planner here, but I don’t really see the problem. You net $5000 and pay $2500 on the mortgage. That leaves $2500 per month for everything else. You don’t mention any other debts, so I assume no student loans, credit card debt, major medical expenses, or child support. How can you possibly not live on $2500 per month? I net less than half of what you do. My rent is about 25% of my net income and other debts (student loans and credit cards) are about 50%. So ~75% of my paycheck is gone (leaving about $600 per month) before it even gets to paying utilities, groceries, gas (most of my money goes here), insurance, etc. My wife does not work (at least not for money. She volunteers for very admirable organizations) and we want for nothing reasonable.
I am not saying you should be able to live on $600 per month. Your posts say to me that you live somewhere with a similar cost of living to the DC area. Even so, $2500 per month is a huge amount of unrestricted money to live on, especially for a one person household.
My suggestion? Get rid of cable TV, get rid of expensive cell phones and other gadgets, buy a reliable car that doesn’t have a payment or exorbitant maintenance/insurance costs (remembering to get rid of any that do) and eat the vast majority of your meals at home. Then give yourself a monthly allowance of $100 to spend on going out and watch your bank account grow while your mortgage dwindles.
I certainly see your point. I could never see my parents, for example, having a stranger in their house. Each of them get the heebie jeebies having their siblings in the house. But most people are a lot more laid back, especially when there’s a lot of space all around.
Should the OP go ahead with renting it out, I would not allow use of the kitchen and would try to find someone whose job doesn’t allow them a lot of time at home (like a medical resident, traveling nurse, etc). I’d require renter’s insurance and provide a hot plate and a nice minifridge. And a month to month lease, so if they’re pigs you can kick them out.
A $450 k house is below the median price for San Francisco (and LA, and San Diego). Here’s a 1300 sq ft 3-bedroom with no yard in a decent San Francisco neighborhood. It’s listed for $550,000.
Changing my vote to: This + get a roomate or two. Rent out all the extra bedrooms before the wedding, consider lowering that to just the seperate area once you are married.
Pay off her debt first, as it’s likely a much higher interest rate. Then start socking money away on that prinicple until you are in a position to re-finance to a lower monthly payment. But don’t stop saving to do this. Lower all expenses as much as possible now, save 10% and put all remaining cash toward getting out of debt.
Children cost so much more than you can imagine. You simply must be as prepared financially as possible. When your genius child is languishing in a public school where his/her talents are wasting away, you’re going to look back on all those latte’s like Oscar Schindler saying “That could have been a month in a better school. And the designer suit, that could have been another month. . .”
“Rental with the right to use the kitchen”. In any shared-home situation, one of the things that need to be established is which areas are common, which aren’t, who’s in charge of cleaning what, how to deal with emergencies that affect usability of an assigned area (if someone’s bathroom is broken, they can’t just hold it!)