Friday, May 20, 2016

It's Friday, and thinking ahead on housing

M & I have been working through our goals for the next 12 months, as our lease expires in August of 2017. Our current plan is to save another $100K for a down payment, and start looking for a house *to buy* in approximately one year. There are so many variables to this, but we think this is a reasonable scenario.

Cost increases & tentative plans:
Saving another $100K would give us enough of a down payment to put between 20-25% down. We are looking at a price range that will increase our housing payment (as compared to our existing rent) by the least amount possible, while keeping the boys in the same school district. The increase in P&I from our existing rent payment will likely be about $1,600. This doesn't include taxes. Property taxes are pretty scary here - we expect to need another $2,000/month for property taxes.

I have a pending question out to our accountant on how much this additional property tax & mortgage interest would change our income tax liability, so that will help us understand net out of pocket impact.

Where will the money for the down payment come from?
As context, M & I have each three sources of "income" - a monthly salary (fixed, well known amount), a yearly bonus (amount unknown, although can predict based on known inputs such as our personal work performance and previous bonus value), and monthly stock vests. For the stock, we have a known amount that we are already getting, and get increased vests once a year. The stock price, of course, is the unknown variable for stock. As a result, I sell my vests every month when they happen - M hangs on to his. He thinks of it as hedging by us each using a different strategy. ;-)

For the additional $100K, the plan is

  • To use my bonus to cover taxes, my 401K and 2017 travel. 
  • M will use M's bonus to cover his 401K contribution for the year, as well as the remaining travel budget. 
  • We will not plan to use our salaries to generate the $100K. We will save our salaries in our existing emergency fund. Mostly because our salaries are covering our existing expenses pretty well right now.  
  • This leaves us with our stock vests. Both of us expect to be able to clear another $50K each (conservative estimate, but again, stock is volatile) in the next year. This will be the source of the additional down payment $100K. 

What about the increase in housing & property tax?
We currently think we could absorb the increase in monthly housing ($1,600) with M's salary. It will be tight, and if our rental house in Seattle has any challenges (we lose our renter, major repairs, etc) things will be very tricky.

Once we are done saving for the down payment, we can free up some amount of our stock vests to put towards property taxes.

Where does this leave me with my job situation?
I'm currently planning on staying at least through June of 2017 to be able to get us through to the down payment savings we need for a house. However, if I can stick it out until January of 2018, we will be in an even better situation (this would include another annual bonus, plus 6 months of additional stock). Mostly because, assuming we buy in the price range we're currently thinking of, I'd need to cover all of our non-mortgage expenses while M covers the mortgage.

I would, of course, really like to hang on to our vacation house. The longer I can work at this income, the more likely it is that we can keep the house. Once things shake out with our mortgage, taxes, and income, it will be easier to understand if this is in the cards.

I do plan (and need to) continue to work, but hopefully not at a job as demanding as this one.

Planning, planning, planning! And with that, I'm off to wrap up a few projects & focus on the much more immediate planning of the weekend. What about you? What's on your agenda for the weekend? 


  1. We need some good planning time as well. My nephew has a graduation party on Sunday and I think of him just starting to make his adult plans and the roads wide open. Not that they are limited, but we are now living the results of decision made at 18, 28, and last year, so know how important planning is as another decade will swoop us up before I know it. I'm rooting for you to make your goals in your time frame, but of course you're sensible to look at options. I don't know how you do the demanding job you do, spend such great time with your family, and are so organized, but more power to you!

    1. Some days I'm not sure either, but I try hard to take care of myself, make manageable lists, and see what I can get done. I also don't watch TV (although I do read blogs), which I feel like helps.

      Hope the graduation party is great, and yes, it's so crazy to me to think about how those decisions impact us forever! I'm glad I didn't think that clearly way back then, or I may have been paralyzed to enjoy & choose paths.

  2. Good to long-term goal plan. Nothing ever happens if you don't plan!

    1. It makes me anxious to think of all of the variables in our situation, but at least having a plan straightens some of it out in my mind. ;-)