Background: My fiancé and I have been looking at houses. She's in law and I'm in engineering. I currently own a house bought before the pandemic with a small mortgage, which allows me about 50% of my income for discretionary allowance (savings or purchases).
I'm studying full time for a second engineering degree and have about 2 years left, for a transition to high tech. I work full time. She is starting first job in law and has credit card and law school loans. There's a "dream house" on the water near by that we could purchase but worry it would slow down our life goals, so we withdrew our offer. How does HN see this decision?
But a home that is very affordable using a 30 year fixed rate loan with a low monthly payment and no early repayment penalties. Pay back monthly more than required, such that you’re on a 10 or 15 year repayment plan.
Pocket the rest as savings, with some discretionary spending money.
In 10 years (earliest) you own your home and should have a pretty sizeable investment portfolio.
You now have an option - do the same thing again (2nd home) or double down on stocks / investment knowing that your primary residence is secured.
The trick in finance is avoiding interest and fees over the long haul. Buy, hold, invest. Be patient and modest while you are young. Your dream home will be there for you in your 40s with this plan.
What I'm saying is, find a house you and your fiance (and whatever plans you may or may not have for... other people living there in the future) can be happy in, that you can afford, and go with that, regardless of whether it's the fanciest house you can afford or not. That "dream house" -- is it really a dream house if, as you said, it would interfere with other life goals that may be more important to you? Or is it just a "fancy house" that looks nice and comfy but has strongly diminishing returns on the utility curve?
Think of it this way: if you buy a big fancy house, you may make more money selling it later in life. If you buy a more modest house, you will have more money now. So either option leaves you with money, it's just a matter of what you'd do with that extra money now vs later. If you have life goals that are important to you, and that would cost money short-term, buy the smaller place. If all your goals are long-term only and you won't need to pay for them until decades down the line, then sure, go for the fancy house.
I've always made the decision to live well below my means.
This has helped with relationships, and also helped me build savings.
With savings come options.
You can afford to take a risk on a high paying but unstable gig.
This approach has worked pretty well for me.
The interesting thing we learned was doctors and lawyers tended to be horrible with money. There was a lot of “keeping up with the Jones’s” which caused a lot of stress.
If you’re at all thinking about starting a business in the near future, do not buy the most you can afford. Having a big mortgage impacts how long you can take to get your business off the ground. Having said that, you’ll want to get a mortgage while you have employment income since being self-employed makes it a lot harder to get a mortgage
Where it worked for couples to max out early was with those with a predictable path that had job security with significant increase in pay, those who got a windfall or had help from family, and those who had the right business at the right time. Also, those who bought in the right area. The nicest area doesn’t always appreciate the most.
The fact that you withdrew your offer means something didn’t sit well with you. There will always be another dream home. Another commenter mentioned buying a fourplex, living in one unit and renting out the others. That’s a great option to look into and learn more about.
If you look at who’s wealthiest in society, it’s the business owner. It’s awesome that you’re exploring that avenue. Just make sure you’re managing your risk well. Also, the wealthiest are landowners. Lots to explore beyond conventional wisdom which hasn’t been working like it used to
If you and your fiancé aren’t aligned with this decision it might help to know that you’ll be able to buy a nicer dream home once your schooling is done, your career is underway, and the credit card debit is taken care of
One thing I will mention that if you want your house to appreciated in value, look for land that can be rezoned, split, and so on, or is likely to change zone in the future, and in a demand trending up location.
I regret not pushing harder for use to live in less-than-ideal house that would have been in a great location. It was a small house, decent land, next door to 5-storey buildings. Get permission for a 5-storey and that would be retirement.
A lovely house on the water? This isn't your only chance to buy one. It's OK to pass on it now if things don't line up right.
You might put polish on the home you're in now if you're looking to invest effort that way. Granite countertops are so last decade: How much more valuable would it be if it had a moat?
Personally, we bought a small old farm house, likely the cheapest house in town. We do have an excellent school district, so we thought it was a great idea. We have no mortgage.
I have zero regrets. Our taxes will always be lower than any of our neighbors, which is good now that I'm on a fixed income.
A much wiser thing to do is buy a duplex or triplex, the "nicest" one you can afford, defining "nicest" in terms of total rent after expenses other than principal.
Then as the value goes up you can access it through rents going up. You may even be able to sell half off as a condo someday in some cases, while still keeping a place to live.
If buying a place that you can rent part of out in the future is not realistic, I would just buy the most affordable home you can tolerate and enjoy. The extra value won't ever be able to help you unless you decide to become homeless, die, or move to a different much cheaper area.
> Tl;Dr: conventional wisdom is to buy the nicest house you can afford, thinking that housing appreciates