With your income and assets you can do pretty much whatever you want and you could even pay cash for the new house once you sell your current house. While there are lots of financial details to figure out it is not really a financial decision for you.1. Bigger home will improve quality of life for everyone - specifically kids, easier to host play dates etc vs This is clearly a want and not a need - don't tradeoff a high likelihood fatFIRE by age 50 (~in 8 years) for a bigger home which will also reduce free cash flow further impacting savings rate.
Your cash flow will only be impacted it you have a larger mortgage payment on your next house.
Buying the house for cash might be a bit extreme but you can only deduct the interest on a $750K mortgage so getting a $750K mortgage and paying cash for the balance would be a good option to consider.
If you cannot bring yourself to write a large check for the house house then that might be a sign that you do not want the house badly enough to buy it.
If you buy the next house before you sell your current house then there would be a period of time when you own two houses worth about $5.5 million dollars. The problem is that there is a risk that something will happen which could make it much harder to sell your current house than you are expecting. I do not have a crystal ball but there is a lot going on in the world and nation which could cause unexpected disruptions which could disrupt interest rates and the housing market for selling your old $2 million dollar house.2. Bridge loan + bigger mortgage rather than selling taxable (in order to avoid cap gains) vs reduce highly correlated risk of stock market + home price + employment (iow, selling stocks and burning down the mortgage minimizes the impact of a severe market downturn, losing job(s) and home prices taking a hit at the same time)
A lot depends on your local housing market but it is usually not that hard to time moving straight from one house to another since closing dates are negotiable and you can often negotiate some sort of deal where you can rent back your old house for a few weeks after you sell it. I have sold a house and then closed on buying my next house a few days later while my stuff was in a moving van going across the country. My son sold a house and then bought his next house an hour later in the same lawyers office.
It is more common than not for people to not own two houses at the same time when upgrading just because most people cannot afford to own two houses at once.
You can also rent temporary housing between homes if you need to.
Owning two houses at the same time should be a last resort.
A couple of things to consider.Hoping to get some opinions on the following to help me think through the tradeoffs, tactical options and uncover any blindspots in my thinking.
1) If you get a 30 year mortgage it will not be paid off until you are in your 70s and late 60s.
There are all sorts of opinions about having a mortgage in retirement but it would be good to have a plan to be able to pay off the house by the time you retire even if you decide not to pay it off then. You could be looking at retiring as soon as when your kids are through high school if not sooner.
2) You mentioned you and your spouses commute but also consider what your kids school commutes will be like especially if they stay in the private school. You will also have years when kids are in elementary, middle, and high school and on different schedules than their siblings. In middle and high school they will also have more after school activities and sports.
3) It will likely take you a while to get your current house ready to sell and in some areas it can be very hard(but not impossible) to sell or buy a house during the Thanksgiving through New Years holiday season. I would suspect that you may be looking at doing any buying and selling the houses after the first of the year unless you really want to rush the move. This could be to your advantage since if you need to sell some investments and move money around you can split those between 2024 and 2025 tax years.
Statistics: Posted by Watty — Sat Aug 31, 2024 8:22 pm — Replies 3 — Views 319