I made a mistake guys. I made the mistake of just looking.
Looking can be dangerous because the problem is that sometimes you find what you’re looking for.
I know, because it’s how I ended up with a second dog growing up. We went to the animal shelter one day, just to look. We came home with a beagle. I learned that you never go just to look.
Alas, I looked anyway. At houses (which are much more expensive to ‘just look at’ than pets, by the way).
Our Current Home
My husband and I bought our house a little over two years ago. We were moving back to my hometown and told ourselves that finding an apartment that allowed two animals would be difficult so we rationalized that we ‘needed’ to buy. (It was a bad excuse, I know that now).
We ended up with a house that we like, it’s just not in a neighborhood that we love. It’s not a bad neighborhood, it’s still comfortable and safe, but just not our dream location. I know, we broke the golden rule of real estate. Location, location, location.
After a while, we realized that we really should have sucked it up and rented for a while instead of rushing to buy that house, but we can’t change the past.
The house is a really good fit for us financially though. We recently refinanced it to a 15-year mortgage and even with that, the payment is manageable so that if one of us lost our job or wanted to quit, we could still pay it on one income. While we’re both working, the payment is at a level that allows us to save aggressively and do things like max out retirement accounts and think about saving for an investment property or take vacations.
After living in it a while we realized we really wish it was more open-concept but it’s just not laid out in a way to make that possible even with a renovation. We never really thought of it as a starter home though because it’s more than enough space for our family to grow into over time.
”Just Looking” at new houses
The other day I was ‘just looking’ at houses online. I came across a house that was newly listed.
It was beautiful. It’s in our preferred school district, it’s literally within walking distance to my work and all the schools our kids would attend. It has the open concept that our house lacks (and isn’t possible to add), and a panoramic view of the city and the mountains (a rare find in our city)!
The only downside is the price. It’s listed for 60% more than we paid for our current house.
Now, being the natural numbers nerd I dove right in and started crunching the numbers.
Issue #1: The down payment.
We could scrounge up enough for a 5% down payment by selling our current home (after realtor commissions and associated costs). We may also need to dip into our savings to cover all the costs at closing.
Issue #2: The monthly payment.
With a bigger loan comes a bigger payment. Luckily we live in a low tax area. But still, with taxes and insurance factored in, we couldn’t afford a 15-year mortgage in this new house. We would pay off the last consumer loan we have with the sale of our house (a truck) and then the 30-year payment would be what we’re paying for both our house and the truck currently. So it wouldn’t really increase our monthly bills, just the life of our loan.
Issue #3: Future kids.
We know we want a second child. Can we afford daycare for two kids with this house payment? Yes, that would still be doable, but during those years I might have to scale back retirement contributions. Now, some people (outside the FI community) might say we’re ’overfunding’ retirement right now, so we’d still be able to contribute some in addition to our mandatory pension contributions if we got this house, but just couldn’t max them out like we’re doing now.
Issue #4: Life Happens.
What if life happens and something changes? Could one of us lose our job? Maybe? It would be uncomfortably tight, but we would be able to cover our bills. The thought of being held in that situation for 30 years scares me. Unless one of us got a raise though, we probably wouldn’t be in a place to voluntarily become a one-income household. My husband will likely be getting a raise in the near future, but I probably won’t.
Issue #5: Interest Rates
Interest rates are still hovering at abnormally low numbers. They’re hovering around 4% now but historically they have been around the 7-8% range. I ran the numbers on what a house like this would cost if interest rates rise. If we stayed in our house for 5 years we could build up $100K in equity and/or savings to use as a down payment on the same price house we’re looking at. If interest rates rise to 8%, and we put down 100k (over 30%), the payment would be exactly the same we’re considering now, with a 5% down payment and PMI! Even after $100K down! Interest rates may or may not rise back to those levels soon, but should financial decisions be based on, “What Ifs”?
Balancing Logic and Emotion
Sometimes logic and emotion can be difficult to reconcile. We went back and forth over whether to offer on the house, until I sat down and thought, “WHAT THE HECK ARE WE DOING?!”
Here we were debating numbers and what we could compromise to make this home work, but what we were really debating was our values. We were considering giving up our path to FI, our financial flexibility, our emergency fund, and our daughter’s college fund to pay for this house. That’s not who we want to be!!
My husband came and asked me if I wanted the dream house or if I wanted financial independence and when he phrased it like that, it was a no-brainer. We want financial independence and that’s within sight for us in this house. The key to reaching financial independence faster is to spend less.
I can live without an open concept house for the sake of freedom.
Gratitude and the Rat Race
Here we are complaining about our house, when we should be recognizing that we are fortunate enough to have a house at all! We are blessed with a comfortable home close to our family and friends and nobody would think more or less of us if we moved to that new house. We are privileged to even consider financial independence as an option.
I’m still figuring out how, but now, more than ever I want to strive for contentment. I want to appreciate what I have and not get stuck in the rat race of being tied to a job because I always want newer, bigger, better.
So, I’m not going to let myself wallow and feel sad about missing out on that house but rather look toward my goals with a renewed fervency. If we pay our mortgage at the increased amount we were considering paying for the new house, we could pay it off in 10 years! That’s what I will focus on instead.
What would you do?
I want to hear from you all. Have you ever been in a situation where you’ve been tempted similarly? How did you make your decision?
Do you think a dream house is worth it? Is there even such a thing?