February 25, 2018 at 4:17 pm #30456juan.d.Participant
Just curious to get everyone’s opinion.
I’m thinking of buying a house. I can put 20% down to avoid mortgage insurance, but the monthly payment is higher than I feel comfortable with. Is it worth selling off some of my non-retirement investments–30 to 40K in mutual funds–to put additional money down to have a smaller monthly payment? Or does it make more sense to have a larger monthly payment but continue to have those investments.
With just 20% down, I will probably need to rely on some of my wife’s monthly income to make the mortgage payments. By making a greater than 20% down payment, I have a smaller monthly mortgage payment and that in theory gives my wife the option to work part-time if we have kids and we don’t really need her salary to cover the monthly mortgage payment.
Any thoughts would be appreciated,
-jdFebruary 25, 2018 at 10:40 pm #30457juan.d.Participant
Also, one clarification to my above post. I currently max out my tsp contributions. With the larger down payment–more than 20%–i could likely continue to max out my TSP or come close; however, with a 20% down payment I could make the larger monthly mortgage payment w/o relying on my wife’s salary by decreasing my TSP contributions.April 26, 2018 at 2:53 pm #30547TS PaulKeymaster
From a straight math standpoint, let’s say you expect a 10% annual return on invested money and you are going to be paying 4% on your mortgage. That’s a 6% swing in favor of borrowing more so that you can have more invested.
But there are always a lot of other factors in a decision like this – in your case the flexibility for your wife to work part time – which might outweigh the math.
From my personal experience, I thought I was getting the largest mortgage I could possibly afford, but within a year or two it was very affordable through a combination of pay increases and those much-maligned automatic step and grade increases we feds get.
The TSP Allocation Guide www.TSPallocation.com
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