The saying on reddit goes the best time to buy a house is when you can afford to. Checking in to see if that's the same for first time home buyers in our 30s.
My 33F partner 39M and I started our careers about 5 years ago and put a lot into becoming and staying debt free, while saving. We now take home 9.9k a month. We paid our cars in saved cash (my partner's ridiculous jeep was 45k, and I have a honda 11k) and paid our 75k of student loans off at the end of the pandemic's interest pause.
Current savings: 76k in HYSA, 6k in S&P 500, 6k in 529 account, 26k each for Roth IRAs we just opened/maxed out 3 years ago
We feel late to the game going into a 30-year loan buying a house in California. My partner will be 69 when its paid off and I will be 63. That's only if we don't move. Is it even worth it?
Our rent vs. buy calculators tell us to rent forever. Even if rent went up every year the max amount, it would take 11 years to make break even; this is for a modest home in our area for $425k. Our stats if interested:
Rent: $1430 for 980sq ft 2br, 2 bath, 2 car garage, decent backyard (rent has went up $200 total since moving in 6.5 years ago. landlord said due to new trash system, sewage, and water. they cover these as well as landscaping and maintenance when things break.)
family size: 39M, 33F, 6yo child. no plans for more.
bills: $2196 including rent (car insurance$190, gas/electric$60-140, phones $60, internet $60, $26 movie subscription, in-laws storage $70, therapy $220)
monthly savings: $4868 (2000 into HYSA at 6% for house, 1k in SP500, $200 monthly for 529 account, $1168 monthly to max out Roth IRAs, $500 monthly travel)
expenses: The extra $2800 each month goes primarily to consumables. it's a lot of nothing really. gas, food, entertainment without a budget. Whatever amount is left over, I put it into the reduced HYSA 3.4%, because the 6% one is capped at 2k per month.
Medical insurance is fully covered by partners job. He will be fully vested in pension which includes lifetime medical in 1.5 years. I also have a pension set up with CalSTRS, but need a lot more years ahead for that. Hope it's still there, because I don't pay social security and we started retirement late. If it's still there I will be taking home 80% of my monthly income. My job is secure as long as there are no HUGE legislation changes. We both get yearly raise increases.
Late-bloomers financially. Should we buy a home?
byu/Any-Life3860 inpersonalfinance
Posted by Any-Life3860
24 Comments
39/33 isn’t even close to “late”. Buy the house.
How’s your retirement looking?
Renting vs. buying is a personal decision. Even if the financials don’t necessarily make the most sense in terms of ROI, it’s ok to say that you’d prefer to own and are willing to pay more to do so.
My two cents – that seems like a steal for rent. As long as you like where you live, in your shoes I’d probably just continue to rent and throw a lot more $$ into investments. If something changes, you can always buy.
If you have access to a 401K, 403b, etc. through work I’d start contributing to that. Or a solo 401K if you don’t have any options through work. And then, just because I don’t see it listed, make sure you both have (term!) life insurance policies.
Buying makes sense if you want control and permanence: no landlord risk, predictable housing costs, and a paid-off place to live in retirement. Given your strong savings and pensions, you can afford to view a home as long-term security rather than a short-term financial win.
Where are you getting 6% right now?
Your rent is phenomenal .. if you’re going to buy.. rent that property out and stay where you’re living. If you’re in Cali and paying less than most 1 bd for a 2 bd.. your mortgage is probably going to be 3x that
I wouldn’t say you’re late bloomers on a house but you’re definitely late bloomers on your retirement.
You should not be allocating that much into HYSA. Once you have a 6 month emergency fund, you need to be shoveling that money into your retirement fund. Not just a Roth. The Roth limit is tiny. You need to catch up on your retirement. You should have 3x your annual spend at a minimum by age 40.
Home ownership historically has been an amazing investment. I bought at the bottom in 2012 in a major tech city. I refinanced at a hair over 2%. So my personal experience would say hell yes.
Right now prices appear relatively high compared to income, interest rates are fairly high, and there is a lot of uncertainty in the economy…and many boomers are aging out of single family homes.
That’s a lot of potential downward pressure on home prices so if I were a first time home buyer I would not have a burning need to get in now…but if you are stable and not planning to move I’d still say it’s a good idea.
Just keep in mind there can be a ton of hidden costs to home ownership, so to keep stress low you want a nice cushion for repairs…and for the love of God don’t max out what a bank will lend you.
My wife and I both work and we bought a modest house based on only one income. Over time our income has risen and our mortgage stays the same…leaving more financial freedom. No regrets on the modest house.
Final note. Your landlord seems to think you are good tenants and isn’t jacking up your rent. Assuming you like your place/location even less of a reason to buy a home.
Buying in this market in one of the worst States to buy? That’s a no from me dawg. If you want to own a home I’d recommend relocating to literally anywhere else. Cali is a cool state, but owning property there is a clusterf*ck between the ridiculous valuations and wildfire insurance situation.
No 401k balances or contributions? You should be more worried about retirement and start contributing to that over the 1k in a taxable account to the S&P 500.
More of a lifestyle decision for you guys than anything else, if you like the property your renting just stay their and keep saving.
At your savings rate and with current interest rates just keep stacking up that house down payment unless you really want to leave your rental but it seems like a great deal to stay
11 years in the future will come whether you buy or not. If your break even is in 11 years, then you’ll be grateful in 11 years when you’ve broken even instead of facing continual rent increases for the rest of your lives.
Here’s the problem with your rent though: it will go up, and up and up and up. If you can find a house you can afford, though of course she will spend money on maintenance and taxes, you eventually will own it and your mortgage payment will not go up. The trickiest part is buying where you live because Bargains are rare. But you are far from being too late to the game and one of the keys for me being able to retire before age 65 was that I paid off my house early because don’t forget normally, your wages will go up even though your mortgage will stay the same. So if you plan on staying there for at least 10 years or more, and you won’t be house poor, generally buying almost always makes sense especially for someone your age.
You need to focus on your retirement right now.
We took out a 30 year mortgage at age 30. Refinanced it to a 15-year several years in and paid it off in 17 total.
The 30-year thing is merely a suggestion. Buy the house – you may never get another chance.
I would buy a house. You’re a perfect homebuyer.
Getting on the housing ladder is historically the biggest wealth generator for your income demographic.
Rent will always creep up. If you are not planing to move then at least lock your cost, hedge inflation and put that money into something you will get a return from
Do the math to see what your all-in housing payment would be if you buy. Mortgage, insurance, taxes, plus assume 1-3% of purchase price per year in maintenance.
If you decide not to buy, take the different between your rent and that calculated housing payment and put it into your retirement, on top of what you’re already contributing. If you’re *not* going to do that, you really should just buy the house.
Definitely buy a home. We were in your situation a while back.. except it was the height of the Great Recession and lots of “smart” people were saying that houses are no longer good investments. Then we got a note from the bank telling us our landlord is in foreclosure. And we bought a home. I am SO glad we did. Our “rent” (ie mortgage) doesn’t fluctuate wildly and it’s way cheaper than rent, even when you factor in the repairs. (BTW, I am really grateful my husband is handy.) And the smart people were dead wrong. A home is a great investment.
Buying is mostly a lifestyle choice right now. Renting, in most markets, is a clear winner financially in the short to medium term.
Can you afford it? Do you want to deal with the extra costs and responsibilities of being a homeowner? Are you reasonably sure you’ll stay in the home 5+ years?
If all three of those are not “yes” without a whole lot of thought, don’t buy. If they are, buy.
$1,430 in rent for suitable housing for a family of three in CA is extremely difficult to beat though. I would ride that arrangement as long as possible and reassess if and when there is a *huge* rent increase on the table, you’ve saved enough to take down a *huge* portion of a home purchase in cash, you need to move out of town, whatever rocks the status quo. That’s so far below what the cost of ownership would be and you need to catch up on retirement.
> We feel late to the game going into a 30-year loan buying a house in California. My partner will be 69 when its paid off and I will be 63. That’s only if we don’t move. Is it even worth it?
You have gotten some great advice, but I just want to address this real quick. I know that 63 and 69 feel really old right now in your 30’s, but it’s not. If things go right you have another 30 years beyond that of living expenses to worry about. But more than that, every middle class parent I know in California worries about how their kids will afford to live in their community as adults. Even if the math doesn’t math for 30 years, there are years beyond that. You are establishing your future in your current location and ensuring your children have the option to stay (even if that means multigenerational living/ADU/or inheriting).
If you aren’t sure this is where you want to be long term, rent and save. But if this is where you want to be long term, buy when you can afford to, and get that prop 13 tax rate locked in.
I didn’t get my first until 44. The motivation was being fed up with the policies at large corporate apartment complexes. However I tried to be smart about it, and after looking at dozens of single family starter homes, I instead shifted to looking at duplexes. I don’t require 1500-1800 sqft, and don’t have a family. So having a tenant helping me afford it made great sense. I’ve been in it 17 years and still haven’t outgrown it.
>My partner will be 69 when its paid off and I will be 63. That’s only if we don’t move.
Basically irrelevant. All that matters is whether you’ll be there long enough for appreciation to compensate for the very high fees involved in the transaction. People say 5 years, but I can tell you first hand it may not be enough. My place lost 20% after the last crash and took 5 years just to appraise again. It was another several years to hit break even with the fees included. Now at year 17, it’s approximately double what I paid.
My only concern is that it sounds like you’ll need to wipe out your retirement accounts to get a down together. My advice would be to not, and to start saving to a dedicated fund. If you get close and need to pull some from Roth to get you over the top, you can, but you also have 60 days to get it back in as a rollover, and I advise doing that.
Also be careful when shopping that you not take tax disclosures as fact until you look up the property on the taxing authority website and verify the appraised tax value. If it’s substantially lower than the asking price, count on being reappraised and having a much larger tax bill than the current owners.
I’ll share my anecdotal experience:
When I was looking for a home, all the rent vs buy calculators said renting forever was the better move.
I bought a place that I felt was below market value in 2010, when fewer people were buying.
I stayed – and this part is important – for 13 years.
In that time the house went up 2.5x in value, and of course I paid down the mortgage. AND the interest on the mortgage was tax deductible. On the minus side, I also had to do repairs and pay property taxes, and all the other annoying things that come with home ownership.
But when I sold I moved from VHCOL Bay Area to HCOL Portland and suddenly was in a very good position to retire.
Would I have been better off keeping my 20% down payment in the stock market and paying rent? Maybe.
But I’m very satisfied having lived in a beautiful Bay Area home for 13 years.
I bought my first home at 32. Sold it later to get a bigger house (growing family) and because it had appreciated in value i got every cent i paid into it back in my pocket.
Definitely not too late to buy a house.
BUT! If the rent buy calculator says to rent, that’s financial the better decision. It assumes you will invest the savings, which historically have grown better than real estate. So from a purely math and money perspective, you should just rent forever.
Whether you WANT to stay in a rental forever is a different story. Many folks enjoy the emotional/mental satisfaction of “owning property”, and there’s no way for anyone else to put a number on that.