My wife and I have always wanted to move to a place in the country "someday". We'd like more space, a shop, some livestock, etc. Background - Single income, 5 kids ages 3-11. Both of us grew up in really small towns and I grew up on a farm. Currently in a great house in a great neighborhood that checks a lot of boxes for our family especially in terms of square footage and quality of home. And the mortgage is super cheap for the house we have.

There's a country home that we've both loved that hit the market. So we went and looked at and had a serious conversation with our realtor. Ultimately, we decided it wasn't quite time. Between the interest rate, what they thought our house would sell for, etc. we're looking at a substantial bump in mortgage, something on the order of $20-25k/yr extra.

I think what's hard is that we could afford it, but that's a chunk of margin to eat into. There's a lot of trade-offs either way we go, and we're wrestling with how serious to be about looking for a place sooner than later. The interest rates could still come down. Housing prices only continue to go up. We've got kids college to think about (we've save a lot but not enough). Being single income puts a lot of pressure to maintain our margin. Our current house is still a great one, and a blessing for our lifestyle. We know our kids will start to leave the home sooner than we think and don't want to miss out. Etc.

I think this question is going to have a different answer for every person, but I'd welcome the input and any thoughts for others who've dealt with the same thing.

If you knew interest rates would be 100-150bps lower this time next year, would that change anything?

I think interest rates will be coming down by next summer when Fed Chair Powell is gone!

Z3phyr said:

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Pass, single income and 5 kids. Margin creates peace

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I definitely understand the sentiment. I'll add that it won't eliminate our margin, but cut it down quite a bit.

We do max out HSA and a 401k, plus a significant chunk in a taxable account. Without getting to specific, I wonder if I'm being too conservative. But I agree that peace is a good thing.

Hard to give any kind of advice without knowing specifics.

I'd also be very careful about expecting there to be 150 interest rate deduction a year from now. Lots of people signed up for interest only loans in 2005-2007 and that didn't work out too well.

The wildcard is the 10 yr. I'd see what happens with inflation, tariffs, BBB, and the markets before making any risky decisions.

Also, home prices haven't bottomed yet imo.

Just how secure is your job? What is the possibility of getting a raise/advancing?

Also is there a home based business that the wife and kids could do to make extra income?
Is it possible to get a loan from a family member [parenst/grandparents]

insulator_king said:

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Just how secure is your job? What is the possibility of getting a raise/advancing?

Also is there a home based business that the wife and kids could do to make extra income?
Is it possible to get a loan from a family member [parenst/grandparents]

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I don't think any job is 100% secure, but it's about as close as it gets in a corporate setting. I'd consider my comp to be pretty good and it stays with the market pretty decently. Where I am in our org structure, there's not a lot of spots to grow into, but those spots would come with a nice bump. I consider myself topped out, but realistically, I think there's a chance I've got one more level to grow into.

As far as home-based business, I do a little bit of cabinetry for people. With a shop, I could bump that up. It is something I enjoy.

Probably a no-go for a loan from family.

I would stay put and keeping building reserve funds. This is not the time to buy unless your cash cushion is deep and net worth, indepedent of primary residance and risk assets, is very high.

If you were an OINK, I would pull the trigger but with 5 kids depending on you...to reduce your margin cushion seems risky. Maybe get the first couple out of the house and hope we have a housing collapse by then and then also hope you are not collateral damage in that same housing collapse economy.

There is really no way that isn't happening based on the data and realities behind it; just a matter of when.

That's going to be a no from me, dawg.

OldArmyCT said:

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What do your kids think about moving out of their neighborhood and into the woods where they can only see their friends if you drive them to them? My daughter lives way outside of town, nice place but her daughter is only 15 so she depends on parents to get anywhere. Can't even carpool.

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Think this is a non-issue for us. Most of our kids' friends aren't in the same neighborhood anyway.

YouBet said:

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If you were an OINK, I would pull the trigger but with 5 kids depending on you...to reduce your margin cushion seems risky.

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Picking at this a little further, because it's where my biggest hesitation comes from.

If I have a $20k/yr margin, and I add $20k/yr in mortgage (new margin of $0k/yr) - that would be stupid.
If I have a $100k/yr margin, and I add $20k/yr in mortgage (new margin of $80k/yr) - It's not a decision that builds net worth, but it's not stupid.

I think there's a threshold somewhere in there, and it's probably different for everyone. But maybe that's a little more discrete of a question. Where is that threshold appropriate?

And I think it pairs with Heineken-Ashi's comments about reserve funds and high non-residence net worth. Where do these need to be to lower the risk? Again, probably different for everyone.

Considering you are a one income family with 5 kids then your margin of error is much lower and your reserve funds should therefore be higher. My wife and I have no kids but we have 2 years of cash in reserve funds - that might seem high to some, but I don't trust our economics considering the federal debt and it gives me peace of mind.

Trump will put a pet monkey in the fed chair in a year. Then refinance

YouBet said:

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Considering you are a one income family with 5 kids then your margin of error is much lower and your reserve funds should therefore be higher. My wife and I have no kids but we have 2 years of cash in reserve funds - that might seem high to some, but I don't trust our economics considering the federal debt and it gives me peace of mind.

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2 years? Add a little risk to your profile. Kidding - way more than I think is necessary, but I understand it. I have a lot of concerns about the economics/fed debt as well, and I think holding so much fiat currency is it's own type of risk if the Great Reset happens, personally.

But I agree that with OI5K, we need more cushion than most, and we've accounted for it. 6 months reserves, plus some diversified investments that have varying stages of liquidity. And when I talk about margin, I mean on top of everything we plan for in a typical year - Food, fuel, insurance, mortgage, vacation, home projects, school expenses, 401k, etc.

We still have 75% of stuff in equities so we are risky enough. Actually want to derisk that further.

I'm single income and sound like in a very similar situation to you… less kids and slightly different circumstances. I have been debt free for about 6 years now and couldn't fathom adding debt to my portfolio with college and such on the horizon for one of my kids.

I've got similar aspirations to you in terms of where I eventually want to be and look from time to time. Focus on dropping the debt no matter how cheap it is would be my advice. The opportunities to go live where you want to will still be there whether you've got debt or not and you'll sleep way better at night not having more debt with presumably larger expenses looming on the horizon. I know I do.

The evaluation I've done is I eat into my cushion now for cheaper price on a property but less reserve margin and possibly an opportunity to refinance down the road. But I live with and think about that risk often. Or I wait until my expenses drop even more after college costs are behind me and my kids feet are under them. Yeah I'll probably pay up a lot more for a property… but will I lose sleep over that or care if it ends up being a property I'm happy with for 10-20 years? Don't think I will,

Not opposed to it, but the value is so much better for used homes vs new homes in our market, on the order of $50/sqft. And depending on the property, there may be other development costs that start to add up. I'll keep thinking on it, though. Maybe even an opportunity to do a lot of the construction myself (famous last words from a lot of people )

Large families ftw! Keep it up.

Thanks - totally agree with being debt free (at least outside of a mortgage). Keep it up

BenTheGoodAg said:

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Not opposed to it, but the value is so much better for used homes vs new homes in our market, on the order of $50/sqft. And depending on the property, there may be other development costs that start to add up. I'll keep thinking on it, though. Maybe even an opportunity to do a lot of the construction myself (famous last words from a lot of people )

Large families ftw! Keep it up.

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Where the heck are you? Builders have been slashing prices everywhere, as well as offering concessions, 6% to Realtors, and rate buydowns. In the majority of locations it as absolutely cheaper, both from a price standpoint and a long-term cost standpoint to buy new right now.

I agree on a macro level. But location may have a unique market. Also I would not bet mortgage rates will go down in the next 24 months. If trumps bill is passed I would watch the 10 year bonds closely. I am not sure that market will welcome 3-4 trillion in new debt.

Iowaggie said:

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BenTheGoodAg said:

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Z3phyr said:

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Pass, single income and 5 kids. Margin creates peace

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I definitely understand the sentiment. I'll add that it won't eliminate our margin, but cut it down quite a bit.

We do max out HSA and a 401k, plus a significant chunk in a taxable account. Without getting to specific, I wonder if I'm being too conservative. But I agree that peace is a good thing.

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Just to come back to this. With what you put in your taxable account and reducing your HSA and 401K contributions by 10-20%, would that cover the difference in mortgage payments?

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We could reduce our taxable investing and cover it without touching 401k or HSA. Not quite sure if that's what you're asking

OldArmyCT said:

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What do your kids think about moving out of their neighborhood and into the woods where they can only see their friends if you drive them to them? My daughter lives way outside of town, nice place but her daughter is only 15 so she depends on parents to get anywhere. Can't even carpool.

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I had similar thoughts regarding them leaving their friends and it being harder to see those friends. We moved to the country when I was 14, and was impacted a little bit by that myself.

OP, you said you have a great house, great neighborhood and a cheap mortgage and needed to set aside more for college costs for your children. I'd likely be inclined to stay put, save a little more for a future purchase, save more for the college costs.

If you found a suitable piece of property, maybe buy it when you do, stick an RV on it (if allowed), start making it the place you want it to be one day (fencing, barns, gardens, trees, pond) a little at a time but not be burdened by debt service of a new house just yet. Still get to enjoy the place while the kids are at home though.

Yeah, prices for building will likely rise. Will your wife go back to work, or start to work, once the kids are all in school? If so, maybe her income could cover the note on the new house.