Hey All,
Thank you ahead of time.
My wife and I are building a home in a desirable ski town, medium cost of living, high cost of ownership. This area is limited on available land to build, and there is very little opportunity to own. If homes do come for sale, rarely is it below $750k for a 40–50 year old home in moderate despair. Thankfully, we acquired a half-acre through an investment opportunity that resulted in our ownership with an automatic $200k in equity. We feel very fortunate.
Currently, we have $150k deposit with a builder, on a design we anticipate falling in our budget of $750k. Our plan is to put $400k down and borrow the remainder from family through an official loan filed with the title company. The rate for the loan will be 5%. We would hold this note until a point at which we can refinance at an equal or lower rate through a financial institution, repaying our family lenders.
Here is our financial situation, questions to follow:
Emergency funds: Not specifically, we have a large amount of cash, probably too much. Desire 6-12 months.
Debt: None
Tax Filing Status: Used to be Individual, this year Married Filing Jointly.
Tax Rate: 24% Federal, 0% State
State of Residence: AK
Age: 36/34
Annual Combined Salaries: $300k-$330k
Annual Expenses: $80k
His Current Assets:
High Yield Savings Accounts: $103,000
Vanguard (VFMXX): $86,400
Vanguard Brokerage: $91,500
Company 401k: $55,400
Vanguard Roth IRA: $102,800
I-Bond: $23,000
Her Current Assets:
High Yield Savings Accounts/CD's: $120,000
Vanguard (VFMXX): $185,000
Previous/Current Employer Combined 401k's: $111,200
Vanguard Roth IRA: $101,600
I-Bond: $12,000
New Annual Contributions:
His/Her 401k Contributions: Annual Maximum
His/Her 401K (Backdoor): Annual Maximum
Questions:
1. I've searched the forum, and based on any of the 2x, 2.5x, 3x rules for affording a home, I believe that we can afford the home. Does anyone disagree?
2. I've also searched the forum for what is the 'best' down payment percentage. Our current plan is to put roughly 50% down to reduce our monthly mortgage payment/utilities/taxes to a rate at which we can easily afford. We have been saving for a long time to accomplish this, we likely would have put down less had the stars aligned in pre-pandemic years pricing. Am I missing anything with this plan?
3. Our plan for a large down payment is based on meeting in the middle for available funds from the family lender. The alternative would be to place a smaller down payment and seek a construction loan from a lending institution. The construction loan would be in the 8% range, to then be refinanced at a rate at roughly 6-6.5%, or the going rate. Obviously, our monthly payment would be higher, but we would retain liquidity. I have not calculated all the pay-now or pay-later scenarios. Would this financially be a better alternative?
4. Does anyone have any insight on the ins and outs of refinancing a private loan with a lending institution? I have been through the process of filing a private loan and promissory note through the title company, but I'm curious if there are any caveats when it comes to refinancing such a loan.
Key Points
Family lending is not an issue for us. We have done it prior and have no worries that this situation will prove toxic. Obviously, one can ever know, but we are confident.
Thank you ahead of time.
My wife and I are building a home in a desirable ski town, medium cost of living, high cost of ownership. This area is limited on available land to build, and there is very little opportunity to own. If homes do come for sale, rarely is it below $750k for a 40–50 year old home in moderate despair. Thankfully, we acquired a half-acre through an investment opportunity that resulted in our ownership with an automatic $200k in equity. We feel very fortunate.
Currently, we have $150k deposit with a builder, on a design we anticipate falling in our budget of $750k. Our plan is to put $400k down and borrow the remainder from family through an official loan filed with the title company. The rate for the loan will be 5%. We would hold this note until a point at which we can refinance at an equal or lower rate through a financial institution, repaying our family lenders.
Here is our financial situation, questions to follow:
Emergency funds: Not specifically, we have a large amount of cash, probably too much. Desire 6-12 months.
Debt: None
Tax Filing Status: Used to be Individual, this year Married Filing Jointly.
Tax Rate: 24% Federal, 0% State
State of Residence: AK
Age: 36/34
Annual Combined Salaries: $300k-$330k
Annual Expenses: $80k
His Current Assets:
High Yield Savings Accounts: $103,000
Vanguard (VFMXX): $86,400
Vanguard Brokerage: $91,500
Company 401k: $55,400
Vanguard Roth IRA: $102,800
I-Bond: $23,000
Her Current Assets:
High Yield Savings Accounts/CD's: $120,000
Vanguard (VFMXX): $185,000
Previous/Current Employer Combined 401k's: $111,200
Vanguard Roth IRA: $101,600
I-Bond: $12,000
New Annual Contributions:
His/Her 401k Contributions: Annual Maximum
His/Her 401K (Backdoor): Annual Maximum
Questions:
1. I've searched the forum, and based on any of the 2x, 2.5x, 3x rules for affording a home, I believe that we can afford the home. Does anyone disagree?
2. I've also searched the forum for what is the 'best' down payment percentage. Our current plan is to put roughly 50% down to reduce our monthly mortgage payment/utilities/taxes to a rate at which we can easily afford. We have been saving for a long time to accomplish this, we likely would have put down less had the stars aligned in pre-pandemic years pricing. Am I missing anything with this plan?
3. Our plan for a large down payment is based on meeting in the middle for available funds from the family lender. The alternative would be to place a smaller down payment and seek a construction loan from a lending institution. The construction loan would be in the 8% range, to then be refinanced at a rate at roughly 6-6.5%, or the going rate. Obviously, our monthly payment would be higher, but we would retain liquidity. I have not calculated all the pay-now or pay-later scenarios. Would this financially be a better alternative?
4. Does anyone have any insight on the ins and outs of refinancing a private loan with a lending institution? I have been through the process of filing a private loan and promissory note through the title company, but I'm curious if there are any caveats when it comes to refinancing such a loan.
Key Points
Family lending is not an issue for us. We have done it prior and have no worries that this situation will prove toxic. Obviously, one can ever know, but we are confident.
Statistics: Posted by bowma2f9 — Wed Feb 28, 2024 11:16 pm — Replies 0 — Views 239