Hey Money Minder,
I’m nearing my graduation from college and I love investing. I’ve managed to grow my taxable account to $250,000 and my retirement account to $15,000 since I was 18. I also have around $10,000 in my bank account and $200,000 in liquid assets abroad. I have no debt, and I’m about to start a job in the Bay Area with a starting salary of $150,000, which could increase to $180,000 and $210,000 in the next two years.
I really don’t like renting, and buying a home in my area seems like a better idea. A decent one-bedroom condo or modern apartment can cost between $600,000 and $1,000,000. I want at least 600 sq ft, but preferably around 800 sq ft.
Here’s why I’m considering buying a home:
- I can use the money from selling my stocks to make a 20% down payment and cover closing fees.
- With a credit score of 780, I expect a good mortgage rate of around 6-7%.
- I’ll have a place to call my own and decorate as I please.
But here are some reasons I’m still considering renting:
- Mortgage payments could be high with the current interest rates.
- Selling my stocks could result in substantial capital gains taxes.
- I may decide to go to business school, which could mean leaving the high-cost city.
Some factors I’m unsure about:
- I don’t have access to a real estate agent because my family lives abroad.
- I might need to get a car, but I’m considering buying a cheap one.
If I go for a $650,000 house with a $200,000 down payment and a $450,000 loan at 6.66% interest for 30 years, the monthly mortgage payment would be $2,892. My post-tax monthly income would be $8,333.
What do you think, Money Minder? Should I sell my stocks and take the plunge into homeownership? Is it too risky?
Thanks,
Financially Confused
Response from THE MONEY MINDER:
Hello There,
Congratulations on nearing your graduation and having such impressive financial accomplishments at a young age! It’s clear that you’ve put a lot of thought and effort into managing your money wisely.
Considering your situation, while it may be tempting to rush into buying a home with the hefty down payment you have available, it’s crucial to carefully weigh the pros and cons. Renting does have its advantages, especially given your uncertainty about future plans like business school and a potential move.
With your significant liquid assets abroad, you have some flexibility in deciding whether buying a home is the right move for you. It might be wise to hold off on selling your stocks immediately and evaluate your long-term goals before committing to such a huge financial decision.
Furthermore, given the high prices in the Bay Area and the substantial monthly mortgage payments you outlined, buying a home might not be the most financially prudent choice at this moment, especially with potential additional expenses like car loans to consider.
It could be beneficial to seek advice from a financial advisor who can provide a detailed analysis of your financial situation and goals. They may be able to guide you in creating a strategic plan that aligns with your aspirations for business school, potential future moves, and long-term wealth-building.
Remember, it’s essential to balance short-term desires with long-term financial stability. By taking a cautious and practical approach, you can ensure that your hard-earned money continues to work for you effectively. Best of luck with your decision-making process!
Farewell from THE MONEY MINDER
