Family making $200K a year worried they're priced out of the housing market
This post is inspired by various newspaper columns where a family shares their financial situation and a financial planning professional offers critiques and tips. I’m doing the same here and maybe some forum members will find it interesting or can provide some critique or advice. I fully understand nothing here can be construed as professional advice.
Me: 37-year-old CPA working at a non-profit. Gross $135K a year. Being an NPO, lots of job security and work life balance, but no bonuses and salary increases are going to be at or near inflation.
Wife: 32-year-old public servant. Makes $75K with DB pension. Her grid tops out at $100K in a few years.
We have a toddler and will likely plan for another kid in a few years.
Living and working outside the GTA, we bought a 1,500 sq.ft. detached home in 2015 for $300K. The house is now worth $750K. We have $235K mortgage remaining.
Our TFSAs has market value of approx. $200K. mostly in equity index funds, and some tech stocks (couldn’t resist). RRSP and DC pension total $220K. No other liabilities. Our net worth is just under $1M.
We live well below our means, and because our current mortgage is so small, we are saving almost 50% of our gross income. We saved $60K in our TFSA and RRSP last year even though wife was on mat leave. We expect to save approx. $100K this year towards our TFSA, RESP and RRSP. I did not count any contributions towards wife’s DB pension. Once we max out our TFSA next year, we will open taxable accounts.
With every increase in home values or stock market, it decreases the buying power of our future income. Gone are the days where you can have a median household income, and afford a nice house, a cottage, a boat and raise four kids. Our gross household income of $200K+, we are very concerned that we will be priced out of our dream home and raise a second kid.
The forever home we want was $700K before the pandemic. It’s now $1M. If we wait another two or three years, it may very well be $1.3M to $1.5M. The rise in the value of our current home can’t possibly keep up. Our salaries and savings won’t be able to keep that up either.
My current thoughts are whether we should take more risk in our investments. Our jobs/incomes are steady, but we are being priced out of the two biggest areas where our money will go – a home and investments. Our mortgage is up for renewal soon. I’m thinking of accessing $300K of equity and max out our TFSA and RRSP right away, then invest in taxable accounts. Taxable account will have a mix of index funds and dividend stocks. I have no interest in buying and managing real estate.
Is taking out $300K from the equity of our home to invest too much risk? (I know risk tolerance is very personal, but I am trying to make the most rational decision based on our stated goal)
Also, for interest to be deductible, can the funds be from a refinanced mortgage on a primary home? Or does it has to be from a LOC/HELOC?
Thanks in advance for any tips or advice.
Me: 37-year-old CPA working at a non-profit. Gross $135K a year. Being an NPO, lots of job security and work life balance, but no bonuses and salary increases are going to be at or near inflation.
Wife: 32-year-old public servant. Makes $75K with DB pension. Her grid tops out at $100K in a few years.
We have a toddler and will likely plan for another kid in a few years.
Living and working outside the GTA, we bought a 1,500 sq.ft. detached home in 2015 for $300K. The house is now worth $750K. We have $235K mortgage remaining.
Our TFSAs has market value of approx. $200K. mostly in equity index funds, and some tech stocks (couldn’t resist). RRSP and DC pension total $220K. No other liabilities. Our net worth is just under $1M.
We live well below our means, and because our current mortgage is so small, we are saving almost 50% of our gross income. We saved $60K in our TFSA and RRSP last year even though wife was on mat leave. We expect to save approx. $100K this year towards our TFSA, RESP and RRSP. I did not count any contributions towards wife’s DB pension. Once we max out our TFSA next year, we will open taxable accounts.
With every increase in home values or stock market, it decreases the buying power of our future income. Gone are the days where you can have a median household income, and afford a nice house, a cottage, a boat and raise four kids. Our gross household income of $200K+, we are very concerned that we will be priced out of our dream home and raise a second kid.
The forever home we want was $700K before the pandemic. It’s now $1M. If we wait another two or three years, it may very well be $1.3M to $1.5M. The rise in the value of our current home can’t possibly keep up. Our salaries and savings won’t be able to keep that up either.
My current thoughts are whether we should take more risk in our investments. Our jobs/incomes are steady, but we are being priced out of the two biggest areas where our money will go – a home and investments. Our mortgage is up for renewal soon. I’m thinking of accessing $300K of equity and max out our TFSA and RRSP right away, then invest in taxable accounts. Taxable account will have a mix of index funds and dividend stocks. I have no interest in buying and managing real estate.
Is taking out $300K from the equity of our home to invest too much risk? (I know risk tolerance is very personal, but I am trying to make the most rational decision based on our stated goal)
Also, for interest to be deductible, can the funds be from a refinanced mortgage on a primary home? Or does it has to be from a LOC/HELOC?
Thanks in advance for any tips or advice.
