How much do I need to make for $1.5M home?
I’m aware there’s a lot to consider here but I’m more asking for anecdotal experiences and opinions.
With that, how much would you need to make in annual income to feel comfortable affording a $1.5M home today? Is $500k in household income more than enough or would you
Not enough information to say for sure. Entirely depends on your down payment.
If you're making a down payment of 20% ($300k), then yes $500k of income would, in all likelihood, be more than enough income.
Assuming a $300k down payment, a 6% interest rate on a 30yr mortgage, with modest insurance and property taxes, your monthly payment would be around $7,600. Using the 30% rule, your gross income should then be around $25.3k per month or $304k per year.
Again, there's no hard and fast rule that "$500k per year is enough income to afford a $1.5M house" but most of the time it should be.
Add $1-2k if its a condo in NYC but this nailed it.
30% rule doesn’t scale very well. You’re gonna get hosed on taxes at that income level. So $25k per month pre tax is more like $13k post tax. That’s a lot of money (% basis) going towards housing.
If you make half a million a year and can't afford a $1.5M house, you are doing a lot of other things incorrectly.
LOL bro first thing I thought was wtf - and then ran to comments
Thanks for the comments. I’m getting caught up because I’m currently spending 20% of my net post tax income on rent. To spend 20% net on a mortgage with taxes insurance, etc. I’m far off snd 500k wouldn’t work. Guess people are just spending a lot more for housing. I’m not at that stage of life yet so this was more for my own curiosity
A common rule of thumb is 30% of your gross paycheck can be used for mortgage. Gross is used becuase the interest on your home is tax deductible. But again, it's a rule of thumb and may differ depending on other expenses you have and comfort level for budgeting.
Rule of thumb is that price should be 2-5x your gross income. Obviously depends on market/rates/etc, but I think it holds.
If you're topped out at $500k after a record year, $1.5M might be a bit steep if you can't get back up there in the next years. If you make $500k on average, $1.5M will be in your range. If you are seeing 10%+ increases in income every year, $1.5M will feel very inexpensive in a few years.
When wife and I bought our house, we were at about 3x income from the year we bought, 4x from the year prior. Probably sitting closer to high 1xs now. The house requires some work, so didn't want to stretch, would have been closer to 3.5x on that year and 5x on prior year if the house was buffed. At 3x, it felt expensive, but after a couple of years and some nice raises, it feels really cheap and we are now savings tons of cash to put towards renovations.
For the next place, we are targeting 3-4x again, but most likely for something with less value add.
Thanks, Sloppo.
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