Hi PF, my spouse and I have been saving and looking for our first home for the past several months and we're about to put in an offer. I'm penciling things out and had the following quandary.
We've saved enough for a roughly 12% down payment on the home in cash (plus or minus accounting for closing costs). The property is well within our means and we have a comfortable emergency budget that would cover our expenses for about 6 months if we both lost our jobs, more if we stretched it. I don't want to touch it for this purchase.
We don't really want to put making a purchase off another year (to save up more for a down payment) for a whole variety of reasons, mostly personal. But we also know that interest rates are good right now. Our student debt's nearly gone (under $10k), we're financially and career stable and have good incomes for this area. The home we're looking at is well, well within our budget based on all the calculators we've used and we had no issue being prequalified.
So I'm wondering if it would be fiscally prudent to dip into what I consider long-term savings to close that 8% and avoid paying PMI. I would do this by selling some index funds (not tax advantaged, in a straight brokerage account -- 401k and IRA would be untouched). I've always considered these funds as set aside for retirement, but seeing as this would be a relatively small percentage of those overall funds, and not involve tax advantaged money / incur penalties other than capital gains taxes, I'm feeling it makes sense in the long run. Not to mention the market's on good footing right now, so my investments have grown nicely.
My rough math says this would take about $20k out of my savings, which is about 7.5% of the overall value of my long-term savings portfolio. It would probably take us a couple years to simply pay down the loan to the level we could remove PMI. So we'd be saving at least $3,000 by avoiding it, perhaps more, and it would free that money up to pump back into savings.
My gut says this is a good move and a reasonable ROI for that $20k by way of avoided cost. This account for the cost of any tax event created by the liquidation. What say PF? Is this thinking sound or am I missing something?
Submitted April 04, 2019 at 08:12AM by Houdinis_Condom https://ift.tt/2G0G6Bh
