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Author: LQueiros Big gold star, 5000 posts Top Favorite Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 885609  
Subject: Re: How big a house can I afford Date: 5/20/2001 10:33 AM
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I have seen this kind of post before but I could not find it....

I think some of these might be what you are looking for:

The Power of Paper (long)
http://boards.fool.com/Message.asp?mid=14905355

Dodged a BIG Bullet Last Night
http://boards.fool.com/Message.asp?mid=14562755

They Might "Have To" Move
http://boards.fool.com/Message.asp?mid=14647850

Trilogy of Doom (Epilogue)
http://boards.fool.com/Message.asp?mid=14415425

Trophy Homes - Retire Early Home Page board
http://boards.fool.com/Message.asp?mid=14980897

Income Question - Buying a Home board
http://boards.fool.com/Message.asp?mid=14860438

Fool's Home Help Center
http://www.fool.com/homecenter/homecenter.htm?ref=LN
includes link to "How Much Can You Afford?" article

Bankrate.com How Much House Can You Afford Calculator
http://www.bankrate.com/brm/calc/newhouse/calculator.asp

I think moving from a $250k to $430k house & increasing your monthly payment by $1200 just for an extra bedroom is a bit extreme. There are no guarantees your income will stay at this higher level. What if one or both of you lose a job? Do you have emergency savings? Retirement savings? College savings for the kids? If you haven't funded any of those, you would do well to use some of that increase for those purposes.

Closing costs average 3-5%. It will cost you approximately $21,000 just to close on the new house. Plus moving costs, increased monthly utilities, taxes, maintenance & repairs (both time & money), insurance, etc. Would you be uprooting the kids from school too or is it in the same neighborhood?

What if you invested those costs plus the extra $14,400 a year you would have paid just for larger payments each year for the larger home into renovating your current home instead? Add a bedroom or renovate an existing office/den/etc into a bedroom? Do you have a basement? Add a bedroom there.

What are the average construction cost in the LA area? Assuming it is around $100 a square foot, $50,000 (the equivalent of your closing costs + 2 years increased payments) would buy you a 500sf addition. That is more than enough for a bedroom & maybe an extra bathroom too.

How much have interest rates dropped since you bought your current home? Would it be worthwhile for you to refinance your current home & reduce your payments instead of moving? Perhaps roll in a renovation loan into the refinance at the same time?

Should You Refinance Your Mortgage Calculator
http://www.bankrate.com/brm/calc_vml/refi/refi.asp

Hope that helps you out,

Laura

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