Photo credit: loanswithrob.comt

Home Sweet Home

I have to admit that I admire those who jump in early … writing these posts is no exception: by posting first, Scott – and now Ryan – are taking a chance. But, taking chances is what life is all about: jump in and see if the water’s fine … find out for yourself, don’t wait for somebody else to tell you

I think there’s a flaw in Ryan’s reasoning around the 20% Rule – but, I’ll have to double-check his NetworthIQ profile to be sure – in the meantime, can anybody else see it?

_________________________________

I purchased my house in February 2007 for $685,000. It was just after everyone knew the bubble had popped, which is why we were able to purchase it for $65,000 less than it had previously been listed for (what we thought was a great deal!). Since then, it has dropped in value to around $630,000 (Yikes!), and we have paid off $20,000. This means we owe about $35,000 more than our house is worth.

My monthly “nut” for this house, including everything, is $4700 (hence the picture at the top of the post!). This is 34% of my net income, BUT, because my home is large enough to serve as my office as well (large dedicated space for storage of product, meetings, etc.), I do not have to lease another office. Therefore, my corporation pays me $1200/month for the use of that space, taking my gross house liability to $3500, or 25% of my net income.

As for the 20% rule, I would be right on with $101,000 net worth and $20,000 of mortgage paid off. BUT, the value has gone down, so technically the 20% rule says I should pay off $55,000 more, right? Though if that is the case, I would probably not follow the 20% rule due to my adherence to the 25% rule and not seeing any additional return on that investment (of course, my payment would go down, but it’s only at 5.25% and I can write off the interest). What do you guys think? What would you do?

As for our plans with this house, we will likely live here for another 8 years or so, until I retire with my number!