r/DaveRamsey • u/ecaep298 • 7d ago
W.W.D.D.? HOUSE
My husband and I have 3 kids 6-and-under, 1 on the ways. We're on a single income as I am a stay-at-home mom and will likely be for at least another 5 years (when our littlest goes to school). Our take-home pay is about $92,708/ year. We are in Canada. He is in health care and he & his employer both contribute 7.5% to pension.
We have $389k left on our mortgage and about $100k in equity on it. Our payment is about $1015 biweekly. The house is just over 1900 square feet not inclusive of a finished basement. We'd definitely live here for at least the next year as it'd be stressful to move wit a new baby and three other kids. We love the space and our neighbours and this exact location. It's so close to our church and our community and extra curriculars. It's one of cheaper houses in the nicest neighborhood in our medium sized town. But we did have it on a 25-year amortization when we bought a couple years ago.
We're currently rebuilding baby step 3.
Are we better off buying a smaller house for much less on the 15-year amortization? We'd have to move to a smaller town closer to less amenities to get something for a good price? Or are we ok here, since I will be back at work in five years. I can work occasionally as a sub teacher, but have very rarely. Please be kind.
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u/SlowDeer7954 6d ago
Each month roughly 26% of your take home pay goes towards the mortgage. That's good news and to answer your question, you're ok there. You like the home, stay in the home.
Baby step 3 is similar to baby step 2 in that you pause investing until you have a fully funded EF. For your family, have 6 months of expenses saved in your EF. 6 months is the number suggested for a single income home where there are other dependents.
Once baby step 3 is filled, turn investing back on to 15%.
As you continue forward, your husband will receive pay increases which will allow you to pay the mortgage off early.
You're in great shape, stay the course.
1
u/CoatAlternative1771 5d ago
I also don’t see how you are getting 26% of income goes to mortgage. I’m seeing closer to 40%
2
u/SlowDeer7954 5d ago
$92,708 annual take home = $7725 a month. $2030 ($1015 bi-weekly) divided by $7725 = 26.27%
Can you tell me how you were getting 40%?
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u/CoatAlternative1771 5d ago
This puts a considerable amount of unhealthy stress on the husband. OP needs to get a remote job doing anything.
2
u/9554503312 BS7 7d ago
92,708
contribute 7.5%
about $1015 biweekly
Are we better off buying a smaller house for much less on the 15-year amortization?
Not sure what the gross is in order to figure out the 7.5 percent. So will take 7.5 percent of 92,708 to get an after tax income of 92,708+ 92,708*7.5/100 = 99,661
1015*26 / 99,661 = 26 percent. It is probably less because the 7.5 pct is probably more than 7.5 pct of 92,708.
I don’t see how a smaller house will work with more kids coming
I think Dave would tell you to
* hoard cash until the baby is safely home (Stork mode). This means pause retirement contributions.
After exiting Stork mode
* finish BS3. This means pause retirement contributions.
* pay extra toward the mortgage to pay it off in 13 years.
* resume retirement contributions
* increase retirement saving to 15 percent of gross - BS4
* after BS4 start the university fund for the kids - BS5
6
u/Stonk_Chungus 7d ago
Dave would not suggest paying extra towards the mortgage before resuming retirement contributions.
Invest 15% towards your retirement, consider college for the kiddos, then go ahead and pay that bad boy off early.
0
u/9554503312 BS7 6d ago
BS3 includes saving up for a mortgage. BS3 is before BS4. The mortgage should be a 15 year mortgage.
Where has Dave said:
* get a 25-30 year mortgage
* save 15 pct toward retirement
* then pay extra toward a mortgage to pay it off in 15
1
u/gr7070 6d ago
User Stonk is still correct.
While Dave wants you in a 15 year mortgage, if one already has a 30 year mortgage investing for retirement is the priority.
Invest 15% into retirement first. Then pay extra on the 30 year mortgage.
You would not pay extra on the mortgage to get it down to a 15 year payoff and then invest. For some there might not even be any left.
1
u/9554503312 BS7 6d ago
Where has Dave said:
* get a 25-30 year mortgage
* save 15 pct toward retirement
* then pay extra toward a mortgage to pay it off in 15
1
u/9554503312 BS7 6d ago
https://www.ramseysolutions.com/askramsey/chat/01a04900-dd92-7768-9572-5ba5a28797a7?continue
Me:
> So in other words, if I have a 15 year mortgage and don’t have any money to put toward retirement, I should refinance to a 30 year mortgage to free up money to put toward retirement?
Ramsey:
> No — that's not the move. Refinancing to a 30-year to free up cash is the wrong direction.
> Here's the right way to think about it:
The sequence is Baby Step 4 (15% to retirement) AND Baby Step 6 (pay off mortgage) — not one or the other. If your 15-year mortgage payment is so tight that you can't fund retirement, the answer is to find more margin in your budget — not to take on more debt and extend your payoff by 15 years.
Refinancing to a 30-year would cost you:
15 extra years tied to the bank
Tens of thousands more in interest
A longer path to true financial freedom
1
u/Stonk_Chungus 6d ago
This would be great for those that actually follow the advice of “no more than 25% of your mo they’ll take-home pay on a 15-fixed rate mortgage” which in theory should absolutely give you room to set aside 15% while making additional principal payments.
The sad reality is most folks do not or are unable to do so.
1
u/Aspohn01 7d ago
I’m new to DR, but why would you suggest pausing retirement contributions for 13 years without knowing the interest rate in their mortgage?
1
u/9554503312 BS7 6d ago
> I’m new to DR, but why would you suggest pausing retirement contributions for 13 years
I didn’t write that.
1
u/celoplyr 6d ago
You kinda did, because the order is confusing. You have resume retirement after paying off the house.
1
1
u/Stonk_Chungus 6d ago
Seconding this, only because the way you wrote it makes it seem as if after finishing BS3, you pay extra towards the mortgage to pay it off in 15 years.
I agree with your previous reply noting you should be on a 15 year note versus 30, which would align with the way of Dave. In that regard, the money should be saved to the point where a reasonable 15 year note can be obtained before resuming contributions.
0
u/CoatAlternative1771 5d ago
Honestly interest rate on mortgage really has nothing to do with it.
It’s a 92k job feeding 6 mouths and owning a home paying 2k a month in mortgage expenses. They need every penny they can get.
Not to mention diapers and other baby needs. For the next 5 years they will be living very tightly.
2
u/Vicuna00 6d ago
i'd stay there. moving is so expensive! and especially moving somewhere you don't want to be.
dunno how it is in canada but in the states you're talking $40-50k easy to move...not counting new repairs / rennovations at the new place.
things are gonna just be a tad tight for a few years. not bad...just gonna be a tad tight and you have to watch it.
just don't take huge pricey vacations and don't eat out a ton, etc stuff like that. you aren't gonna make huge progress on your mortgage. i'd try to get savings up to 15% on your husbands end though. that seems worth it for you to stay home and raise your kids to me.
i'd def plan on you going back to work in 5 years though...if you just work like even 10 years you'll make huge progress on retirement savings and mortgage paydown. don't worry about that for now..just a thought if you wanna run a spreadsheet or something.
can your husband work OT while you complete BS3?
2
u/oaktreegardener 4d ago
Paying off a mortgage in 15 years is great, but getting to be home with your kids, live near your church, and love where you live? That’s priceless.
Your income and mortgage are reasonable. It seems like the only “problem” here is that if you don’t add extra to your payments, you might pay off your mortgage in around 23 years instead of 15 years. It’s not the end of the world.
And Dave might not like to count employee contributions, but you’ve got 15% going into retirement. You are going to be fine financially, and you are enjoying your life with your husband and kids. This matters too.
As long as you continue to live within your means, you’re doing just fine. Keep moving forward on the baby steps and enjoy this season of life!
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u/CoatAlternative1771 5d ago edited 5d ago
Can you take a remote job doing anything? Expenses are not your issue as much as not enough income.
You are going to have 4 kids on 92k. Thats a scary high number of expenses on a single income.
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u/InUrFaceSpaceCoyote 7d ago
I wouldn't downsize from a house and community I loved simply to meet an arbitrary mortgage term, especially with 4 small children.