On our road trip two weekends ago, C and I discussed the possibility of moving to a nearby community where the public schools are top notch. Since we’ve been talking about schools and private schooling, simply moving to the other side of Lake Washington and getting some of the best public education options in the country seems like it should be on the table.

Because I like numbers, I ran the following scenarios.

The 3 years most of the options come with is because that is how long it would take to save $20,000 at $550/month, and also because even if we get a 2 year old this summer, that would put us at moving right at the time that schools become important.

 

Option 1: Now -Down Payment $30k, comfortable monthly mortgage/tax/insurance payment of $2,500

Right now, if we used all $30,000 we have, that could be a 5% down on a $600k house. Since the credit union allows mortgages at 5%, I figure it’s a safe bet we could do that. (I think we would at best sell our house for what we owe- so no money from that.) However, looking at that amount of mortgage, plus insurance and taxes, I don’t think we could afford a $600k house with only $30k down. With $30k down, I’d be comfortable going up to a $400k house.

The reason for this is that we currently pay $1700/month for mortgage/taxes/insurance. We had been putting $400/month toward the basement, and we get $400/month from J in rent. That takes my comfortable house payment up to $2,500/month.  With $30k down, between taxes and insurance, we hit that at around a $400k house.

(For the record, while there are $400k houses in the area we’d be looking at, going up to $600k triples options, and we’d still be looking at the bottom 10% of houses in that community- and this is after the real estate down turn…)

 

Option 2: 3 years – Down Payment $49.5k, comfortable monthly mortgage/tax/insurance payment of $3,050

We talked about taking $20k and paying off my graduate student loans. That still leaves us with $10k in the bank against adoption costs (plus the $3k my brother owes us) and whatever else we save. Paying off the student loan saves us $550/month. Just saving that $550/month means we get our $20k back in 3 years. Given our current savings, I don’t think it’s illogical to think we could again have $30k available for a down payment.

That also means 3 more years for the real estate market to recover and for us to pay down our mortgage, and possibly do some minor renovations to the house that would increase its value at least a little. If mortgage payment remained what it is now,  we’d owe $16k less on the mortgage than we do now, which would mean that in addition to our $30k down, we would likely have another $19.5k from selling our house (assuming that real estate prices are able to go up about $4k in 3 years).

 

Option 2a: 3 years – Down Payment $51k, comfortable monthly mortgage/tax/insurance payment of $3,050

We could also apply that $550/month that we’d be saving to the mortgage payment instead of putting it in savings. At the end of 3 years, instead of having $20k in the bank, we would owe $21,400 less on the house. So $10k in savings, and $41k in home equity for a down payment.

 

Option 3: 3 years – Down Payment $39.6k, comfortable monthly mortgage/tax/insurance payment of $3,210

Instead of saving that $550 a month, we could then apply it to my undergraduate loan, and have that paid off by April, 2014. Between April 2014 and June 2015, we would then save $10,140 (again, putting the $710 that would go into student loan payments into savings). That gives us only a $20.1k down payment in cash (still assuming that we could save $10k otherwise), but also the additional $19.5k equity in our house, and we’d have an extra $160/month available to go toward monthly mortgage payments.

 

Option 3a: 3 years – Down Payment $40k, comfortable monthly mortgage/tax/insurance payment of $3,210

We apply the $550/month to my undergraduate loan, and have that paid off by April, 2014. We then take that $710/month and apply it to the mortgage, giving us $30k equity in the house, plus $10k savings, and the extra money to put toward the monthly payment.

 

 

Now, all of this assumes that J remains living with us and paying $400/month in rent. It assumes that we are able to maintain the current $10k in savings even after paying all adoption expenses, home improvement, and the added expenses of having a child. I don’t think this is unreasonable considering that we are now putting $1,950/month into savings, and none of these plans would touch any of that money until we were making a new house payment. Even if we were just looking at the $800/month I’ve figured we could add to the house payment, that’s $28,800 over 3 years, giving us $18,800 to use for renovations and still have $10k in cash to go toward a down payment.

 

Will we take any of these options- probably not, or at least not anytime soon. C and I both like to talk about our options, and I love to run scenarios, but right now, we’re not ready to make any major financial decisions, beyond the one we’ve made to adopt.