Should I buy a $4 million home now or keep renting in the Bay Area? My financial situation explained.

Buying a $4 million home is obviously a major investment, and not something many people can do. One Reddit user, however, is trying to decide if this is the right financial decision for him. He’s living in the Bay Area, where real estate is expensive, and he said property values are increasing rapidly, so he wants to get into the market.

He’s trying to decide if this is the right choice, though, and, if so, how he should structure the deal in a way that makes the most financial sense given that mortgage rates are high right now. 

Is this Reddit poster in a position to spend $4 million on a house?

The Redditor explained that this will be his first home purchase. He’s married and both he and his wife work, and they have an $11 million net worth right now, including $400K in stock, $5 million on concentrated Google stock with Schwab, $3 million in 401(k) accounts, and $2.5 million in Vanguard brokerage accounts.  The poster and his wife also have a 529 account for their child. 

Their current expenses are $60,000 for rent, and $150K total, and the couple makes a combined income of $2 million but ends up with $1 million left over after taxes are taken out. He’s thinking of buying a house in the Bay Area — an area which he can’t leave because of family and work commitments — but purchasing the home he wants would total around $4 million and he doesn’t want to buy a cheaper house in a worse school district so he’s essentially stuck with that price.

While the poster said he was happy renting and didn’t want to buy, he feels like he should because houses are appreciating so fast.

So, the big question is, should he move forward with the purchase and, if so, what’s the best way to actually buy it at a time when mortgage rates are still in the 6% to 7% range?

Buying the home is affordable, and the poster may have more options than he thinks for a home loan

While $4 million is an expensive house, the OP isn’t wrong that he’d need to spend somewhere in that range if he wants to live in his desired neighborhoods. With a $2 million annual income and a substantial amount of money invested, he’s also in a position where he can afford to make the purchase.

Of course, he can’t assume that real estate is going to continue to appreciate at the level that it has been, so there may not necessarily be the rush to buy that he thinks. In fact, odds are that home prices may not go up as much in the coming years as they did in the post-pandemic era when the real estate market has behaved unusually due to a limited supply of homes being sold as people don’t want to give up the low mortgage rates they may have locked in before the recent mortgage rate increases. 

Still, since he wants to buy, and doing so is within his price range, there’s no reason why he can’t move forward, as long as he isn’t counting on the home to build his wealth, which it seems clear that he isn’t. Several Redditors also suggested that he may actually be able to get a better deal on his mortgage, given his level of investments, especially if he consolidates some of his assets with one brokerage firm and can get a relationship discount from the brokerage firm on his home loan. 

The poster may ultimately want to talk with a financial advisor about the decisions he is making, including how much of his investments he should sell, if any, in order to make the home purchase. His advisor can help him determine the best path forward and can work with him to ensure that it’s really the right time for the home purchase, given the poster’s goals.

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