Personal Finance

My spouse and I are career hungry professionals - we've saved enough for an 80% down payment on a house, but would it be wiser to just do the 20%?

David Beren

Published: October 30, 2024 9:30 am

Last Updated: October 30, 2024 9:31 am

24/7 Insights

• This Redditor wonders how much to put down on a house. 
• There is a plan to have more children, which would increase expenses. 
• Out-of-town family is also a consideration. 
• Also: Are You On Track to Retire? Take This Quiz and Find Out (Sponsored) 

When putting money down on a house, there are different schools of thought on how much you should use for an initial down payment. The most popular notion has been to put down 20% of the sale price and mortgage the rest. However, many people want to lower their mortgage costs, so they want to put down more than 20%. 

This is the case for one Redditor in the r/fatFIRE subreddit. He and his spouse have saved enough to buy a home and put down around 80% of the asking price. However, he’s having second thoughts about that kind of investment and wonders if putting 20% down is the better course of action. 

I love this post because even though it involves a couple with a $4.5 million net worth, they are still considering actions that people making far less also have to consider. 

The Scenario 

Within this scenario, we have a 37-year-old Redditor and his 35-year-old wife living in a city with a very high cost of living. With an approximate $750,000 total household income annually, no debt, no car, and no current mortgage, they are looking to buy a home in the $3-3.5 million range. 

Along with their current child, they hope to have more, so their cost of living will go up. As part of this planning, they have made some smart investments: 

• 401K: $1.1 million 
• Roth IRA: $635,000 
• Cash: $380,000
• HSA: $90,000 
• 529: $83,000 
• Traditional IRA: $43,000

Additionally, they estimate to save around $250,000 annually: 

• Company stock: $125,000
• 401K Match: $60,000 
• MBDR Roth IRA: $30,000 
• Cash savings: $20,000 
• 529 contributions: $10,000 
• HSA contributions: $8,000 

The family currently rents a two-bedroom, two-bathroom apartment for around $4,300 per month. However, they have been notified that their rent will increase to $7,000 in 2025. As a result, they are looking for a larger place, which would cost around $10,000 per month in their current city. 

The Recommendation 

While I am not a financial advisor, I can provide some recommendations here as a parent and someone with family living out of town. As this Redditor is considering buying a home that increases the space for additional children and has potential space for visiting out-of-town families, it’s a tricky time to figure out how to make the best investment. 

On the one hand, additional children bring absolute chaos to the family. Any scenario you think works now will be thrown off when another child arrives. This isn’t just about your living situation but your overall life scenario. Just expect things to go differently. 

So, the best move is to ensure you have room for family to visit, as putting them at a hotel for one month is silly. With all this said, I’m afraid I have to disagree with Redditor’s thoughts that selling company stock, which totals around 30% of their net worth, to buy a home is the right move. 

I have learned that expenses can shift quickly with children, so having more free cash is always recommended. It’s hard to give any recommendation that ties up to 80% of money that could otherwise be used in an emergency. By all means, buy a home and put 30-40% down, but putting down any more than that is unnecessary. 

The Takeaway

I’m struggling with any scenario that would smartly allow them to spend so much on a down payment. While this family might have a good financial situation, things can change too quickly. Money invested in a home is illiquid, and the last thing you want is to be underwater in a house you can’t quickly get rid of. 

Instead, they should consider either spending less money on a home and putting more down or spending what they want and putting less down. If you want to ensure the family can visit and stay with you, that’s great, but if you need help, you may also like financial room for a nanny. 

Many Redditors in the comment section echoed this: Parents get older and become less able to help, which has to be considered. This only adds to the case for putting less money down and having more cash and liquid investments available if they need hired help.