#LiquidAssets #HomePurchase #PersonalFinance
Considering Your Financial Position
When it comes to purchasing a home, it’s essential to evaluate your financial position carefully. One crucial factor to consider is how much of your liquid assets you’re willing to tap into for the down payment and other expenses related to the home purchase.
Exploring Your Options
Some individuals may be comfortable tapping into a significant portion of their liquid assets, such as 35-40% of their net worth or even up to 50% of their liquid assets. However, it’s essential to weigh the pros and cons of this decision before moving forward.
Weighing the Consequences
While tapping into your liquid assets for a home purchase can help you secure a larger down payment and potentially lower your monthly mortgage payments, it’s crucial to consider the long-term consequences. If you deplete a substantial portion of your liquid assets, it may take time to replenish them, especially if you’re not planning to sell any investments or properties in the near future.
Planning for the Future
Before making a decision, it’s important to assess your financial goals and priorities. If you’re comfortable with the idea of tapping into your liquid assets for a home purchase and are willing to wait for them to replenish over time, then this may be a feasible option for you.
Seeking Advice and Input
Ultimately, the decision to tap into your liquid assets for a home purchase is a personal one. It can be helpful to seek advice from financial advisors or consult with individuals who have gone through a similar experience. By discussing your options with others and considering their input, you can make a well-informed decision that aligns with your financial goals and circumstances.
In conclusion, tapping into your liquid assets for a home purchase can be a strategic move, but it’s essential to carefully assess your financial position, weigh the consequences, and plan for the future. By taking the time to consider all factors involved and seek advice from professionals or peers, you can make a decision that aligns with your long-term financial goals.
Really depends on your comfort level with risk. I have three properties. Back in 2021, I tapped about 50% of my liquid NW at the time to buy my current home, because I do not plan to sell any properties.
Before my last home purchase in 2021, my NW was about $1.5M w/ $500k liquid, and then we spent half (about 250k) for our downpayment on a $1M home at 3% rate. Flash forward to today… we have almost $3M NW and about $750k liquid.
My previous two primaries (which have since been converted to rentals) also depleted a significant % of my liquid at the time of purchase since I rent out the current w/o selling to upsize into the next. My three properties were all purchased about 5-6 years apart. So it took that time to replenish the liquid ports after every purchase to where I was comfortable to unleash again on a bigger, more expensive property to upsize into.
It’s turned out well for me as my networth has skyrocketed from the equity built up by not having to sell any properties. Even my liquid ports have rebuilt nicely as my income and annual investing has increased over time. The current bull run has certainly helped.
I used about 75% of my non-retirement savings to do down payment, closing costs and initial setup for my house. I still have a 6 month emergency fund but it will be a long time before I have 60,000 in cash again.Â
It’s fine. I ran the budget multiple times and things will be tight for a bit but it will ease up.Â
When my now wife & I bought our first house, our down payment was a little over 90% of our liquid cash, and probably right around 75% of our total net worth. Net worth at that point in our lives would have been calculated including household goods that could be sold; like a television, stereo, or one of the cars. About half of the leftover cash was almost immediately spent on a refrigerator, just a really basic top-freezer model (which should illustrate how little there was left over).
Things were very, very tight for at least a couple of years; but buying that house was by far the single best economic decision I’ve ever made. I’ll still every now and again thank my wife for trusting me and going through with it. We wound up getting married in the backyard of that house a few years later.
My down payment plus closing costs came to $55k and change in the end, about a third of my liquid assets and maybe 20-25% or so of my net worth. I massively over-saved because I had no idea *what* I might have to do to land a house, like if I’d have to bid way over asking, put in a gigantic down payment to mollify a seller, have to deal with apartment troubles (having to go month-to-month for a massively inflated price, BS fines, etc.), or immediately have to shell out for some big-ticket item like an all-new roof or HVAC system or something.
In the end, I lucked out and nabbed a house way under budget with no major problems.
In the process of borrowing against about 40% of liquid assets on an SBL to fund a house down payment and purchase on new home so we don’t have to sell immediately on current home, so more or less same situation.
I’ve read it’s best if the underlying asset is treasuries or bonds therefore has no risk of dropping.
Me personally when I bought my current house I got down to sub 1 month of funds left between down payment and moving expenses. Now mind most of my efund was tied up in the house I was moving from so as soon as we sold that house the efund was back to being fully funded and then a little little extra. Extra being 2-3 more months of funds.
I will admit we did play the credit card float game as if the house did not close when it did then it might have been really tight as I was between paychecks as well as my new job had not paid its first check yet. I was starting to look at a temporary option like borrowing a few grand from my mother.
I use expenses as months as everything is relative.
I didn’t want to take on a 7% mortgage, so I used about 25% of my total NW to pay all cash for my house recently.
Do you mean sell assets or use them to borrow against? I would try to find a way to borrow against my investments before selling and paying cap gains
What sort of rate are you looking at now?
I put about $300k down, about 40%. 5.5% 39 yr loan.