Thursday, June 08, 2006

Thursday, June 8, 2006

As if it isn't hard enough figuring out what to do with my life, now I have to figure out how to pay for everything?

Well, OK, we've already got that figured. But it wasn't easy. I put my love of spreadsheets and budgeting to good use and In the end my wife and I decided to sell our house and use the gain to finance the first three-plus years of my practice. By then I should know whether I am cut out for this profession or if I should refocus on another career path.

The hardest decision was whether to sell the house or stay and pull out equity. I ran numbers five years into the future under both models using conservative estimates for appreciation and investment gains, and the result showed a slight benefit to the equity loan side, but not by a huge margin. The problem was that under that scenario we would hit the maximum loan-to-value ratios that most mortgage lenders impose (usually 80% - 90% of the value of the home) around the middle or end of year two, at which point we will have to sell anyway, so staying put and pulling out equity just delays the inevitable.

We have decided to rent for a while, and are looking for a slightly bigger house - we currently have more kids than bedrooms, and having our 6 and 4 year olds share a room has been challenging at times, especially at bedtime. It will be a little strange to be a renter again after being a homeowner for ten years, but we'll manage.

There are other financial adjustments to deal with, not the least of which will be the shock of paying for my own health insurance. Oh, the joys of self employment.

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