How much SHOULD you spend on a house?
I've seen tons of formulas on how much house you can afford, how much of a payment can you handle, etc.....but is there anything out there on how to optimize your housing purchase?
Here's the background:
I get paid reasonably well as an IT person, and carry no credit card debt. I save at a pretty good rate (roughly 20%), and max out 401K and IRA savings. We have a house with about 50% equity in it. We have 2 kids that have good college savings programs under way, and we contribute to those every year - they'll have no problem going to school anywhere they get in.
Here's the problem:
With both kids in school now, my wife has gone back to work as an independent consultant. She doesn't need to get benefits or insurance (covered under my plans), but every dollar she makes is taxed at a high marginal rate, and she will likely make close to my base salary this year. There aren't many ways to reduce her (our) tax liability other than 4 ways:
Educational Savings Accounts (in place)
IRA, SEP-IRA (in place)
Mortgage Interest deduction (in place, but that brings me to the real question):
Is there a formula that can help determine the optimum housing purchase? One that maximizes your benefit from having a particular investment in a home, while minimizing your tax liability? We don't want to be house rich and cash poor, but we definitely underspend compared to what we could afford.
Any advice? Thanks in advance.....