Renee and her husband live and work in a paid-for RV. Renee wants to upgrade to a larger one. They have $30,000 in savings and make $55,000 a year. What are Dave's thoughts on a mortgage on an RV?
QUESTION: Renee in Denver and her husband live and work in an RV. It’s paid for, and Renee wants to upgrade to a larger one. It might mean taking out a loan. They have $30,000 in savings (including their emergency fund) and make $55,000 a year. What are Dave’s thoughts on a mortgage on an RV when it’s their home?
ANSWER: I wouldn’t because they go down in value so quickly. I think your emergency fund may be a little steep. It should be three to six months of expenses. On a $50,000 household income in this situation, if you held $20,000, that would be a bunch. If you kept $15,000 in there, that would leave you $15,000, and if you are talking about a $30,000 upgrade, you would need to come up with another $15,000. Or maybe you skimp and save and put $5,000 with it and move up by $20,000.
The problem here is this: It is your deal, and it’s what you’re doing at this stage of your life, but as a long-term game plan, mathematically speaking, what you are doing is buying a house trailer that you’re driving. That’s what trailers do.
I think what you’re doing is cool, by the way. If the whole family is having fun by doing this at this stage of your life, that’s great. But you wouldn’t have money invested in something that’s going the wrong way. This is a cost of your lifestyle decision, a cost of this adventure you’re on. The adventure costs you what the RV loses in value. That’s all right if you have the cash.
You don’t want to finance anything, especially things that cost you. I wish I could tell you that I think it’s a good idea, but I can’t. It’s the same thing I’d tell you if you were living on a houseboat. I wouldn’t finance the move up, and I wouldn’t finance it just because it’s the primary residence.