Rebejay from Vancouver, Washington asks:
Is it better to sell the fancy house, pay off all debt and rent until we can purchase a more affordable modest home? We may have enough equity to accomplish it all and not rent. We are tired of the rat race and want to send our kids to a Christian School. We both work and can make the debt payments – just tired of being a slave to them. I want to simplify. We want to pay it all off and have the burden lifted. Also worried about housing market crashing…
Tawra: I would say go for a modest house and get out of debt. Even though our culture tells us we should have everything, there is no reason that we need all of the "stuff" that the popular culture says we should have. The reason they says we need the "stuff" is supposed to be to make us happier. Clearly, it doesn’t sound like the fancy house is making you happier, so sell it, and the sooner the better. I would do everything possible to sell it and buy the modest one right away. We have not had good experiences renting and unless you plan to live in the rental for a number of years, renting would mean that you would have to deal with moving twice in a short time period which is exhausting and costly. Once you sell the fancy house, you shouldn’t have a problem getting a mortgage on a more modest one unless you lose big money selling the fancy one or unless your credit has been negatively impacted since you got the mortgage on the first one.
Once you get the more modest home, try to pay the same amount you’re currently paying for your house, allocating the difference in your old payment and your new payment to the principal. If your fancy house costs $1500 per month and your new house costs $1000 per month, pay the extra $500 to principal on the modest house. Make sure you indicate on your mortgage payment coupon that you want the balance to go to principal so that you pay it off faster. You be surprised how quickly you can pay it off over-paying the principal and since you can make your current payments, you can keep paying the same amount and eliminate your debt completely.
I would do everything possible to get TOTALLY out of debt. Most people don’t consider a mortgage a debt, but it is. Once it is paid off, you will be able to use all of the money that you currently use for housing for something else, like the Christian School you mentioned. Not only that, one day, you will want to work less. Hopefully, you will not become disabled, but it does happen and it would be easier to have the flexibility of having no debt.
Regarding the housing market, it is a reasonable concern, but in most (but not all) areas the values will increase eventually even if they go down for a few years. Still, if you pay off your house completely, you won’t have to devote time to thinking about it. Go with your instinct!
Tawra
photo by: taberandrew’s
Great advice! I was wondering about the very same thing.
You are blessed to be able to make this decision. If you can sell your home now and rent for awhile, it would be the best thing to do. The housing market is probably going to continue to slide for the next two years. There are still a lot of people out of work and many continue to go into foreclosure.
My advice is to sell now and wait until about 2012 to buy a home. The market should be at the bottom then and interest rates will be the lowest we will ever see in our lifetime.
Best wishes to you and your family.
I would say sell the house. You don’t sound happy owning it and it adds to the stress. So sell it and lose the stress.
13 years ago we bought our first house. We had been married for 27 years but we moved a lot due to job situations. Miners move frequently.
We paid $20,000 for it as it was a house the owners walked away from. We have from the front of the yard 300′ in length and 100′ wide. The house is 2700sq feet two story with a full basement. 2 garages. We got a great deal. We paid it off in 2 years so now it is ours.
Now here is the thing. The loan officer at the bank came to the house when we signed the papers and he looked at it and advised us not to spend a fortune making it a dream house with lots of curb appeal. I was not too happy to hear that but his reasoning was right on.
We live in a small mill and mining town. Last year the mill closed so most of the people here are now unemployed. The mines have about another 4 years and they may be gone unless they open more in the area.
So a town of 5000 most people already having their homes are not about to buy a new one. Also the mines for the next 4 years are not hiring so nobody is moving into town. Also the house is 60 years old and structurally it is in great shape. It had a brand new furnace the year be bought it and the roof had been reshingled. It has its faults but they are kind of quirky and that makes the house fun. We have fixed the interior so that with my disabilities it is doable most days. With no exterior changes the taxes are low and haven’t gone up actually they went down the year after we bought it. We called and said the taxes were too high so the inspector came and agreed. They went from $1000 a year down to $700.
now what I am saying is when the mortgage company tells you not to make major improvements it is a good idea to listen. At least until the house is yours free and clear and you have the money to spend.
One house show gave great advice when looking for a home buy the worst house you can live with in the best neighbourhood you can find. rather than the best house in the worst neighbourhood. when it comes time to sell you will make money by improving it as you live there.
If new mines don’t open up all we have to do is close it up and pay the taxes and when Don retires we can come back here to live. Which is one of our plans. If there is a boom people buy whatever they can find and if there isn’t and we have to walk away we are not any money. We have lived rent and mortgage free for 10 years so far selling would be great but we are not going to panic if it doesn’t.
Just don’t jump into any changes without a lot of research and family talks.
We sold our first home ten years ago because we were planning to move to another state. Well, the move did not happen, and we were renting a townhome for what we couldbe buying for. There was not much on the market, the boom in Florida real estate had not yet come about. But we did find a house we liked that was within our budget. So here we are nine years later, and we owe about $105,000 on the home. I feel that since my husband is 51, and I don’t work due to health issues, that we should sell and buy a less expensive home. There are not many out there, but there are some. Our neighbors just put there home on the market for $150,000, and they do not have a garage at all (we have a 2 car) and their yard is much, much smaller. I don’t know that they’ll get $150,000, but I think we could get around $130,00 for ours, at least. That would give us a good size down payment on a home in the $70,000 range. My husband however feels that we should stay here, that we will be better off in the long run. He does not pay extra on the pricipal. I just am starting to feel this mortgage hanging over our heads. I know from biblical teaching that he is head of the home, and should consider my suggestions, but that we should let his decision be final. Our pastor preached on the verse “Let not your heart be troubled.” I’m clinging to that right now.
The house that we sold ten years ago has now gone on the market for $154,900. We bought it for $54,900! Just think, it would be paid for by now!!