Sell the house, move to an apt. to simplify and pay off debt? - Mothering Forums

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#1 of 17 Old 02-12-2006, 02:35 PM - Thread Starter
 
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I'm looking for other mamas who made the decision to move from a house to an apt or other rental...in order to pay off debt faster. I don't know why I can't get this idea out of my head...and I might just be crazy. I just need someone to tell me that I am

We bought a house last March. It's in a beautiful historic neighborhood...which is famed as the "most desirable" in our city. It's within walking distance to the library, coop, coffee shop, post office, bank, church, good restaurants, and consignment and clothing stores. The house is really fun...all hardwood, 3 BR, 1 1/2 bath, new paint, crown moulding, etc. Nice backyard, private. In other words, it would sell fast. It would be hard to give it up, but it's just a house.

So here is the deal. If we could move to a rental that costs about $500 a month (there are several available), we could put an extra $1300 a month towards our $38,000 student loan debt. Essentially, we could be out of debt in a year, insead of 2 1/2 or so.

Everyone is always going on and on about how owning a house is so great, and you get all these tax breaks, etc. But...I just don't see how it could ever outweigh that much savings.

Beyond the debt repayment, for about 9 months now, I have been CRAVING a simpler life. Less living space, closer family time, less to clean, less less less.
Oh, and I should add that we have plans to re-evaluate our employment, etc when we are out of debt, so we may not be in this town anymore anyway.

Can anyone offer some advice? All the advice we are getting is completely skewed because it's coming from my real estate investing guru brother and my parents who just bought a McMansion in the suburbs.

Help me mamas!

Sara ::: Mama to Bella Grace & Lucy Mae Cultivate inner beauty, the gentle, gracious kind that God delights in. 1 Peter 3:4
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#2 of 17 Old 02-12-2006, 02:48 PM
 
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Honestly, I think your house is the best investment you can have. It is a huge security blanket. You have been there less than a year, which means you haven't built up *that* much equity, and you need to consider whether you have prepayment penalties on your mortgage. That could completely eradicate the financial build up you have.

We have twice sold houses (to buy a different house) and used equity to pay off credit cards. Yes, it's a GORGEOUS feeling, and I know why you're attracted to it. However, "whether you rent or whether you buy, you pay for the house you occupy." For many people who attempt to radically simplify their life, the goals include being truly financially free-- owning a home outright, no mortgage, no rent. You will be one step AWAY from that if you trade your mortgage for a rental payment.

It will seem to take longer to be "debt free" if you keep your home, but if you are planning to move... why not stay where you are, build equity and revisit this when you are ready to leave town? Then you will have more cash on hand available when you sell your home to pay off your SLs (GAWD I am so tired of our SLs!!!!!) and to put money on a new home.
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#3 of 17 Old 02-12-2006, 06:57 PM
 
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Your house sounds so nice! As long as your house is increasing in value (even by a little) I don't think you should sell your home right now. There are huge transaction costs (real estate commissions, inspections, moving expenses) to "flipping" a home so quickly after you have bought it- these costs are likely to eat up any small amount of equity you have earned during the months you have owned the house. Maybe you could really focus on frugal living to help you pay off your loans, and in the meantime come up with your strategy for simplifying your life. Once you decide on your strategy, then you can figure out if selling your home is part of the plan. And, by that time, you will have built up a little equity which may help you realize your dreams (a lower paying but less stressful job, or whatever).

For us, owning a home has been our #1 savings/investment decision by far. Owning our home has really given us a lot of options, including dh and I both leaving high-paying jobs to do far more flexible and family-friendly work (we have a 30-year mortgage, so that part of our cost of living is "fixed" and we were able to figure out how much we really need to earn). Prices in our market have skyrocketed since we bought our home 10 years ago- this is where we want to live, and we could never afford to buy here now. If we had been renting all this time, our rent would have gone up-up-up and we would have nothing to show for it.

Good luck on achieving your dreams of a simpler lifestyle!
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#4 of 17 Old 02-12-2006, 07:22 PM
 
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I sold my house several years ago to pay off debt and I regret it in some ways, not so much in others.

My ex originally purchased the house before we were married and it wasn't in a neighborhood I would have picked. Perfectly lovely, but much too suburban feeling, although it was located fairly central in location. I didn't want to live there and had been renting it out for a couple of years which was a nightmare! I moved in only long enough to prep it for sale.

I got a good price and paid off all my and the ex's debt (we weren't divorced yet) and had some left over. It felt amazing to be out of debt and I swore I'd never get back in...famous last words

I have two big regrets. Firstly - It was 3 blocks away from a huge new urban development on an old air force base. While I got some of the benefit of the climbing prices, I'm sure I could have doubled or maybe even tripled that if I'd just held on a couple more years. I knew I would sell it, I wish I would have just waited a little longer. It was a 5 bedroom house after we'd finished the basement and that was unheard of in that neighborhood.

Secondly - my biggest regret - is that I gave the ex all the extra $$ instead of investing it in a new house in a more desirable, to me, neighborhood. I felt like he should get the money since it was his house in the first place. I TOTALLY regret doing the "right thing" in this case. Should have screwed the idiot!

So now its nearly 10 years later and I'm still renting because life happened and I got back into debt. At least this isn't all foolish debt like the first time...only part of it is foolish We manage our small apt building which gives us dirt cheap rent and is allowing us to get ahead of the debt fast. We should be ready to buy late this year or early next year depending on dh's summer (he's a contractor.

So, I guess in your situation I'd hold on to it. You like the house and the location - if you didn't, I'd say sell. It feels incredible to be out of debt!
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#5 of 17 Old 02-12-2006, 07:31 PM
 
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I agree with Wolfmeis and other posters- there are huge transaction costs to selling. If you like your house, and it is in an area that will hold its value and sell quickly, you might want to stay and build up equity until you are ready to move to another city.

Good luck with your decision! I totally understand the desire to simplify. A house in some ways owns you.

Being right is not always fair, but being fair is always right
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#6 of 17 Old 02-12-2006, 07:44 PM
 
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again I want to say that you should wait a few years, until the house value raises enough to make it worth while.

but we did something very similiar...we moved out of house in the city and bought a mobile home (minimal maintenance and small area to keep clean...FORCED us to simplify and heating, electric, all that is cheaper ) we live in a very nice 'community' that is in a national park, which I know is a rare location and we may not of done it if we hadnt of seen this place . we rent out our home in the city (its a double) but it is not breaking even and a huge hassle, so we are probably gunna sell it and we will make enough to completely oay off debt, and even have a bit to save to go towards our next house in a better location for us (in this same national park, probably)

so, maybe you could temporarily move out to see if you would like to live elsewhere, while maybe renting out your current home? then if you find its not a change you would like, you can move back in...or go ahead and sell it. what would be best is if you could make more than the mortgage with reliable renters, and then the house would pay for itself and you could keep the property and build equity/

good luck, I know what its like to feel overburdened and restless!
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#7 of 17 Old 02-12-2006, 09:15 PM
 
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Go into your bank ASAP.
Talk to them about options, you could refinance your mortgage (have it appraised higher as its value has gone up) get a new mortgage or a second.

Dont' sell, moving would cost you realestate fees (as you will buy a house again in the future) movers, etc.

You will not put the 1300 a month totally to your student loan trust me!

Quote:
Essentially, we could be out of debt in a year, insead of 2 1/2 or so.
Penny wise pound foolish, to sell your house lets say you take a bath of 10k, you could end up being sued if something goes wrong in the house, etc. Its risky to move you won't be as happy in an apartment trust me its noisy and not as family friendly.

Simplify your life where you are before you think of moving.

I dream of living in an environemnt like your house, and if house prices don't level out you could end up paying 40-50k more for that same house in 2 years, think about it. Stay where you are, talk to your bank if you could roll in the student loan or any straggling debt into one mortgage do it.
Rent a room, rent a parking spot for someone's other car, take in a student.
You can save or make far more $ owning a home than renting, renting an apartment gives you very little flexibility besides you'd have to store your house stuff (gardening, bikes, lawnmower, appliances) or buy them again new?

8 might be enough
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#8 of 17 Old 02-12-2006, 09:31 PM
 
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I agree with the other posters, if it's only going to make a difference of 1.5 years in the time to you are debt free then I would hold on to the house. We just essentially did what you are talking about, though not by choice. We just transferred cross country (military) and are selling our old home. When it closes next month we will be able to pay off our credit card and car and be debt free.

However, after owning our own home for 5 years I absolutely HATE renting! I don't particularly care for the house we are renting, it is too small, the kitchen is outdated and has no storage space and we can't do any upgrades to the place. It's driving me crazy, I am even looking into buying another house out here. I would give anything to be back in the home we own even if it means another 3.5 years of car payments.

eta: Oh yeah, realtor's fees ate up $12k of our house profits.

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#9 of 17 Old 02-12-2006, 10:04 PM
 
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Quote:
Originally Posted by LadyBug & BabyBug
However, after owning our own home for 5 years I absolutely HATE renting! I don't particularly care for the house we are renting, it is too small, the kitchen is outdated and has no storage space and we can't do any upgrades to the place. It's driving me crazy, I am even looking into buying another house out here. I would give anything to be back in the home we own even if it means another 3.5 years of car payments.

eta: Oh yeah, realtor's fees ate up $12k of our house profits.
We just did this... I could have elaborated. We moved from SC to WA for a job for dh; we sold our home and rented a HOUSE here while we hunted, and I still hated it. It's a distinctly different sensation to have someone else in charge of your domicile.

We had an enormous profit from the SC home, but instead of paying down every debt, we rolled it all into a new home. Believe me, we considered it. We did. But I think we made the right call.
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#10 of 17 Old 02-13-2006, 12:29 AM
 
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Quote:
Originally Posted by Wolfmeis
We moved from SC to WA for a job for dh; we sold our home and rented a HOUSE here while we hunted, and I still hated it. It's a distinctly different sensation to have someone else in charge of your domicile.
Yep, sounds like us, we just moved from GA to WA. We're debating buying another home but we have a large car payment. Ironically, we would get approved for a bigger loan (in other words, one big enough to actually afford a house here) if we used the house profits to pay off our car and finance 100% of the house than to keep the car payment and put $30k down on the house. That just seems backwards to me, but

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#11 of 17 Old 02-13-2006, 01:11 AM
 
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#12 of 17 Old 02-13-2006, 01:26 AM
 
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Quote:
Originally Posted by LadyBug & BabyBug
Ironically, we would get approved for a bigger loan (in other words, one big enough to actually afford a house here) if we used the house profits to pay off our car and finance 100% of the house than to keep the car payment and put $30k down on the house. That just seems backwards to me, but
EXACTLY what happened to us. Exactly. The banks know a cash cow when they see one. I can't wait to refi this bad dog.
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#13 of 17 Old 02-13-2006, 01:39 AM
 
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It's a wonderful thing to be debt free. If that's what you want to do, and if you'd really do it , then go for it. But do consider how much it could really cost (fees) and what a house will cost you in 2 or 3 years if you would want to buy one, and what your hosue will be worth then....
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#14 of 17 Old 02-13-2006, 02:55 PM
 
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I hate owning ANYTHING. And the only thing I knew for sure when I was young is that I never wanted a mortgage.

But we did buy a small house 4 years ago and sold it for a slight profit last fall. We're renting agin and saving about $400 a month by renting. We did love living there and have very fond memories.

We're already debt-free, but when we did decide to move (to save money monthly and be able to work less) we signed the apartment lease because we had what our realtor said was a pre-approved deal. Turned out, it wasn't and we sweated over paying for the house and the apartment for three months. We ended up selling for much less than we could get, just to get out of our situation.

The way I see it, the less you own, the less you have to take care of! Sell the house, get out of debt and start over feeling free! You can always get another house, but you can't get these days back - days spent struggling instead of living!
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#15 of 17 Old 02-17-2006, 03:46 AM
 
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I am a big advocate of home owning. When my husband and I got together, he owed his (our) home and I owned a duplex. (lived in one side, rented the other)

We have just taken the equity out of "our" home and paid off ALL of our frivolous debt. We are doing it so that we can move to CA and still keep all of our property in OR.

It works like this, if your cars, boats and CC have no loans or zero balances, the lenders like you. Who cares that the home is up to the hilt with debt, it gains equity, the cars and the like DEPRICIATE.

Student loans are deductible aren't they? I know that my husbands student loans were at 1.9%, that is as close to free money as you can get. I say keep the house, it is your cash cow. (in a good way)
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#16 of 17 Old 02-17-2006, 03:58 AM - Thread Starter
 
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Thanks so much for all your opinions. It seems there are lots of differing views. I guess it really depends on our goal. Right now, we've decided to just stay put because our house is in an above average appreciation area (10% or so a year). Not sure if that is high anywhere else, but it is for our city. So, we will make more money in appreciation than we would save by renting. And, the headache of packing, apt. searching, etc. is more than we can handle right now. Plus, we do LOVE the area and the house and will not be happy anywhere else now that we've been so spoiled!

Our biggest goal is to be out of debt so we can work less. I can totally relate to you rabbithorns...I really have no need to own a house just to own a house. I do feel like it can suck the life out of you if you take it on before you are prepared. But it can be a very rewarding thing as well.

As for the student loans...yes, the interest is deductible...but that's not much per year. Defintely not worth hanging on to for that. The emotional value of having our "pet student loan" paid off will be worth SO MUCH. And not owing anyone anything. That's huge. We're big Dave Ramsey fans...so we're doing everything we can to get out of that hole.

My ultimate dream would be to pay cash for our next house, or whatever we might live in. I would have a yurt Or just build a very small, eco-friendly cottage. Simple living = happy life.

Again, thanks for all your thoughful replies.

Blessings...

Sara ::: Mama to Bella Grace & Lucy Mae Cultivate inner beauty, the gentle, gracious kind that God delights in. 1 Peter 3:4
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#17 of 17 Old 02-17-2006, 05:08 PM
 
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I haven't read the whole thread, but I wanted to say that I do believe owning is better than renting, but you have to compare apples to apples - owning an expensive house versus renting a cheap apartment are very different things - it isn't about the ownership issue anymore, its about downsizing to fit your budget. You could also look into buying an apartment that size and living it, that would also save you money, in addition after your debt is paid off, you could then move to a house and rent the apartment you purchased to someone else.

Keep in mind that the real estate market across the country has passed the peak. Your area may have appreciated 10% a year the past few years, but most areas are now going to either stagnate or depreciate as many are very overvalued. (Here is a great article with some idea of which markets are overvalued http://money.cnn.com/2005/12/29/real...kets/index.htm) - Overvalued means that the incomes in the area are much lower than the values of the houses, so eventually there will need to be a readjustment. However, that isn't necessarily a bad thing, selling now might mean you get out at the peak, however I know here in MA we are now in a buyer's market, houses are dropping their prices like crazy.

Good luck!

Mightymoo - Mom to DD (6) and DS (4)
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