Hi ladies. We are looking for reduce our debt (and stress!) by getting a cheaper home. When my hubby & I were dating we bought a foreclosed home for $72k, fixed it up, and sold it a few years later for $90k. Our current home we bought 5 years ago for $133k and we've done a lot of work to it. We finished the full basement into 5 rooms, fenced in the yard, and made tons of upgrades inside. We haven't talked to a realtor yet but I'm hoping we can list it for at least $150k.
We are considering buying another foreclosed home. If it was under $70k and we sold our current home (there are several in the area for that price or lower) we would not have a mortgage payment. But the idea of going through all that again feels completely insane right now.
My husband just finished his masters degree so will have to start paying on those student loans, and our property taxes went up so our mortgage payments are nearly $200 a month higher than when we bought it! Plus I am a stay at home mom now and we have 2 kids instead of 1. So things are financially a lot tighter than they were 5 years ago, and if we could sell our current home it would be a huge weight off. Or maybe we are just nuts.
Any advice?
Edit: Great tips so far. The only debt we have right now is 1 car payment and our mortgage. We pay off our credit cards every month, and we won't have to start paying on the student loans for another month or so. My husband will get a slight raise around the same time. He was supposed to get a reimbursement grant for up to 75% of his student loans, but that hasn't happened yet and we're unsure if it will anytime soon or at all. I sell Mary Kay to help out, but that fluctuates month by month.
We're done having kids, and our current home is plenty big, almost too big. My husband has no interest in looking for another job, if anything he will go after a promotion from within.
Yes. If you can pay cash for a home--do it YESTERDAY!
I wouldn't be essarly look for a fixer-upper/flip home but something live able.
Don't worry about losing the tax deduction with a "paid for" home.
You can google Dave Ramsays logic & explanation for that.
Good luck !
We're in a similar scenario.
I think anytime you have the chance to go completely debt free (especially your home) it is worth serious consideration. How fast could you pay off that student loan? How "live-able" would the new house be?
It sounds like you need to really crunch some numbers to see if it makes sense.
IMHO debt = slavery. The "leverage" argument is a clever way to ensnare people into bondage. One thing that "leverage" doesn't account for is the RISK that you are taking on with debt.
Our only debt is our house. And I would love to have that off my plate, ASAP. The only way we can do that right now is to downsize.
ETA: I know several extremely wealthy people where I live who are completely debt free and buy all their properties with cash. Your income is your greatest wealth producing asset in most cases - so don't blow it paying interest and living beyond your means. Dave Ramsey is right about that imho. But really it's common sense.
Do it. We sold our house which we worked on, and have just bought a smaller cheaper place. We paid off all our other debt, and our mortgage will be much lower than before. The freedom and relief it brings is so wonderful. I'm no longer buying into bigger is better. We have relieved ourselves of unnecessary clutter, debt, and stuff. It is great.
Not having a mortgage & owning your house outright would be a HUGE weight lifted...!!!
I would do it in a heartbeat if I were you. It would be a lot of stress for a little bit BUT after it was over you'd have YEARS to bask in your good choices!!!
Better get tax advice before foregoing a mortgage. Home mortgages are the biggest tax deduction people have. You may end up paying so much in taxes that you would be surprised. Best to know in advance of making this decision.
Not having a mortgage sounds like a great plan unless the place you buy turns into a money pit and cost you more in the long run.
Debt is evil. Do everything possible to be debt free.
Keep in mind the expenses that you incur for the routine upkeep of a house which can sometimes be huge.
It depends. Getting out of debt is a good idea however do you and your husband have time and/or the money to fix up another foreclosed home? Will his master's degree give him more income at his current job (it should) or will that give him the impetus to go find a higher paying job. Does his current job have any educational reimbursement ?? If he looks for another job with his new credentials, will you even be staying in the same area? Those are some questions you probably need to answer first. In addition, what is your current mortgage rate? Have you considered refinancing it to a lower rate to lower your payment? Are you paying PMI insurance? Can you drop the PMI insurance if your house now has more value and you owe less??? What about taking on a child care arrangement for 2 days a week for someone that just needs part time care. That could provide you with the extra income to cover the higher mortgage payments.
Here's my thought.
Are you going to take the kids to child care so you can single handedly turn the new house into a home and not a dump? How will you afford that? Or is hubby going to take off a year or so and get this new home up to living standards?
WHO IS GOING TO DO THE WORK IF YOU ARE TAKING CARE OF KIDS AND HE'S OUT LOOKING FOR WORK?
No one, that's who. You will be living in the home you buy until your kids are in school and you start doing it yourself.
Get a different financing on your current loan. Get a job, get child care assistance to help pay for your child care bill, find ways to limit your spending so you can help your family, consider all the things you can do.
My friends have all moved away in the past year or so due to job transfers and such. They all took huge loses on their homes. One was paid off and they paid something like $50K when they bought it years ago, their home they added on a family room and an extra bedroom sold for $65K. Pennies on the dollar of what it was worth a few years ago. Houses are not selling for what they are worth. They are selling for pennies on the dollar.
If you have a Realtor come in and value your home then you can see if it's worth it to sell it.
My sister just sold her home they had lived in for about 10 years, their house payment was about $1000 per month. They lived in this home, painted it, put in new carpet after the Realtor told them it had to be done, they completely redid a bathroom too.
Their home was on the market for a couple of months and sold for about $5000 more than they paid for it. They basically paid rent over a 10 year period. The value of their home had decreased so much that they only made $5000.
The new home they bought has 4 bedrooms, 2 living areas, a closed in sun room, a dining room, 3 car garage, is in an exclusive neighborhood in OKC, and it has a gorgeous inground pool with a slide and diving board. It has a storm shelter and a nice set apart garden area.
They only paid $190K for it.
I think until you talk to a Realtor and see what they say about the value of your home, what you'd have to fix, how much they would charge, and all that....then you can decide if it's worth it.
I'd rather not go through all the hassle of moving and living in someone else's run down home for God knows how long than give up a home that is comfortable and nicely redone.
You also know the Realtor is going to quote high to you right? They are going to say you can get $XXXXXXX.00 out of your home just to get you to list it with them. Then they wear you down with people who want to see it, then no one makes any offers that you'll take. She gets paid no matter what when it sells for less than what she tells you she can sell it for.
Then you've put all the money into it to get it updated, repainted, and repaired. So you actually out money in the long run.
So think it through. I wouldn't put a home on the market right now, if it was anything I like then I would hold on to it until the price of homes went back up a LOT.
Another option is to get another home and rent this one out. If you can find someone that will pay what your mortgage is and a bit more.
Also since you're so handy why not make the basement a separate living area and rent it out. Lots of people are doing that with their basements now. If you can give up all that space to sell it why not just make it a separate apartment and rent it out.
Have you ever listened to Dave Ramsey? Look at his website, listen to his radio show and get his books at the library.
He would say, YES, sell that house! But probably rent till you can get your debt under control. You have lots of unknown variables right now.
You need to go after the debt you have with intensity. That means paring down what you spend money on. If you buy again, there are those taxes again. Insurance, again. If it feels insane to go there again, it's probably too soon. Look at Dave's site. Find his show. Take control of your finances!
Just a couple of thoughts to consider: If you and your buyer use a realtor, you will lose $9,000 of the $150,000 immediately to the 6% commission. Hopefully you still come out ahead.
On the plus side, I would support the idea of getting a really cheap house. As long as it is livable, it is your choice whether / when you fix it up / upgrade it. You can do that as money allows. But if you stay in the more expensive home you are for sure paying out more money.
