Financial overview:
Gross income is ~$85k, excellent credit. Just received $40k inheritance, now have ~ $50k total in bank. 401k's contributions set to employer 5% match. ~$50k in 401k's. No other investments. 2 cars, 1 in good shape, 1 on it's way out. (worth ~$10k and $4k).
$10k on 0% interest credit cards (I play the rewards game, but never pay interest). No other debt.
We are both 29 years old with a 2 year old daughter who does not currently have a college fund set up.
The issue:
My property taxes and interest rates are f*cking ridiculous for my 1600 sqft $160k home, built in 1969. It needs a new driveway and back deck, but is OK otherwise. We have $138k left on the 30yr, 4.88% mortgage (we had average credit back then). Taxes were $5900 at purchase but are now $6,500 annually. Similar house in the area just sold for $235k, but it was a little smaller and needed updating.
My town has been rapidly increasing the property tax rate for the last few years. The rate is now @ 9.9%. They've been lowering the "fair market value" so the actual tax paid did not increase for a year or two. But this year it shot up, and now I'm worried that once they max out the rate (I think it can only be raised X % per Y years) that they will begin raising the FMV to increase the taxes paid.
Other towns in the area have tax rates between 4% and 9%, depending on how wealthy the town is, with the richest towns having the lowest rate (of course). The towns we were looking at moving to have a 6.5 - 8% tax rate, but the average houses in those areas are 1940's era and start at $250k. Some of these have been updated, and the property taxes are typically around $5000.
I live in the Chicago suburbs, and it's expensive around here. I'd like to stay in the area because all of my family and friends live here, and I like my job. However, it feels like just living in this area is anti-mustachian.
What should we do in our situation? Now that we have the inheritance, we have some options. Some we've considered are:
1. Refinance to get a lower rate (and maybe a 15 year term), then invest the inheritance in a college fund, Roth IRA's, emergency fund. Maybe fix the place up if there's anything left over.
2. Sell our house (optionally fix up to sell faster) and move to wealthier town. This will fix our crappy interest rate, and our outrageous tax rate. But the house itself will be costly (forget the 15 year term) and won't leave much for investing otherwise. I'm not much of a handyman, but can fix minor leaks, paint, etc., so major fixer-uppers are out.
Any thoughts or suggestions?
