Author Topic: Stay or sell advice request  (Read 611 times)

incremus

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Stay or sell advice request
« on: June 08, 2018, 10:30:41 AM »
Hello,
I am new to the journey to financial Independence and am hoping to get some good advice regarding selling my house. My wife and I bought a foreclosed house in a booming historic district at the bottom of the market about 6 years ago. We had very little money saved between us at the time and a small mountain of debts. We had only 5% to put down, but we loved the house and especially its prime location - walking distance to both of our jobs and schools for our kids, a large yard, and terrific neighbors. Since then, we have paid off all of our debts except the house. The interest rate on the mortgage is 3.75%. I'm 34, my wife is 32, and we have two kids, both younger than school age. I work a white collar job with a steady salary and my wife works from home part time while staying home with the kids.

Home prices in the area have doubled since we bought and we have had several unsolicited offers recently. We realized we could now sell this house and make enough profit to buy another with cash. Obviously such a house would not be in as prime a location and would lack the improvements we've made to ours, but the idea of not having a mortgage payment is very appealing. We would try to stay within biking distance of my office. We don't want to spend more on the new house than we'd make in profit on the sale of our home.

Again, I'm new to this and would greatly appreciate the community's input. My question is which strategy of these makes the most financial sense:
   1. Continue to live in the nice big house and focus on paying the mortgage off as soon as possible (with frugality and some good luck, this will take us 5 to 6 more years).
      a. Do this by paying as much extra principal each month as possible
      b. Do this by investing as much money as possible in Betterment or Vanguard ETFs and cashing out when the payoff amount is reached in the ETF balance
   2. Sell this house and move to a less advantageous location, be mortgage free right now, and focus on building our stash with ferocity since we're older than many who start down this path
   3. Other (OP is insane, hasnít considered X, Y, or Z, or hasnít provided enough information)

Thank you for reading.

cloudsail

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Re: Stay or sell advice request
« Reply #1 on: June 08, 2018, 11:38:08 AM »
If this isn't the house you want to stay in forever, I really wouldn't try to pay off the mortgage.
Is this house really too big for your family? Since real estate prices have appreciated so much in your area, I question how easy it would be for you to actually find a cheaper house that is not much farther or crappier than your current one. Do you have one car or two? Consider that when your kids start school, if you no longer live within walking distance, your wife would have to drive.

Honestly, it sounds like you're in a pretty good position already. If I were in your shoes I probably wouldn't change anything.

waltworks

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Re: Stay or sell advice request
« Reply #2 on: June 08, 2018, 12:39:57 PM »
At 3.75%, you should probably not pay off the mortgage any faster than you have to. Invest in *almost anything else* and you'll do better in the long run.

I'd stay right where you are and enjoy your life.

-W

marty998

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Re: Stay or sell advice request
« Reply #3 on: June 27, 2018, 02:06:35 AM »
If the house is doubling in value, chances are it is in a desirable area that is going to keep appreciating in value.

There's a thing on this forum (and elsewhere) about housing being a liability and not an investment. But not all of us subscribe to that theory.

Linda_Norway

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Re: Stay or sell advice request
« Reply #4 on: June 27, 2018, 03:54:35 AM »
The value of a house is all about location, location and location. Obviously your current house has a very attractive location, both for yourself and for others. According to MMM you can save lots of money by living in a central location from which you can walk/cycle, so you can skip owning/driving a/two car(s). Commuting costs are often higher than you think. Today you walk and get exercise, if you drive a car, you'll sit on your butt and need to do your exercise some other time of the day. Do the math for the additional commuting cost and hours. Also try count the physiological effect to leave your best house ever for another, less attractive, house. If you think your next house (that will cost half of your current house) will be less attractive in many ways and might cost you more driving, you should reconsider. Selling a house and buying another one also has a high cost.

Buying a foreclosure, renovating it and selling it with large profit, is called flipping houses. If you buy such a house for a good low price, this can a profitable business. If you make this a habit, you will always be living in an old house and be renovating, which you must be attracted to. Hm, if I read the original post again, I don't see that you actually did any renovations. Do you want to go flipping houses or do you want to settle somewhere? Also look at rental houses in a good location. Maybe they make sense from an economic perspective.

If you current house is too big for you, do you have the option into renting out a room? Maybe this could compensate for the mortgage cost?

Dee18

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Re: Stay or sell advice request
« Reply #5 on: June 27, 2018, 06:56:04 AM »
If you are happy where you are, stay there. Being walking distance to everything is fantastic! I liked paying off my mortgage, but I don't necessarily think it was a wise financial choice. If you want a smaller house, move.

Dicey

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Re: Stay or sell advice request
« Reply #6 on: June 29, 2018, 08:13:50 AM »
At 3.75%, you should probably not pay off the mortgage any faster than you have to. Invest in *almost anything else* and you'll do better in the long run.

I'd stay right where you are and enjoy your life.

-W
Once again, Walt nails it. You've won the big one. Keep salting the rest away so you can hit FI sooner.

Rosy

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Re: Stay or sell advice request
« Reply #7 on: June 29, 2018, 01:35:34 PM »
This is like a dream come true - great house in a perfect location @3.75% - jackpot. Doubled in value already - sweetness!
All debt eradicated - yay!

Don't mess with a good thing, just enjoy and stash the money that used to go to debt payoff, the house will eventually be paid off without causing you any stress or taking away from your stash - awesome!