Author Topic: Housing question  (Read 3666 times)

process

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Housing question
« on: January 26, 2014, 05:56:31 AM »
I make 78000/year.  I have a second job that brings in between 3000 and 4000/year.  I am currently working on paying off debt that totals 6000, should be paid by March 2015.  I have one student loan of 27000 I'm paying now, should be paid in late 2018.  I also have additional student loans totaling over 300000; fortunately, I work in public service so will be able to make payments on these based on my income over ten years and then the balance will be forgiven.  I also have a mortgage of approximately 300000.  I have no savings other than a few hundred dollars.  I do live frugally, but I do commute by car (2006 Corolla, paid for) and I do have Aereo at 13/month (I would do without, but my SO likes to watch sports which are not available for free online.)  I very rarely buy anything except gifts.

Later this year, my SO will begin paying me rent which will total 18000/year.  Most of this (12000) will go toward payments on my big student loan, beginning my ten year commitment to monthly payments.  The balance will go toward increased living expenses and home maintenance.

I want to be able to retire from my current job in five years, when I'm 55.  I will then begin receiving a pension of about 24000/year, which will not keep pace with inflation.  I plan to find another job, which will likely pay 45000/year, and live off this for the next ten years while saving my pension income.  My SO will do the same, so total income will be 90000 at that time, and total yearly savings (from both our pensions) will be 35000/year (48000 minus my estimate of what we will lose to taxes.)  Ten years after our first retirement, we will have 350000 in the bank, plus the income from our pensions, and will be able to stop working if we choose to.  Our current living expenses, minus the mortgage and student loans, which will both be paid off before our second retirement, are about 30000/year.  I've run this scenario on FIRECALC and it seems to work, but my current financial situation looks so dire, it's hard to believe it could actually work out.

My question right now is what to do about housing.  I love my house, but it is old, drafty, and in need of some major work (new roof, exterior paint, repointing of the stone foundation.)  I have done many repairs and work in the house myself, but don't feel up to doing these major repairs.  I think the house would sell for a bit more than the mortgage, but probably not a lot more.  I would be lucky to find another house in the area for the same price; however, a different house may not need the repairs mine does--nor would it be worth as much as mine would be if the repairs were done.  I could move to another location where housing prices are lower, but there, real estate taxes are much higher (although there's no income tax.)  How do I begin working through this decision?

process

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Re: Housing question
« Reply #1 on: January 26, 2014, 11:59:49 AM »
Thank you for your questions, Dmy0013.

My SO is not yet living with me but will be in July 2014.  I do have an adult child living with me, who pays most (but not all) of his own bills. 

In addition to all the standard deductions, a 10% contribution to my pension is taken from my paycheck, so of the 80000 I earn, I net about 48000/year or 4000/month.  Of that, 1725/month is my mortgage payment (includes taxes and insurance), leaving my 1275 for all my other expenses.  I pay 250/month toward the smaller student loan, and 380/month toward my other debt.   

I would love to hear any ideas to lower my expenses, as well as how to make the best decision about housing.

BPA

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Re: Housing question
« Reply #2 on: January 26, 2014, 12:08:57 PM »
Is it possible to move close to work so that you could walk or bike and buy a (much) cheaper house?  If not, I would move closer to work and rent.


MrFrugalChicago

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Re: Housing question
« Reply #3 on: January 26, 2014, 12:35:04 PM »
Your house sounds very unfrugal for your income. What city do you live in? You may not have a choice in a few places like SF, but most of the world you should be able to live for less...

process

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Re: Housing question
« Reply #4 on: January 26, 2014, 12:48:48 PM »
I live in the Boston area.  Renting would cost as much, and the expense would continue into my retirement.  At least with my house (or another house, if that turns out to be the best option), once it's paid off my housing expenses will be limited. 

There are areas near me where housing is less expensive, but only by about 50000 or so, and the value of the house would be much less than the value of my current house would be if the work was done (smaller but renovated houses in my neighborhood have sold for close to 450000 in the last year.)  What factors come into making this decision?  What should I be thinking about?

bop

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Re: Housing question
« Reply #5 on: January 26, 2014, 12:59:49 PM »
I net about 48000/year or 4000/month.  Of that, 1725/month is my mortgage payment (includes taxes and insurance), leaving my 1275 for all my other expenses.
One of the numbers looks incorrect: 4000 minus 1725 equals 2275 (not 1275).

process

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Re: Housing question
« Reply #6 on: January 26, 2014, 01:07:29 PM »
Thank you, bop--I thought something was wrong!  I have 2275 a month for expenses, not 1275.

BPA

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Re: Housing question
« Reply #7 on: January 26, 2014, 01:36:57 PM »
With your current house you will need to spend a lot in commuting costs and upgrading costs.  Might be worth it to rent and save separately to buy a house outright when you decide to retire.