Author Topic: Settle for debt-free or Love with a mortgage?  (Read 2621 times)

Taterbug

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Settle for debt-free or Love with a mortgage?
« on: June 21, 2018, 12:18:12 PM »
My husband and I have found ourselves at a crossroads. The question? Should we move into a house we can pay cash for in an area we do not love (near family) or do we take a mortgage on a house (that will need work) in an area we love. There is a lot of back ground here but I will try to keep it short and to the point.
We are in out early 30's, my husband works from home (he keeps west coast hours) and I am an advance practice nurse who "travels", meaning I go to hospitals with a need for a period of time (usually 3-6 months), as part of this arrangement I am provided housing and a rental car. So, realistically, we are only home 6-12 weeks per year anyway. Annual income is around 300K. We currently have a mortgage at $700 a month with 13 years left (we are making no effort to pay this off early as the interest rate is so low). No other debts, just monthly stuff (electric, water, etc) and what we spend on travel (which is a lot of money but it's our luxury and we plan to cut back on that in the coming years)
We do not have kids but we do plan to add one in the next 18-24 months. I intend to take around 1 year off with the little one but then return to my current job arrangement and take baby with us (we will be a one child family).
The "paid for house" is a foreclosure that needs a great deal of work in the town where both of our families live. The location is perfect, it is the nicest part of town and in the best school district (we think we will home school but still think this could be an important factor as things change). This is not an area of starter homes, it is the area that people move to for the long term. We could easily fix it up and make an excellent profit. But, we could also spend the money we have saved to make it our home and be mortgage free. The house is near our families which might be nice with the addition of a kiddo and it would be paid for and that is just awesome. However, we do not love the area, we are very outdoorsy (about an hour drive to get to several state parks) and liberal (super red state in the bible belt). But, the cost of living is low. Estimated cost + remodel about 120K
The other option is to spend the money we have saved on a home in an area we love about 6 hours away from our families. The home is on the lake and it (like all other lake houses)is expensive and will still need updating. We have always wanted to live on the lake, there are mountains nearby with great hiking with the beach just a few hours drive away. My job situation will still be the same so while we will not be spending a great deal of time there right now it would be a place we would love to come home too and eventually where we would retire. We like the idea of choosing a place we love but we are looking at probably 10 years of a good sized mortgage. However, we think this would probably be the last house we would buy. Estimated purchase price (no remodel included) about 400K
We think both options are decent. They are just good in different ways so we thought asking a community of likeminded individuals might help us make the decision. So, tell us, what do you think?

nkt0

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Re: Settle for debt-free or Love with a mortgage?
« Reply #1 on: June 21, 2018, 12:28:59 PM »
I don't mean to be unhelpful, but it sounds like a decision only you and your family can make. Sounds like a win-win, though, so it shouldn't be too difficult.

FIRE@50

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Re: Settle for debt-free or Love with a mortgage?
« Reply #2 on: June 21, 2018, 12:29:18 PM »
Does your husband travel with you when you take the nursing jobs? Is "we are only home 6-12 weeks per year anyway." a typo? I would not buy anything if I wasn't home 75%+ per year.

If the lake house would be your forever home, then I would lean towards buying that one. I would not live in a state that did not align with my values, especially if planning to raise a child. My wife is originally from NC and all of her family still lives there. Her family has been asking us to move back there pretty much as long as we haven't lived there The COL is much lower, but the state is incredibly bigoted and doesn't value education in the way that we do. I would never raise my child there.

Good luck!

rubybeth

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Re: Settle for debt-free or Love with a mortgage?
« Reply #3 on: June 21, 2018, 12:30:35 PM »
That's a tough choice. I think you could try to flip a coin and see how you feel about what you get. If it feels right, go with it, and if not, do the opposite.

DH and I specifically decided to stay in a community near family since it's hard to put a price on the time spent with them and the amount of support they offer--support can be worth a lot more with a child, and for the child to have a relationship with family? Priceless. But if you'd be absolutely miserable and the area doesn't align with values, etc. then that might be tough. We have other things we enjoy about the area we are in, and make the most of it.

I do question buying a home when you're only going to be there 6-12 weeks per year, unless I'm misunderstanding that. It sounds like it would be "home base" for all the traveling? Only being "home" for 6-12 weeks might mean it doesn't really matter where "home" is, since you're only using it for a month to three months of the year. In that case, I'd look at a condo or townhouse or another housing option that allows you to leave and not worry about stuff going wrong while you're away. My sister works in a school and spends most of her summers away from her "home," and she specifically bought a condo so someone else would do the bulk of the maintenance while she's away for three months. In your case, would a 2 bedroom suffice, or even just renting a couple rooms from family/friends in the area while you're there?

Mother Fussbudget

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Re: Settle for debt-free or Love with a mortgage?
« Reply #4 on: June 21, 2018, 02:07:23 PM »
Come on, fellow Mustachians!  There is NO QUESTION of what the answer would be for a Mustachian:
    LOVE WINS - follow what brings you Happiness!

Don't forget that Pete himself focuses on Mustachianism as a LIFESTYLE BLOG.  Of the many tenants of a Mustachian life are:
* Early retirement
* Financial independence
* Frugality and simple living
* Anti-consumerism
* The philosophy of happiness
etc.

Yes, I realize there's a LARGE VOCAL contingent of Mustachian's who agree with the thinking "It makes more sense to rent than to buy" in most real estate markets.  But the intangibles aren't accounted for in that discussion.  In my case, and possibly yours, Happiness is the biggest intangible.  By BUYING/OWNING, I feel like I'm investing in myself.  By RENTING, I felt as if I was giving money away to someone else who was generating cash-flow to fund THEIR path to FIRE.  (and I'm correct in that assumption)

If owning a home involves using OPM (other-peoples-money / a mortgage), so much the better!  Think of a mortgage as 'paying your future self WITH INTEREST', that interest being the average 3-to-5% annual home appreciation, and the home mortgage tax exemption...
I thought of my mortgage as investing in 'real estate bonds' with a 3.75% interest rate (my mortgage interest rate).  Now I borrow on investment real estate, and the mortgage notes are paid by the renters.

If you want more information on the many Mustachians who are using REI (Real Estate Investing) as a way to generate income, and accelerate FI, you should move to the Landlording forum, and read, read, read (starting with the book recommendations list - my current favorites: "The Millionaire Real Estate Investor", and "Landlording on Autopilot").

My next book will be... [well, who knows what it will be - young adult fiction, financial self-help... who knows...]  but it *might* be:
   "The Millionaire Property Manager" - how to use real estate investing, and maintenance - for your investments, and for out-of-town investors - to achieve financial independence.   MANY things work in your favor here, REI Depreciation being the main one (depreciating the purchase price of rental houses over 27.5years as a way to cut your tax burden).  Give yourself the title 'property manager' [it's just semantics] "working for the nameless/faceless corporation" (LLC) that owns the properties (even if the LLC is a pass-thru company owned by you).   Even if your home mortgage is your ONLY real estate investment... realize that generations of people have used real estate investment as a way to diversity their investment portfolio.

Best of luck, and let us know what you decide!  MFB

Scortius

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Re: Settle for debt-free or Love with a mortgage?
« Reply #5 on: June 21, 2018, 02:16:16 PM »
A major point of Mustachianism is to help focus on where to save money so you can spend money on what you truly value. The number one item on that list is often simply 'time', but you don't have to limit it to that. Buy the lake house.

farmerj

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Re: Settle for debt-free or Love with a mortgage?
« Reply #6 on: June 21, 2018, 02:18:05 PM »
"We do not have kids but we do plan to add one in the next 18-24 months." => With  a kid hopefully coming in the relatively near term, why decide now? Just punt until afterwards, because even perfectly healthy and normal children are the cause of major life alterations.  Your preferences pre-kids are not necessarily the same as post-kids. If you've moved to the lake, you've foreclosed a lot of your family support options. If you've stayed in-town you can't as easily take the baby with you on a quiet stroll through the woods. You'll have a better handle on what you want and need later.

Scortius

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Re: Settle for debt-free or Love with a mortgage?
« Reply #7 on: June 21, 2018, 02:30:46 PM »
"We do not have kids but we do plan to add one in the next 18-24 months." => With  a kid hopefully coming in the relatively near term, why decide now? Just punt until afterwards, because even perfectly healthy and normal children are the cause of major life alterations.  Your preferences pre-kids are not necessarily the same as post-kids. If you've moved to the lake, you've foreclosed a lot of your family support options. If you've stayed in-town you can't as easily take the baby with you on a quiet stroll through the woods. You'll have a better handle on what you want and need later.

Good point with the kids, the answer could very well be none of the above. Why buy now? Don't be afraid to miss out on a supposedly good opportunity to buy. Houses go for sale all the time. Are you feeling pressure to buy because you don't want to miss out on one of these two houses? That could be a red flag.

bluemarie

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Re: Settle for debt-free or Love with a mortgage?
« Reply #8 on: June 23, 2018, 07:59:38 PM »
In the end, only you and your husband can decide what's right for your family - but personally, I would never buy in a place where I wasn't excited to live.

mxt0133

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Re: Settle for debt-free or Love with a mortgage?
« Reply #9 on: June 23, 2018, 08:11:30 PM »
I also vote for going with the 'Love' options if your really feel like you need to have a house.  But with your current lifestyle does it really make sense to own?  I would look into that first.

My wife and I moved across the country to a much higher COL area because we wanted to live in a place that we wanted to.  We could have stayed in where we grew up close to family, affordable housing, and plentiful high paying jobs.  However, we like the outdoors, hate long commutes to work, and although love our family, also like our distance from the family obligations and drama.  We could have been in a much better financial position now but our quality of life and happiness would have been much lower.  Every year we ask ourselves if we should move back to where our immediate family is, we have been in the west coast for almost 9 years now.

You only get one ride on this planet, don't settle if you don't have to.

MayDay

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Re: Settle for debt-free or Love with a mortgage?
« Reply #10 on: June 24, 2018, 05:32:27 AM »
I would generally say get the mortgage and live where you want, except for the fact you'll only be there 6 weeks a year.

Just rent a house there for 6 weeks!

Basically I vote to wait until you actually have the kid to decide.

skeptic

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Re: Settle for debt-free or Love with a mortgage?
« Reply #11 on: June 29, 2018, 12:19:14 AM »
Although I would usually say to splurge for the place you actually "love" and want to stay in long-term, this place comes with the massive caveat that you aren't ready/able to actually live there yet.

I have seen a number of people buy houses "for later," and they don't tend to be financially good decisions. Maybe you are thinking of renting it out until you are ready to live in it? But that can be it's own form of financial drain, not to mention the time commitment and hassles... even if you use a property management company.

How long have you been looking at places, and how many have you actually visited?

It's hard to imagine how the lake house could be a good decision right now. If and when you are ready to move there, then go for it! Or: maybe rent in the area for a year or so first to see if you _really_ want to live in that particular location.

Houses are abundant.

Other awesome houses in the area (or maybe better locations) will still be coming on the market when you are in a place where you are ready and willing to live in one of them.

So that leaves whether to buy the cheaper house.

I lean toward no, mainly because you don't sound that enthusiastic about it. This is a big decision and a big commitment. I like to think that you will feel pretty sure you want it when the time comes. Purely from a financial perspective, the cheaper house seems like it could be good. But since you don't sound enthused and you aren't sure what you'll want in a few years, I'd say probably pass.

Obviously only you can know. Reasonable people probably would have tried to talk us out of buying our current house, at a time when I was working at a failing organization and likely to be let go at any moment, and even waiving the financing contingency to be competitive against the investors who were competing against us with all-cash offers. Nine years later we think it's one of the best decisions we've made, and not only was it a financial boon but it has brought us much joy. The hardest part wasn't knowing it was right, the hard part was walking away from several "quite good but just not good enough" houses during the previous years we were searching. (And by "not good enough" I don't mean they weren't fancy enough or anything, but just that they didn't quite meet our particular needs, and at a price that made it worthwhile for us.)

Good luck! Have fun!

frugaliknowit

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Re: Settle for debt-free or Love with a mortgage?
« Reply #12 on: June 29, 2018, 10:14:17 AM »
 I am confused.  If your employer provides a rental car and housing, why are you considering buying a home (at least now...)?

Also, you do NOT yet have any children, but are planning to have them.  I would not make a financial commitment on a home based on plans of having children.

From someone who is older:  There is NO SUCH THING as a "forever home".  Some homes DO end up being forever homes, but life happens.

There are ALWAYS homes for sale, just like there are always used cars for sale.

formerlydivorcedmom

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Re: Settle for debt-free or Love with a mortgage?
« Reply #13 on: June 29, 2018, 12:33:21 PM »
In your shoes, I would not buy a house right now.  I would probably put my things in storage (or sell them) and try to rent a furnished property on the lake on the few weeks I was in town.  That will also give you an opportunity to make sure that you like the area and will enjoy living there.

Even if you want to buy a house, does it have to be one of those two? Are there other houses on the lake that don't require so much work? 

You have some time before you have a baby, and as other posters have said, you never know what changes that can bring.

LouLou

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Re: Settle for debt-free or Love with a mortgage?
« Reply #14 on: June 30, 2018, 08:06:20 PM »
Another vote for waiting. My husband and I bought a house before we started having kids, but the precise location of our house made sense regardless of how many kids we had, if my job changed, etc. I think there are too many factors that could change in a couple of years. I say you should keep renting.

I would also add that the lake house sounds like my dream house, but living near family when you have a baby/todder is priceless. Based on this post alone, I would say live near the family when your kid is little and move to the lake later.

ysette9

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Re: Settle for debt-free or Love with a mortgage?
« Reply #15 on: July 02, 2018, 09:18:22 PM »
I feel like framing these decisions as binary, as though there were only two houses in the world you could choose from and your only choice is to buy, is way too limiting. As others have said, neither seem quite right, so why would you take such a big financial step in that solution? Unless you are specifically buying something to rent out as an investment property and have run the numbers to show a good return, a house is not an investment. It is a place to keep you protected from the elements and store your crap. It may appreciate and may even appreciate faster than inflation, but even then it is an opportunity cost for your money that could otherwise be invested. Don’t get suckered into hand-waving arguments like “interest deduction” to prevent you from taking a cold look at the numbers.

I have lived what others have said about your priorities changing when you have a baby. It is just impossible to fully predict how you will react and what you will find important once this life-changing noisy bundle comes home.

I have bought real estate three times now and regretted it the first two. Those two times I didn’t take enough time to really think clearly about what I wanted and needed, and made too many compromises. This last time has made me really happy with our decision to buy. We rented for five years before in the same neighborhood and looked at EVERYTHING before deciding. We considered: sticking with renting, buying SFH, duplex, two houses on the same lot, townhouse, condo, and considered at six different cities.

There will be other houses. This is a big decision. Don’t make it lightly.

Lmoot

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Re: Settle for debt-free or Love with a mortgage?
« Reply #16 on: July 03, 2018, 04:17:28 AM »
 I would not buy a house that I never stayed in, unless I was renting it out at least part of the time. Too many things go wrong with a house, especially when you are not there often enough to stay on top of it. They need ongoing maintenance (especially yardwork), and unless you hire somebody to maintain it while you are gone, it could end up costing you more than if you were living in it for most of the year.

If you want to buy it because this is where you see yourself in the future, when youíre more settled, then go ahead and do it. But make sure itís earning you money or at least being self supporting in the meantime, which means adding a rental option, or renting the whole thing out for the time you are  gone. Or just rent on a monthly basis. Like others have mentioned I would be wary about making such a large purchase and decision based mostly on my future wants and needs.

elliha

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Re: Settle for debt-free or Love with a mortgage?
« Reply #17 on: July 03, 2018, 06:13:13 AM »
I have to agree to wait to see what your life is going to be like with a child. You plan to keep your job but once your child is older it might be very hard to keep moving that often for you and especially for a child that is going to be an only child. It can be lonely especially if you don't have that much contact with extended family and you have to make new friends every 3-6 months and on top of that you are home-schooled so you have less natural ways of meeting other children. No, I don't believe that homeschooled children are isolated but most schools give you access to 100s of kids that you might get to know and that isn't possible for just one parent to do, over and over in a new place. Of course, for the first couple of years it might be doable but up until then you can think about what to do.

narrative

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Re: Settle for debt-free or Love with a mortgage?
« Reply #18 on: July 03, 2018, 07:37:41 AM »
If you go with the lake house is there potential to rent it out (AirBNB, etc) when you aren't there?

If you do have a child your perspective on being close to family may change. It may hold more value for you to have help (of course this depends on your family haha) than to live near the lake. How will the things you enjoy about the lake change while your kid is young? This is obviously a variable you can't expect to know but it is worth thinking about.

I think it is worth looking at the money you have. If you don't buy a house, and put that money into an investment for the next year or two while you live this moment in time sans-owned-house, could you still rent at the lake for the 6-12 week span and see how you feel about it? Take a "trial run" without tying yourselves down there financially?

Also, both houses need updating. It sounds like you only have 6-12 weeks a year to accomplish that updating. You know a kid is in your future. Almost 40 year-old me (with two kids) says take the kid-free time you have now to do some things that you might not be able to do with a baby (especially with family 6 hours away). Enjoy your hobbies, take long multi-day hikes if that's your thing. Rent in several places and see how you feel about them in person, not just on paper. Wait until you are sure on the house. Like everyone has said, there will always be houses for sale.

Also, know your family. We tried living near family for 18 months while we searched for a house. It was nice in some ways but we were happier with some distance. They really didn't help out with the kids even though we were next door. Only you know your families and how that will go, but if you end up in an area you really aren't excited about and the family closeness doesn't pan out to be what you hoped you might find yourself longing for the lake. :) I might be a bit jaded on that point. Hopefully your family is nothing like ours.

One more thing. How do the taxes compare between the two areas? This makes a big difference when you look at overall cost. We just moved from IL to CO (yay for living somewhere you enjoy!) and property tax differences were shocking. On a 30 year mortgage the payment was the same on a $350k house in IL as it was on a $450k house in CO b/c the CO property tax is much less. I'm not sure what areas you are looking at but it can be an important distinction.


TVRodriguez

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Re: Settle for debt-free or Love with a mortgage?
« Reply #19 on: July 03, 2018, 09:24:26 AM »
Another one saying: wait.

I also will add that we have been living over 1000 miles from our parents and siblings, and we have 3 kids.  We manage, and we still have great relationships with them.