Greetings,
Looking for some living situation advise. Three years ago we bought our townhouse from the people we were renting it from. The best part of the deal at the time was they personally financed it for us. Our mortgage is $950 a month and we pay a little extra ($50) each month. we save about $150 a month for our yearly property taxes. Being that it is a townhouse there are monthly HOA dues in the amount $250. The property is 20 years old and thus is beginning to need things 20 year old properties need. Many of these things are supposed to be covered by HOA dues. This is where the problem starts. The HOA was poorly managed for the first 10 years and much of the money that should be in reserves by now was spent on unnecessary maintenance. Because of this we are getting yearly assessments in the range an extra $250 per month to cover some repairs and maintenance. We anticipate these assessments to continue as the years go one.
Some other necessary info:
We are recently debt free other than the mortgage but do not have another down payment saved yet. Being debt free allows us to save/invest an additional 20-25k a year after we fund our retirements.
Our financing through the previous owner has some stipulations. If we sell between year 1-5 we have to pay a penalty of 10% of the remaining principle. If we sell between years 6-10 that penalty reduces to 8%. We agreed to this because we had a very small down payment, they gave us a great price, and didn't require mortgage insurance. The current principle balance is $185K.
Our dilemma:
The increasing cost of the HOA dues seem to be not worth it despite them paying for some of the repairs and maintenance of the property (property meaning the whole property, not necessarily our home).
The poor state of the HOA finances and constant assessments, could make the house hard to sell and decrease the value.
The prepayment penalty would significantly eat in to any profit we would make upon selling it (Value is 250-275k and would owe 18.5k)
Options we are considering:
-Sell soon, pay penalty, look for favorable financing on a new place despite not having a 20% down payment
-Stay for a few years, pay down the principle a bit more, save a down payment with excess from being debt free and move then, still paying a penalty, just less.
-Stay for a few years, significantly pay down the principle, refinance, pay the penalty and convert to a rental
Those are just a couple ideas we have kicked around. Let me know if there are any other ideas you might have or if there is more info you might need to make a suggestion.