Stay or Sell?

[azu612]

Hello,

I have a condo that I own and live in.  It is in the suburbs of Boston.  It's a fairly expensive town.  The schools have a good reputation and it is pretty well connected to the city.  I am currently working on paying down some high interest loans (6.8%), but once I finish I plan on saving for a down payment. 

I know that I don't want to keep the condo as a rental, but I also don't really want to move right now because my mortgage is cheaper than rental rates, which allows me to pay off debt.  However I was also thinking that I may be able to sell it, take about half the profit and pay off the loan balance, and then save on top of the other half. 

My worry is that since most rentals are about $500 or more expensive per month, maybe it would best to stay in the cheap condo and just sell once I'm actually ready to buy.  I suppose I fear a big downturn in which I would not be able to sell my current condo.  I don't love the idea of renting and I certainly don't want to have to keep moving around. 

Any opinions on whether I should sell and rent or stay and save are greatly appreciated.

[RidetheRain]

Depends on the loan balance and how long it would take you to pay off. Can you hash out a few more numbers for us? Off the top of my head I'd like to see:

1. Loan balance
2. Loan term and how far you are into it
3. Current monthly payment (minimum or otherwise)

[azu612]

My loan balance is 128k.  I am 3 years into a 30 year mortgage.  I don't have the exact numbers in front of me, but the mortgage itself is about $730.  The taxes are about $290 per month.  The condo fee is $366.  I also pay insurance of about $45 each month.

The condo has increased in value quite a bit over the years I've been here.

[azu612]

One other thing. The mortgage is 5%.  I'm not sure if that makes a difference in the calculations.

[RidetheRain]

SELL!

You are barely into your mortgage and are already thinking about moving means move - and fast. Interest is generally front-loaded into your loan payments so right now you are mostly paying interest and not putting much of that monthly payment into your assets.

Or, this of it this way:
Mortgage: $128,000
Rate: 5%
Term: 30yr
Total Cost: 247k
INTEREST: $119k

Do you have something better to do with $119k? It sounds like you do. Try a rent-or-buy calculator with more exact sums to get a more accurate picture AFTER you pay off your debts.

[azu612]

I know I will want to sell, I'm just debating over whether to do it now or in a year or two.  I would pay down my loans while paying the mortgage which is a good deal more affordable than rent.  I definitely want to be an owner, I would just rather own a house than a condo.  Our housing market is really strong right now, but I fear a downturn before I would have the chance to sell. 

[RidetheRain]

I would sell and deal with renting for a year or two then turn to home ownership when you are out of debt. Right now you are paying interest on a place you don't want to live instead of paying extras on your debt and getting yourself into a place where you can comfortably get a decent mortgage. Also, if you are worried about prices going down in future, what better plan than to sell now and buy later when prices are presumably lower.

Real estate is one of those things that works best if you are flexible with the timing. Renting isn't all bad especially when it's only for a year or two.