Author Topic: Should I move?  (Read 3232 times)

Secret Stache

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Should I move?
« on: September 18, 2012, 10:03:16 AM »
My wife and I live 25 miles away from work and owe $107k on our home (original purchase price of $125k).  We are considering listing it next summer and taking a slight loss on the sale in order to move to a neighborhood closer to work (10-15 miles and no toll roads).  Now, in moving we would like to buy a place that can accomodate our family's growth over the next few years and would like to upgrade homes.  We are thinking in the $215k-$230k. 

We will have about $50k available for a down payment on a new place next summer and for planning purposes we are assuming nil profit from the current house.  Good idea?  suck it up and hope the value goes up on the current residence?  Rent the current place and buy new?  We have not other debt and have about 45k after tax dollars extra a year that is available for savings and/or paying down mortgage debt.  Any input is appreciated.

Use it up, wear it out...

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Re: Should I move?
« Reply #1 on: September 18, 2012, 10:12:26 AM »
Hi Matt,

We'd need a lot more information, I think, to give an opinion here. Here are a few questions to get you started:

-Do both you & your wife work in the same city, so moving would bring you both to walking / biking distance?
-How much do you pay per mile now for your current commute (think: car costs, gas, etc. You could just assume $0.51 / mile + whatever your car payments + insurance are)
-Will you be able to get rid of one / both cars after you move?
-What size is your family? How much are you thinking about in terms of sq ft / # bedrooms / etc?
-What is the range of prices for housing in the area you're considering? Are there other options to get the size you want, e.g. a fixer-upper?
-Are there any other expenses associated with the new area, e.g. higher property taxes?

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Re: Should I move?
« Reply #2 on: September 18, 2012, 06:31:40 PM »
Hi Matt,

Just ran some quick, simplistic numbers. Spreadsheet attached - it looks to me like you can make the move within your month-to-month budget - assuming you're OK taking on a lot more debt. You need to evaluate that against your goals, FI and otherwise. If you want to get to FI quicker, look for a cheaper house or stay where you are (obviously).

The way I figure it, on a pure monthly cash flow basis you either pay $125 / mo additional to live there or, if you factor in your saved commute time valued at $25 / hr per person, you actually save $376 per month.

What this doesn't take into consideration is the additional interest you'll pay. If you were to refi your existing $107K at 3.5%, 30 years, you'd pay $65,972 in interest over the life of the loan. For your hypothetical $225K house, it would be $107,898 over the life of the loan - a difference of $41,926 (approx $116 / month) which, if invested at 5% over those same 30 years, would $88,828 additional savings in your 'stash at the end of it all.

Another way to think about the interest is: you'll pay $332,898 over the next 30 years for the privilege of living in your hypothetical 4 bedroom home, vs $172,972 to stay where you are.

FYI, by way of comparison, my wife and I have 2 children and we all share an 1,100 square foot, 3-bedroom 2-bathroom apartment quite comfortably. 2,500 sq ft should be considered a luxury.

Some notes on my spreadsheet assumptions
  • I assumed you pay 4% now on a $107K loan, and assumed $175K loan at 3.5% in the new property
  • I estimated 50 minutes per day commute today, and 20 minutes commute if you move within 10 miles
  • I valued your commute time at $25 / hr per person

velocistar237

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Re: Should I move?
« Reply #3 on: September 18, 2012, 06:33:48 PM »
I have a truck that sits pretty much idle at home and is covered for liability only.  I've debated selling it but it's paid for and would probably fetch $10-$13k.

Sounds worth it to sell. If I owned a second, ever-so-often vehicle, it would be worth about $2K.

Right now, it is just the two of us and two dogs but we plan on expanding in about 2 years.  We are looking for something with 4 bedrooms approximatley 2500 sq ft

Why so big? Is there nothing smaller? 1700-2000 sq ft is big enough for 99% of American families, especially if you have a yard.

On your original question, if you like the idea of becoming a landlord, then this sounds like a decent opportunity for that. Otherwise, sell and move. Don't wait for your house value to change.

I'm surprised there are no non-sketchy options within a 10-mile radius of your work. What do you consider sketchy?

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Re: Should I move?
« Reply #4 on: September 19, 2012, 07:38:29 AM »
Good luck!