Author Topic: Case study-Move closer but increase mortgage?  (Read 989 times)

ezd2027

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Case study-Move closer but increase mortgage?
« on: June 20, 2017, 10:20:13 AM »
First post, been reading this site for a few months. Recently had some epiphanies in my life and my wife and I have gone back and forth on selling, my son turned 4 recently so we want to settle in one area for his schooling. I live in the Chicago area, we love our home but it's rather large for us and too far from work.  We want to move midway between our jobs ( I commute 32mi/45min-1hr each way, my wife is 18mi/30min). I set a goal to FI in 10years, and possibly FIRE by then as well. Homes my wife are looking at are going to cost ~$450K-500K, I ideally want to stay below that. I don't want to increase our mortgage burden, but its hard to avoid, moving inward towards the direction of Chicago costs more in areas people want to live (i.e. good school districts). Thinking about the true cost of commuting and every mile closer articles.

Why do we want to move?
-time lost driving=less time to spend with my son
-taxes (my area has "good" schools, but is funded 75-80% by homeowners-very little commercial where the schools are located). Our township has increased 30%. It's highly possible we could be paying $18k/yr in taxes soon.
http://www.dailyherald.com/news/20170531/where-rising-assessments-are-boosting-property-tax-bills-most
-maintenance on this oversized home will drain us long term, some of it is because of the time factor.
-it is not my wife's dream area to live, but I think we have a decent community for activities and amenities. The library is fantastic.

My wants
-Closer commute (30min or less)
-bike to grocery, library, parks
-walking/biking distance to schools
-nearby parks
-kitchen that works, good sized family room
-3 beds/2baths

My wife's want list

-white trim
-2.5 bathrooms and kitchen of her style
-good public schools
-no split levels
-character (to me this means something that requires more maintenance)

Market Value: $470K
Original Purchase price: $385K
Original Mortgage Amount: $365K
Interest Rate: 3.375
Mortgage Term: 30
Term remaining: 29
Amount remaining on mortgage: 349K
Gross Rents:
Principal and Interest (the P&I of your PITI - should match with the above info): 1670/m
Taxes and Insurance (the T&I of your PITI): 2200/m
HOA costs: 200/yr
Deferred maintenance notes:

So does it make sense to increase my mortgage to achieve some other benefits? I know it sounds like I am asking for permission, but really do want honest feedback. Taxes will go down ~4K-5K a year.

Cossack

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Re: Case study-Move closer but increase mortgage?
« Reply #1 on: June 22, 2017, 07:44:12 AM »
If you want to FIRE earlier you might want to consider not getting into that much debt for a home. Property is something you leverage for wealth creation. It should not be an emotional decision but a business one which gets a good return on investment. It is bad debt if you have to pay for it yourself. If you use other peoples money to pay for it can be good debt. If you make some sacrifices now, it will mean you reach your goals quicker.

Cwadda

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Re: Case study-Move closer but increase mortgage?
« Reply #2 on: June 22, 2017, 08:11:59 AM »
Quote
3 beds/2baths
If you only have 1 kid with no plans to have more, you might want to reconsider the need for a 3 bedroom place.

What are rents fetching in the area you want?

ezd2027

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Re: Case study-Move closer but increase mortgage?
« Reply #3 on: July 10, 2017, 11:36:52 AM »
The area we are looking at is tough, there is a big difference in homes in the 300-350K range and $450K-500K. Price per sqft is about $200-220 with some trying to get $300/sqft. I think those will not appraise out. Market conditions for homes that people want to live in are getting into bidding wars, and the 300-350K range is where this is happening. Even the good ones priced at $450 do not last long in that area. Our house is on the market now, and if it sells before we find a place then we plan on renting, not going to rush or get emotional...my wife on the other hand tends to get excited.

Rental prices range from $2000-$3500, depending on small houses or apartments, the apartments are actually more expensive because they are right near the trains, updated and cater to the younger generation. There are several smaller colleges in town as well.

Regarding beds, 2 beds are nearly non-existent unless renting, and 3 gives us space, the homes my wife likes are 4 which we don't need. My wife plans on working for 16+/yrs, I am recently trying to get my time down to less than 10, but it's going to keep taking small adjustments along the way to get to that savings rate, it hard to get the spouse completely on board, but she is supportive.