New here

[SimpleMama]

I'm new here and wanted to share a little about myself. I'm a middle aged, simple minded.... for the most part,stay at home mom to some not always so simple kids, that are the joy of my life and married to a wonderful hard working man.

We are debt free other than our mortgage and a home improvement loan that has 0% interest for the next two years. We could pay that off with out savings, but I'm not sure it's the best idea.

My parents were horrible with money. My dad worked hard and went back to school at night to better himself and eventually made good money, but he and my mom always spent more than they made. Buying homes, new or old, dumping tons of money into them, landscaping, fences, finishing basements, doing repairs etc. They ran up credit cards to do so. I remember many times them being stressed over finances, fighting and arguing  and then going to Beneficial to refinance everything and coming out happy only to do it all over again. Eventually they would need to sell the home to get out from the mess, pay it off, by a cheaper home, start all over again. Other than Christmas, where in the early years they went crazy overboard, they never gave us kids too much, materially or emotionally, and when I was 14 I got a job and would blow through the money on "cool clothes" and hanging out with friends as fast as I made it to feel accepted and fit in.

My dh was raised basically by a single mom, who was frugal to the max.

When we married, I had a lot of bad spending habits and  I managed to run up some debt and I managed to erode away some of my husbands frugality through nagging or just spending and him not really trying to stop me. Then I got smart and worked hard to pay it off. (back in those days I worked part time out of home) However this pattern would often repeat through the years, many times.

We had a lovely home that worked for us but of course wasn't perfect, but I got caught up in the materialistic idea that a big beautiful house would make life more perfect. So we bought it. On one hand I really like our home as it works well for our family size and functionally wise, but truthfully I'd give it up in a heartbeat, if the real estate market would let us, because to me the tradeoff in expense for mortgage/ upkeep/ utilities is no longer worth it.

Sadly at the present moment we have lost about 100K (or 25% of value) since we purchased it just before the big crash, which means our equity is minimal. Maybe 10% equity out of what we could sell it for minus any real estate fees.

Since January 1 of this year, I have been very mindful of the money we are spending and made a reasonable budget that we comfortably  live on. I've been excellent about sticking to it, and not buying anything we don't need. We have a 6 month EF saved up as well. But most of the monthly income is accounted for. Dh gets a big yearly bonus, but I am no longer counting chickens before they are hatched, so to speak, so it's not part of my budget.

I guess the  biggest question I've been constantly mulling over is, should we basically lose everything we have put into this house up to this point with the hope that perhaps long term we would save more on paying less interest on a smaller loan, as well as less upkeep/ fewer expenses on a smaller/less expensive home or, should we ride it out for a few more years and hope the market really does come back?

I'm just not hopeful we will ever get back to anywhere near what we paid for it and I'm not sure how one goes about making this kind of decision.

[sherr]

In economics there is a term, "sunk cost". That's money you've already spent and that you can't get back. Many people continue to throw more and more money after a lost cause because of all the money they've already thrown after it, figuring that if they give up now they'll have "lost" all that money they've already spent. The reality of the situation is that they've already lost it, and if they continue to throw money away they will continue to loose more. The most rational thing to do is decide at any given point, "starting from now and going forward what is the best choice I can make?" If it's better for you to switch then switch, what you did in the past is irrelevant.

If you do decide to switch to a smaller house, it's likely that the you'll buy it for cheaper than it would have sold for a few years ago - whenever you bought your current house. So even though you'd be selling your current house for less than you paid for it, you're also buying your new house at less than you would have paid for it. You're getting more house for your dollar on the purchase, but getting fewer dollars for your house on the sale. It kinda evens out. If you do switch and the market does come back, then your new house would also appreciate.

So given those two facts I would say you're thinking about the wrong things. The kinds factors you need to consider are:
1) how much can you afford / do you want to spend on mortgage / upkeep / utilities
2) how small of a house can you live in and still enjoy an acceptable quality of life
3) how much will it cost you to move (real estate agent percentages, other fees, moving expenses, etc.)
4) can you find a place closer to work? other places you go often? how much will that save you in commuting time / expenses?

I hope that's helpful.

[SimpleMama]

Thank you. I've been thinking many of those same things. You are right, we can't get back what is lost and in the last few years my values and ideals about what is important have been changing.

Lots to think about, but at least we are doing that, and also being more aware of how and why we are spending money on the house.