The Money Mustache Community
General Discussion => Welcome and General Discussion => Topic started by: Count of San Francisco on June 13, 2017, 06:01:57 PM
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Curiosity since this is not relevant directly to me, a renter. But here in the SF Bay Area, it's not unheard of for people to be sitting on $500k or more of home equity. Much of it in just the last 4-5 years.
Coupled with that and some retirement savings, have any of you done or play to FIRE by selling your home, tapping the equity, and moving to a cheaper COL area?
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As part of our FIRE plan, we intend to sell the house we are living in now and buy or build one worth about half as much. So yea, definitely downsizing.
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We're sitting on $1M in equity, but sometimes life, even post-FIRE, throws you curveballs.
DH and I each had a reasonably priced (for the Bay Area) house when we got married in 2012. Right after we wed, DH's dad died. We realized that his mom wasn't quite right and she was subsequently diagnosed with Alzheimer's. Neither of our houses had a downstairs bedroom, so we sold 'em both, bought a clown house on a short sale and moved his mom in with us, along with DH's college-age son.
We would love to live in something smaller and less fancy, but as long as his mom's with us, we're kinda stuck here, which is why DH is still working. Happily, our house is so close, he walks to his office, which is practically unheard of in the Bay Area.
But oh, how I long to do something like the Spartana Plan! Someday...
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We're sitting on $1M in equity, but sometimes life, even post-FIRE, throws you curveballs.
DH and I each had a reasonably priced (for the Bay Area) house when we got married in 2012. Right after we wed, DH's dad died. We realized that his mom wasn't quite right and she was subsequently diagnosed with Alzheimer's. Neither of our houses had a downstairs bedroom, so we sold 'em both, bought a clown house on a short sale and moved his mom in with us, along with DH's college-age son.
We would love to live in something smaller and less fancy, but as long as his mom's with us, we're kinda stuck here, which is why DH is still working. Happily, our house is so close, he walks to his office, which is practically unheard of in the Bay Area.
But oh, how I long to do something like the Spartana Plan! Someday...
of course the Spartana Plan means not having a clue where to move to next ;-). But then that can be the fun part.
I have complete faith in the efficacy of the Spartana Plan.
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On the other hand, those of us that sitting on huge amounts of appreciation and low Prop 13 taxes may end up keeping our houses because of the capital gains tax. Some of us traded up under the old IRS rules and have very low basis. Even a $500k exclusion means a lot of the equity goes to taxes. California will take a huge bite because capital gains are taxed at the ordinary income rates. A lot of baby boomers will stay and let the kids benefit from the stepped up basis when they die as well as the inherited property tax basis under Prop 58.
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We are sitting in a modest chunk of equity for our area (roughly 100K). In 10 years when the wifey wants to quit working and the kids are finished with school we fully plan on selling and using the equity to downsize into a LCOL area. It is part of our full FIRE plan.
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Yes, we currently have around $1.4M AUD equity in our old home (currently rented out) that is worth around $2M.
We plan to sell post FIRE and buy something for around $0.7M - $0.8M.
The problem is DW is not ready to commit to a timeline for selling and moving, and with the extra risk of having so much at risk in what I consider to be a presently grossly overvalued asset, our timeline for FIRE is facing quite a lot of uncertainty.
I am thinking I need an extra stash to cover living in the ultra HCOL area for up to 10 more years just to be safe.....
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My DW and I have ~400k equity in our home currently. We are 55 and plan on FIREing in one year. We'll use the equity when we sell to move to a LCOL area, downsize and buy a place for cash. (Not ready to FIRE now as we are helping the youngest child finish school).
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We are in a similar boat to Itchyfeet. Overheated housing market, uncertain timeline of when to downsize, and lots (ca $1.5M) of home equity.
We could downsize now and FIRE. For various reasons, we're not ready to do that yet. I'm working part time and not in a rush to move - we love our neighbourhood too much. My client base is here, family is here.
This is definitely the plan though, to downsize to a lower COLA eventually (could be in 10-20 years.) I'm hoping to harvest about $750k in equity in today's dollars when we make the move. Our goal stash size is around $2M in investments for retirement.
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I am certainly planning that our home equity will help our FI process. Not in a hugely expensive market like most of the posters so even a fully paid off house (which is our target before we retire) would give us maybe $250K, from which we'd need to buy our next abode. We enjoy where we are now, but assuming all the kids will disperse around the country, or possibly world as is more common these days and therefore there is little to tie us to this area in 15-20 years when we expect to be ready to hang out the retirement shingle. It's possible her mom could still be alive then, and that may bind us here a bit, but we've talked about just heading out to Montana and living out our lives there in quiet and seclusion as most of our hobbies do not require a big city nearby and we love the mountains. Might do something like North Carolina in the Appalachians, but that appears more costly, and less majestic.
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On the other hand, those of us that sitting on huge amounts of appreciation and low Prop 13 taxes may end up keeping our houses because of the capital gains tax. Some of us traded up under the old IRS rules and have very low basis. Even a $500k exclusion means a lot of the equity goes to taxes. California will take a huge bite because capital gains are taxed at the ordinary income rates. A lot of baby boomers will stay and let the kids benefit from the stepped up basis when they die as well as the inherited property tax basis under Prop 58.
Yup. All of this (except we're not boomers).
Even if we wanted to live elsewhere, we would keep our house & rent it out. We know people who sold, moved away, and then wanted to come back. They were priced out.
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Yup - Currently about $300k in home equity but house is not paid off. Looking to sell eventually and move to LCOL once house is paid off and DH retires.
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If you sell a home and don't buy another, or buy one that costs less, don't you have a potentially giant tax bill staring at you in the face??
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If you sell a home and don't buy another, or buy one that costs less, don't you have a potentially giant tax bill staring at you in the face??
Not sure the rules in US but in Canada we have no capital gains tax on the sale of a primary residence.
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In the US you can use the Home Sale Exclusion rule to avoid paying taxes should you downsize or pocket the equity, depending on the amount of the sale. IRS verbiage below:
Topic 701 - Sale of Your Home
If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income. You may qualify to exclude up to $500,000 of that gain if you file a joint return with your spouse. Publication 523, Selling Your Home, provides rules and worksheets. Topic 409 covers general capital gain and loss information.
Qualifying for the Exclusion
In general, to qualify for the exclusion, you must meet both the ownership test and the use test. You're eligible for the Section 121 exclusion if you have owned and used your home as your main home for a period aggregating at least two years out of the five years prior to its date of sale. You can meet the ownership and use tests during different 2-year periods. However, you must meet both tests during the 5-year period ending on the date of the sale. Generally, you're not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home. Refer to Publication 523 for the complete eligibility requirements, limitations on the exclusion amount, and exceptions to the two-year rule.
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On the other hand, those of us that sitting on huge amounts of appreciation and low Prop 13 taxes may end up keeping our houses because of the capital gains tax. Some of us traded up under the old IRS rules and have very low basis. Even a $500k exclusion means a lot of the equity goes to taxes. California will take a huge bite because capital gains are taxed at the ordinary income rates. A lot of baby boomers will stay and let the kids benefit from the stepped up basis when they die as well as the inherited property tax basis under Prop 58.
I think this explains why my friend's mom continues to keep her house in Sacramento though it's sometimes been a pain to find a good tenant. Friend's grandparents bought the place (on half an acre, iirc) for $6,000 in the 50s. I don't have much familiarity with the Prop 13 rules, but it sounds like, if she were to sell, she'd have to pay a huge amount to the state.
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I think this explains why my friend's mom continues to keep her house in Sacramento though it's sometimes been a pain to find a good tenant. Friend's grandparents bought the place (on half an acre, iirc) for $6,000 in the 50s. I don't have much familiarity with the Prop 13 rules, but it sounds like, if she were to sell, she'd have to pay a huge amount to the state.
Prop 13 favors people who bought for a lower price. California property taxes are based on sales price (but go up a bit each year). So someone who paid $6000 for a house now worth $600,000 would have much lower property taxes than a person who bought the same house for $600,000.
The high taxes on the gain in your example would come from the fact that the property is a rental. If it's a residence & you've lived in it for (I think) 2 of the past 5 years, you can realize a gain of $250,000 ($500,000 - married/joint) without paying federal income tax on the gain.
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If you sell a home and don't buy another, or buy one that costs less, don't you have a potentially giant tax bill staring at you in the face??
That used to be the case but it changed around 1997.
Now you can sell your primary residence (where you've lived) and the first $250,000 of the gain ($500,000 - married/joint) is exempt from federal income taxes (regardless of whether or not you buy another house or its value).
https://www.irs.gov/taxtopics/tc701.html
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This is definitely part of our FIRE plan. We have $537k of equity in our house. Since we prefer mountains and trees over the beach, we plan to retire in a different (and much cheaper) area. Unfortunately we plan to stay here at least six more years, and then we'll re-evaluate whether it's time to cash out and re-locate, or downsize locally and stay while the kids finish school. I am anxious though to build up our other assets outside of the home equity in case there is another housing crash. It is completely insane where we are right now; things don't stay on the market for more than 5-9 days, offers higher than asking. I wish we were a few years further down the road...we would cash out now. It isn't the right time for us though, unfortunately.
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I have built into cfiresim as well as my own models, a plan to sell my house in about 15 years. This is because I really like where I live right now and I've built some great friendships here.
of course the Spartana Plan means not having a clue where to move to next ;-). But then that can be the fun part.
Oh my gosh, Spartana, you've just made me realize that my next move doesn't have to "stick". I've always known I have choices, but I am just realizing I may have an unlimited number of choices! Yep, I agree the Spartana plan sounds wonderful. I have some thinking to do!
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We might sell the house for its equity if we decide to move, but otherwise, we'll probably keep owning a home in this area as a way to control housing costs; rents are getting outrageous here in the PNW.
A question, though: Can you sell your residence when you hit $500,000 profit and get it tax-free, and then buy a new place and start the capital gains clock again at $0? So could you basically leapfrog from house to house, always selling when you're at $500,000 profit, and never pay taxes even though your equity and profits increase over time? Is that a strategy that people use to clamp down on taxes?
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We might sell the house for its equity if we decide to move, but otherwise, we'll probably keep owning a home in this area as a way to control housing costs; rents are getting outrageous here in the PNW.
A question, though: Can you sell your residence when you hit $500,000 profit and get it tax-free, and then buy a new place and start the capital gains clock again at $0? So could you basically leapfrog from house to house, always selling when you're at $500,000 profit, and never pay taxes even though your equity and profits increase over time? Is that a strategy that people use to clamp down on taxes?
I believe so, as long as you fall within the parameters established by the IRS to be eligible for the Home Exclusion benefit. IRS pub 523 can better explain the exclusion in depth.
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We have about 350K equity currently with the house being slated to be paid off in 8 years or so. At that point, my kids will be in college or through it so I will likely downsize to a smaller condo (I don’t like to deal with upkeep).
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We might sell the house for its equity if we decide to move, but otherwise, we'll probably keep owning a home in this area as a way to control housing costs; rents are getting outrageous here in the PNW.
A question, though: Can you sell your residence when you hit $500,000 profit and get it tax-free, and then buy a new place and start the capital gains clock again at $0? So could you basically leapfrog from house to house, always selling when you're at $500,000 profit, and never pay taxes even though your equity and profits increase over time? Is that a strategy that people use to clamp down on taxes?
Sure, though the typical house transaction (sell + buy) loses something around 8-10% to frictional costs (realtor, title insurance, mortgage origination fees, inspections, fees, lawyers, house staging, etc)
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We have a ton of home equity and I think about it ALL THE TIME. However I love where we live so not seriously considering but it would make things easier!
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If I was single I would sell my house, buy a van and invest the rest. I would be FIRE.
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We have a ton of home equity and I think about it ALL THE TIME. However I love where we live so not seriously considering but it would make things easier!
This is where we stand too. I want to live as well or better in retirement as I did while working.
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I toy with this idea, I have a house in Outer London, which is reasonably priced (relatively) and easily commutable to central London.
However, I love London, and any other place that would be equally cool to live in to me, is actually more expensive than my current place.
Of course I could downsize to a real LCOL place, but haven't found any that I'd love to retire to yet; I like liberal vibrant cities and beautiful countryside - one is high demand for workers pushing up prices, the latter has second homers/retirees propping up the market.
But I guess it's good to know I have the option of unlocking equity if needed.
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If I was single I would sell my house, buy a van and invest the rest. I would be FIRE.
:)
*No*, I don't want to be single, but I can't say I've never thought about this.
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If you sell a home and don't buy another, or buy one that costs less, don't you have a potentially giant tax bill staring at you in the face??
That used to be the case but it changed around 1997.
Now you can sell your primary residence (where you've lived) and the first $250,000 of the gain ($500,000 - married/joint) is exempt from federal income taxes (regardless of whether or not you buy another house or its value).
https://www.irs.gov/taxtopics/tc701.html
I forgot about the one time exclusion. My apologies. But then there are greedy states that want a piece of the pie as well...
but not Florida!
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I toy with this idea, I have a house in Outer London, which is reasonably priced (relatively) and easily commutable to central London.
However, I love London, and any other place that would be equally cool to live in to me, is actually more expensive than my current place.
Of course I could downsize to a real LCOL place, but haven't found any that I'd love to retire to yet; I like liberal vibrant cities and beautiful countryside - one is high demand for workers pushing up prices, the latter has second homers/retirees propping up the market.
But I guess it's good to know I have the option of unlocking equity if needed.
Isn't the air pollution in London pretty bad for your health? I read that it was worse than Beijing (briefly) early this year.
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If I was single I would sell my house, buy a van and invest the rest. I would be FIRE.
:)
*No*, I don't want to be single, but I can't say I've never thought about this.
I have less than $200K of equity so after buying a van it would nudge me over the edge of FIRE. If I had a $1.5M paid off house I'd sell it tomorrow. Buy an apartment condo for the GF and cat to live in. Then buy my van and be FIRE. I wouldn't have to choose as long as I wasn't on the road for more than a month at a time without a visit home or a visit to where I was travelling by the GF. :)
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We don't have a lot of equity compared to some of you in super HCOL areas, but we have maybe $250k after taking into consideration realtor and moving fees.
Just for kicks, I added $250k into FIRECalc to see how it would affect our SWR if we retired today. Without it, the SWR is ~$43k/yr. Adding in the $250k the SWR is ~$51k/yr. While the former would allow us to retire today in a van down by the river, the latter would afford us a much nicer van, and we could also go out for ice cream as often as we liked.
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If you sell a home and don't buy another, or buy one that costs less, don't you have a potentially giant tax bill staring at you in the face??
That used to be the case but it changed around 1997.
Now you can sell your primary residence (where you've lived) and the first $250,000 of the gain ($500,000 - married/joint) is exempt from federal income taxes (regardless of whether or not you buy another house or its value).
https://www.irs.gov/taxtopics/tc701.html
I forgot about the one time exclusion. My apologies. But then there are greedy states that want a piece of the pie as well...
but not Florida!
I don't think it's a one-time exclusion:
Generally, you're not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home.
But yes, some states will take a big chunk.
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There are two ways to get home equity: pay down your mortgage, or have your home appreciate. The latter is what we all prefer, I imagine.
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Isn't the air pollution in London pretty bad for your health? I read that it was worse than Beijing (briefly) early this year.
Yes it can be, but the places with the terrible pollution are mainly central London and near busy roads.....where I live is fine, and at work I'm in an air conditioned office.
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There are two ways to get home equity: pay down your mortgage, or have your home appreciate. The latter is what we all prefer, I imagine.
Well, I'm doing some of each ;)
Unfortunately by the time I am eligible for my pension I will have paid roughly 100% of my house value in property taxes...
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We are at 1.4Mish in seattle area for current properties, the problem is I want to retire in HI which is equally expensive. I still have 4 years until I feel ready to FIRE, but if the house appreciate kept up at this speed I could probably do it sooner. It seems too good to be true. Houses around me that are smaller but newer are selling north of 1m which does not seem sustainable at all with normal human salaries in the area even in tech. I just do not understand how anyone is able to afford homes "starting in the upper 900's".
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I just do not understand how anyone is able to afford homes "starting in the upper 900's".
We'll need to move to generational mortgages where your grandparents buy the house and your kids finally pay it off after 100yrs.
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We are at 1.4Mish in seattle area for current properties, the problem is I want to retire in HI which is equally expensive. I still have 4 years until I feel ready to FIRE, but if the house appreciate kept up at this speed I could probably do it sooner. It seems too good to be true. Houses around me that are smaller but newer are selling north of 1m which does not seem sustainable at all with normal human salaries in the area even in tech. I just do not understand how anyone is able to afford homes "starting in the upper 900's".
Scale down your size (going to be outside on the lanai anyway) and save a few hundred thousand.
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We are at 1.4Mish in seattle area for current properties, the problem is I want to retire in HI which is equally expensive. I still have 4 years until I feel ready to FIRE, but if the house appreciate kept up at this speed I could probably do it sooner. It seems too good to be true. Houses around me that are smaller but newer are selling north of 1m which does not seem sustainable at all with normal human salaries in the area even in tech. I just do not understand how anyone is able to afford homes "starting in the upper 900's".
A household income of $200,000 converts to about $10,000 monthly take-home (http://www.calculator.net/take-home-pay-calculator.html?cannualincome=200000&cpayfrequency=Monthly&cfilestatus=MarriedSeparately&callowance=2&cdeduction=500&cstatetax=10&ccitytax=0&cadditionat1=no&printit=0&x=70&y=16) (probably a bit more).
A million dollar mortgage at 4% over 30 years with 20% down costs you about $5,000 in PITI?
So spend half your take home pay on mortgage. Not a great idea in my books, but I'm sure there are people who do it, and you could probably do it and get away with it if you are smart about others things. I don't reccomend it.
Or come to the table with more cash (from previous appreciated housing) or higher household income I guess..
Or parental help, see all the comments above about parents keeping highly appreciated housing to inherit to children at preferentially taxed rates. There is a lot of established built up wealth, if you have the right parents
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I just do not understand how anyone is able to afford homes "starting in the upper 900's".
We are not in the tech sector, but we do own our expensive house outright. We did it because it wasn't our first house. We sold two other highly appreciated properties to buy this one. We were going to get a mortgage, but the lending officer pissed us off. I wanted to lock the rate on a Thursday, but she insisted we wait until Monday. Yeah, by Monday, rates had spiked by 75 basis points. By the following week, it was up a full point. We said "fuck it" and wrote a big-ass check.
DH paid $135k for his first house, and I paid $101k for mine. Lather, rinse, repeat.
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We love the SF Bay area but have barely lived there two years, despite owning homes there for over a decade. I think we will retire, repatriate, kick our beloved renters out of the main house and see how we like living there. We love the weather, culture, food scene, hiking, city, etc. We hate the traffic, crime, homelessness, and techies taking over. We can sort of tolerate the political correctness. Only thing is, the house needs some upgrades which don't thrill us to undertake. So, we'll either stay and continue frugality, fix it up (which would drive us nuts with tradesmen), or sell and get something we love in a location cheaper and more suited to retirement (e.g. Santa Fe, Tucson, Boise). Another option would be to retire but try to restrict our movements to the immediate area to avoid the greater Bay area chaos. We have local shopping, tennis, swimming, hiking, biking, etc without traffic or freeways. Can walk to BART but lack the patience to ride it.
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There are two ways to get home equity: pay down your mortgage, or have your home appreciate. The latter is what we all prefer, I imagine.
Well, I'm doing some of each ;)
Unfortunately by the time I am eligible for my pension I will have paid roughly 100% of my house value in property taxes...
These type of things can be a huge hidden drain that just gets absorbed into "it is what it is". And without moving to another state it usually does not change much. Thinking along these lines I will have paid about 35% of my house value in property taxes by the time it is paid and I'm ready to retire in 20 years. Not as good at TN, where over a 20 year period I would have paid 12% of my house value in property taxes ($1,800/year on a $300K home), but nowhere near as bad as IL where I was paying at a rate of 100% of my home value in property taxes over a 20 year loan.
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There are two ways to get home equity: pay down your mortgage, or have your home appreciate. The latter is what we all prefer, I imagine.
Well, I'm doing some of each ;)
Unfortunately by the time I am eligible for my pension I will have paid roughly 100% of my house value in property taxes...
These type of things can be a huge hidden drain that just gets absorbed into "it is what it is". And without moving to another state it usually does not change much. Thinking along these lines I will have paid about 35% of my house value in property taxes by the time it is paid and I'm ready to retire in 20 years. Not as good at TN, where over a 20 year period I would have paid 12% of my house value in property taxes ($1,800/year on a $300K home), but nowhere near as bad as IL where I was paying at a rate of 100% of my home value in property taxes over a 20 year loan.
Yeah, it takes ~24 years here to pay 100% of value in property taxes.
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OK, let's turn this around. At a SWR of 4 percent, what is the total value of your property to all the taxing jurisdictions that tax your property. For many of you with high property taxes, that's going to be a high number, especially compared to the market value of your property.
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OK, let's turn this around. At a SWR of 4 percent, what is the total value of your property to all the taxing jurisdictions that tax your property. For many of you with high property taxes, that's going to be a high number, especially compared to the market value of your property.
Not sure what you are asking exactly.
Assessed value of my house = $430K
Taxes = $1800 so at 4%WR that would require $45K saved and invested to pay each year.
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So the government "owns" $45k of your house and you own $430,000. That's a fairly low percentage.
If you live in a state that has high property taxes, the government "owns" a higher percentage. If your house is worth $100k, and you pay $3,500 a year in taxes, the government "owns" $3,500/0.04 or $87,500 of your house. Taxes are having a severe impact on property values.
Just another way of looking at property taxes...
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So the government "owns" $45k of your house and you own $430,000. That's a fairly low percentage.
If you live in a state that has high property taxes, the government "owns" a higher percentage. If your house is worth $100k, and you pay $3,500 a year in taxes, the government "owns" $3,500/0.04 or $87,500 of your house. Taxes are having a severe impact on property values.
Just another way of looking at property taxes...
It's also a great talking point in the pay off the mortgage discussion. There's no such thing as owning a home "free and clear".
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I just do not understand how anyone is able to afford homes "starting in the upper 900's".
We'll need to move to generational mortgages where your grandparents buy the house and your kids finally pay it off after 100yrs.
Isn't an interest-only mortgage just a version of this?
For fun, I'm putting the 100-year term into my mortgage calculator. At a fixed rate of 4.75%, monthly payments would be $1,034 (on a $260,000 mortgage). For a 30-year term, they'd be $1,351. For a 40-year term (I've heard of these actually happening), it's $1,206.
If a bank is seriously offering these 100-year loans, you're probably not going to get the same rate as the 30-year.
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Isn't an interest-only mortgage just a version of this?
For fun, I'm putting the 100-year term into my mortgage calculator. At a fixed rate of 4.75%, monthly payments would be $1,034 (on a $260,000 mortgage). For a 30-year term, they'd be $1,351. For a 40-year term (I've heard of these actually happening), it's $1,206.
If a bank is seriously offering these 100-year loans, you're probably not going to get the same rate as the 30-year.
Well an interest only mortgage would never get paid off so that's not what I am talking about. It's also hard to get a mortgage where I am longer than 30yrs and the rates are not fixed for more than 5yrs at a stretch. It may be possible to get something longer, but I am not aware of how realistic that is for folks without a lot of money and it's folks who can't afford a "normal" 30yr mortgage that would be looking for a longer amortization period.
Offering a 100yr loan doesn't mean you would offer a locked in rate for 100yrs. It just means you would accept a borrower who's income only allowed them to repay a mortgage on a longer term and who would fail the approval tests for a normal 30yr mortgage. Unless something changes in hot housing markets the number of people who can afford a 30yr mortgage will keep dropping so if we want those people to still have a shot at a house something around mortgages has to change.
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I heard somewhere that the average home tenancy is seven years. So let's say I get a $150,000 mortgage, interest rate 4.75% with a 30-year term.
When I'm selling the house (at the end of year 7) my loan balance is still $131,000, more than 87% of the total (with 75% of the term remaining). If I change houses three times, I could be 28 years in with 87% of my loan balance remaining, effectively simulating the 100-year term through a series of 30-year mortgages.
Canadians must think we Americans are so weird with our 30-year fixed mortgages.
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I heard somewhere that the average home tenancy is seven years. So let's say I get a $150,000 mortgage, interest rate 4.75% with a 30-year term.
When I'm selling the house (at the end of year 7) my loan balance is still $131,000, more than 87% of the total (with 75% of the term remaining). If I change houses three times, I could be 28 years in with 87% of my loan balance remaining, effectively simulating the 100-year term through a series of 30-year mortgages.
Canadians must think we Americans are so weird with our 30-year fixed mortgages.
In that scenario you would be getting a new mortgage every 7yrs and having to deal with interest rate changes each time, which is not that far off a Canadian with a typical 5yr fixed term mortgage. Our mortgages are frequently amortised at 25 or 30yrs even though the term is only 5yrs long.
Canadians don't think US 30yr mortgages are weird, but we do wish we had that as an option if we could get such low rates on them. From what I've seen on these forums the 30yr fixed US mortgage is lower or similar interest to the Canadian 5yr fixed rate mortgage.
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We need to sell our house to be able to FIRE. Our house cost approx 1 mil USD when we bought it. We spent practically all we had on it, just before discovering MMM. We are building stash from scratch again.
But I think we can easily buy somewhere smaller where we can free up 60% of the sum. And since we have the house I realize it is a lot of work to clean it. So my next place should definitively be smaller.
My DH thinks we just as well let the money sit in the house until we need it. But I've told him it need to generate rent to make the 4% rule. Houses usually don't generate a lot. He is starting to agree on it.
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Taxes and running costs, not equity, is what would (or will) prompt us to high tail it the hell outta here.
Appreciation almost always brings along costs.
This year, property taxes jumped pretty brutally for us, but so did water/sewage, sanitation and electricity. Why? Because the government can! Everybody wants to live here right?
So we get to enjoy 50% more in running expenses in return for.....'equity'...that may or may not ever actually materialize. I suppose we should just feel privileged to pay MORE for the SAME (or actually diminished) services.
I suppose its just another reason to NOT own anything expensive. Sure, you can make some money on house appreciation, but you can also pay thru the nose every year making your way there.
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Our property taxes haven't gone up much despite a hot real estate market. Locally they take the municipal budget and divide it by the property value of the tax base. So if everyone's house went up 15% in market value, but the municipal budget stayed the same property taxes don't go up.
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We actually plan to do the opposite. We live in TX which has very affordable housing but are thinking of FIREing in a few places that have higher real estate costs. Our plan now is to use whatever equity we end up with as a down payment on our FIRE house so we don't count home equity in our 'stache since we plan on spending it once we are ready to FIRE.