Houses: What would you do?

[Laurajean1014]

Would you give up you great big home (4200 sq. ft - newer, Circa 1999) to buy a small home (1800 sq. ft. - 30 years old) in the same town to get rid of your mortgage for good? Taxes would also lower by 125%, as would all of your expenses.

Or, keep the house another 10 years, until the mortgage is paid for and then sell it for over $1.5mm?

 

[Minnie824]

If I could no longer afford the newer house and needed the money, then yes, I would sell it. If I could still afford the new, larger house, I would definitely want to stay in it as long as possible.

 

[golfgal]

Not enough information. A lot of it would depend on the smaller house, where it is located, is it really big enough for my family, what the current house is worth now, etc. You can't predict the future market and it could very well be that in 10 years your house will be worth less then it is now. Also, it is my experience that higher end homes are VERY difficult to sell because most people in that price range build. Also, in 10 years 1.5 million isn't going to be "worth" more then say a 600,000 house now because all the other houses are going to cost more then too.

A lot of square footage means nothing if it isn't laid out well. A huge 2 story foyer to me is a waste of space for example. Our second house felt a LOT bigger then this house, the rooms were larger, more open floorplan, but there were fewer rooms, etc. It was about 1200 sq feet smaller then this house.

 

[disykat]

I'd get rid of the house. I wouldn't want to clean 4200 sq feet!

I know people think of real estate as an investment, but I'd rather have a house I can afford to furnish comfortably to my tastes (I probably couldn't do that with 4200 sq ft), keep clean and well heated, etc. I wouldn't want to live in a dump, but I'd definately choose a smaller home in a nice neighborhood.

I'd live in a smaller house and then take the mortgage money and buy a rental property or other high yield investment.

 

[Christine]

In a heartbeat--but only if that older home was not going to make me "poor" with repairs.

I'm actually considering this myself. While my mortgage is only 28% of my entire income, I feel so strapped because my kids' expenses and some of our medical expenses are SOOOO high. My current house is 2500 square feet (not counting the basement) and is really more than we need. I could sell it for about $550,000, clear about $300,000 and turn around and buy a house that is cheaper and smaller and wouldn't give me much of mortgage. Honestly, it sounds so liberating that I'm really tempted to do it.

 

[Poohgirl]

If you could set aside the money you would be spending for the extra costs for the utilities/taxes/mortgage etc and determine the future value of that money in ten years then and add in the value of the smaller house at the end of ten years if that number is bigger then 1.5 million. You have your answer...

 

[NMAmy]

I didn't get rid of a bigger home but we did buy a more modest home so we could pay the mortgage off faster. There's only 3 of us--we don't need 4200 square feet (nor would I want to clean it.) Our present home is around 1800 square feet and has rooms that we never really use that often--I couldn't see us in something bigger.

 

[cyndibelle]

umm i think it would depend on the circumstances..yes if i was living off of peanutbutter and jelly sandwiches..no if it was just to do it...what is all the reasoning behind it ??

 

[Mishetta]

If I could no longer afford the newer house and needed the money, then yes, I would sell it. If I could still afford the new, larger house, I would definitely want to stay in it as long as possible.

My feelings exactly.....

 

[barkley]

i would actualy consider selling it now, moving into a rental and waiting till the housing market cools in a year or so.

houses on our street that sold for 425,000.00 2 years ago are now selling at close to $600,000.00-in another year they could be selling at $500,000.00 or $550,000.00. so i would pocket the equity, bank what i saved each month renting vs. owning (interest, property taxes, homeowners insurance, higher utilities, home repairs...) and wait for the market to cool down. the house that i might be eyeing thats going now for $350,000.00 could be selling then for 50,000.00 less. i would end up with a lower mortgage (if any at all) plus whatever earnings my "equity" money and savings have amassed over the past couple of years.

 

[dvcgirl]

We sort of did this....except we didn't have a mortgage on the first home. Bought the 4,000 sq ft+ house in 2000....paid cash, it doubled in price and we sold and moved to Orlando. Here we bought an older, smaller, more modest house. But we went the 4,000+ to just under 3,000 sq ft. However, we moved to a much cheaper area. Now we're actually contemplating selling here in Orlando (we've gone up a remarkable 50% in value in 18 months) and renting for an extended period. We don't see ourselves staying forever and we pay out $1,800 a month between taxes, homeowners, insurance and maintenance as it is (on our completely paid for home).

That's the other *huge* perk of downsizing. Besides no mortgage (which is *awesome*....just wait and see how much cash you can pile up), your expenses will drop significantly. For me, it would be a no brainer....we ditched the "keep up with the Joneses" lifestyle, and we're looking at retiring in our mid-50s.

 

[Laurajean1014]

Wow. Lots of good advice.

I love our home, but it is costing over $3000 a year to heat and my electric bill is over $400 a month and my water bill is over $375 per quarter. Taxes are $8500 a year.

Our current house is maintenance free (we built it that way), other than needing an interior painting. Hardwood floors on first floor (custom), with all granite in kitchen and baths (4.5 baths, 3 bedrooms, 900 sq ft playroom upstairs). We have two staircases in the house for ease of movement. The layout is perfect. Lots of room and the rooms are very large. (3 car garage). The basement is not finished.

I think we can sell for about $700 or 800k and buy an 1800 or 2000 sq ft house for about $400k, in the same town.

We're not living on sandwiches, but certain times of the month, the bills add up and get me very fustrated. I am only able to save about $20k a year, which is not enough for "getting old." We have savings but, again, I don't think it's enough to live on when we get older.

Just an fyi: WE are two adults, 1 child (10 years) and 1 dog.

I certainly cannot predict the future, but I want to be prepared. And, if something happens to me and/or DH, then my son is taken care of.

 

[mom2grace]

What is your gut telling you?

 

[dvcgirl]

Wow. Lots of good advice.

I love our home, but it is costing over $3000 a year to heat and my electric bill is over $400 a month and my water bill is over $375 per quarter. Taxes are $8500 a year.

Our current house is maintenance free (we built it that way), other than needing an interior painting. Hardwood floors on first floor (custom), with all granite in kitchen and baths (4.5 baths, 3 bedrooms, 900 sq ft playroom upstairs). We have two staircases in the house for ease of movement. The layout is perfect. Lots of room and the rooms are very large. (3 car garage). The basement is not finished.

I think we can sell for about $700 or 800k and buy an 1800 or 2000 sq ft house for about $400k, in the same town.

We're not living on sandwiches, but certain times of the month, the bills add up and get me very fustrated. I am only able to save about $20k a year, which is not enough for "getting old." We have savings but, again, I don't think it's enough to live on when we get older.

Just an fyi: WE are two adults, 1 child (10 years) and 1 dog.

I certainly cannot predict the future, but I want to be prepared. And, if something happens to me and/or DH, then my son is taken care of.

Well, I think you're taking a good hard look at your finances, and in all honesty, I'd sell and downsize. If 20K is all that you're saving for retirement each year and you're spending close to that ($17,800) on electricity, heat, water and taxes, well, you've probably bought more house than you can comfortably handle. There's no shame in that (if that's even the case...it may not be). Remember, the best certified financial planners will recommend that your mortgage payment is no more than 25-30% of your *take-home* pay. They'll also recommend that 20-30 year olds be saving 15% of your income towards retirment. If you're in your 40s...more like 20% and on up from there.

Also, I noticed you mentioned the possibility of selling your home in 10 years for 1.5 million...basically thinking it will double. Well, you know that game...it may double, but it may not. We're coming to the end of an historic run-up in real estate in this country. We may be flat for some time now. Any gains will be much more modest. Sure 10 years is far out, but the very house I live in here in Orlando appreciated no one penny from 1990 (year it was built) until 1998 (when the folks we purchased it from bought it). So that scenario can and will happen again.

Trust me, I had the big house...downsized and I'm not one ioda less happy with my life. In fact it was quite liberating. We got rid of so much *stuff* when we moved. Just stuff to fill rooms that we didn't need. You have one child, we have none..just the two of us, but still....4,200 for three people is an awful lot of space.

Imagine now...that the mortgage is gone, your bills (taxes and utlities) just dropped by over 50%.....man, are you going to have an awful lot of cash flow. And your savings/investments are going to go through the *roof*. No more frustration...no more worry....just a good solid financial foundation for you and your family.

Best of luck in your decision.....

 

[golfgal]

In your situation, I would sell in a heartbeat. First I wouldn't want the upkeep of a house that large. Your utility bills are outrageous. You can customize a smaller house to have some of the features you mentioned, putting in the wood floors, granite countertops, etc. Does one child really NEED a 900 sq ft playroom (which is the size of our first house by the way). Also, in 8 years, your son will be in college, do you and your DH need that big of a house? With the money you are saving in utilities alone you can finance your sons college education.

 

[chyam]

I cannot fanthom needing a 4200sq foot house for 3 people and a dog! Not to mention in another 8 years it will be just 2 of you since your son will probably head off to school. I would defineately sell and find something smaller, save the money and perhaps later on buy a retirement home or take some nice vacations. I gave up long ago trying to keep up with the "Jones" and decided I would rather be able to do more things than to be a slave to a house!

 

[puffkin]

Don't forget that you can always rent a storage unit if space/storage is a concern with a smaller house. With a smaller mortgage/utility bills, even paying a monthly fee to rent a decent sized storage unit would still allow you to save tons of money and maybe make a smaller house more feasible and not feel as small. I would also look at your quality of life. Would the smaller house allow you to save more for retirement now (since there are no guarantees for the future), allow you to work less hours, or take more vacations, things like that.....