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Our current house, which is almost 50 years old, has about 2,000 square feet of space, and is OK for our family of four. However, we would like a newer and bigger home, and we're tempted to move up now, mainly because interest rates are so low, and we think a bigger house would be a good investment. Our current home is worth $400,000, and we have two more years left in our mortgage, so with the equity that we have, we think we can afford a $600,000 house. Also I have $30K now in the bank; can be used as a down payment or closing cost.
But is buying a bigger home a smart financial move? We'd have a bigger mortgage payment, moving costs, higher homeowner-insurance bills, and higher property-tax and utility payments. Should we stay put or move on?
One more thing my kids will be off to college in ten years.
Another idea is to rent the first home and we move to second home. But only problem is what if the rent doesn't come. I will not be able to pay two mortgage.
Any one took any risk like this before ?? Any idea. Thank you so much.
Well, if you need a bigger house... you need a bigger house.
Is it a good financial move? Of course it's impossible to say for certain, but I wouldn't plan on it. A home that's 50% more expensive will likely have higher carrying costs from most/all points of view... interest, taxes, insurance, utilities, maintenance, etc.
IMO... Buy what you want/need as long as it doesn't strain your budget.
Well, if you need a bigger house... you need a bigger house.
Is it a good financial move? Of course it's impossible to say for certain, but I wouldn't plan on it. A home that's 50% more expensive will likely have higher carrying costs from most/all points of view... interest, taxes, insurance, utilities, maintenance, etc.
IMO... Buy what you want/need as long as it doesn't strain your budget.
Does the OP NEED a new house or WANT a new house? When you start trying to justify something as an investment you tend to stop thinking of the real costs and risks involved. You can easily put together scenarios of houses with mortgages and get an estimate on insurance, find out the property taxes, and figure out increased utilities.
But you haven't even tried to do any of this? That's the absolute first thing I would do - otherwise it's all just wishful thinking! I'd be scared crapless to think of such a thing when you have kids heading to college in 10 year (multiple kids, right!). Don't go into this lightly - it might doom your retirement years!
Our current house, which is almost 50 years old, has about 2,000 square feet of space, and is OK for our family of four. However, we would like a newer and bigger home, and we're tempted to move up now, mainly because interest rates are so low, and we think a bigger house would be a good investment. Our current home is worth $400,000, and we have two more years left in our mortgage, so with the equity that we have, we think we can afford a $600,000 house. Also I have $30K now in the bank; can be used as a down payment or closing cost.
But is buying a bigger home a smart financial move? We'd have a bigger mortgage payment, moving costs, higher homeowner-insurance bills, and higher property-tax and utility payments. Should we stay put or move on?
One more thing my kids will be off to college in ten years.
Another idea is to rent the first home and we move to second home. But only problem is what if the rent doesn't come. I will not be able to pay two mortgage.
Any one took any risk like this before ?? Any idea. Thank you so much.
You would need implausibly rapid appreciation of housing values for it to make financial sense to move to a bigger house. There are plenty of ways to have more space without buying a bigger house - the first and easiest is simple de-cluttering but if you want to get more advanced you can convert unused areas to storage space, for example under the bed, behind shelves, etc.
It's never a good idea to think of your primary residence as an investment. Rental properties are investments; your personal home is just a place to live. It's much safer to view it as a consumption item, like a car. So, how much housing do you really wish to consume? How much more would the new house cost you on a monthly basis when you factor in everything, and what else could you be doing with that money if you weren't spending it on a bigger house?
Our current house, which is almost 50 years old, has about 2,000 square feet of space, and is OK for our family of four. However, we would like a newer and bigger home, and we're tempted to move up now, mainly because interest rates are so low, and we think a bigger house would be a good investment. Our current home is worth $400,000, and we have two more years left in our mortgage, so with the equity that we have, we think we can afford a $600,000 house. Also I have $30K now in the bank; can be used as a down payment or closing cost.
But is buying a bigger home a smart financial move? We'd have a bigger mortgage payment, moving costs, higher homeowner-insurance bills, and higher property-tax and utility payments. Should we stay put or move on? One more thing my kids will be off to college in ten years.
Another idea is to rent the first home and we move to second home. But only problem is what if the rent doesn't come. I will not be able to pay two mortgage.
Any one took any risk like this before ?? Any idea. Thank you so much.
Is the financial difference worth it when it is two of you in the home after the kids have moved out?
Personally we have 1300 square foot and sometimes that is too big for two of us.
You have 10 years to enjoy it. I have 3000 sqft for 2. I bought our latest house when my kid was a senior in high school. Before that she didn't want to move because it was further from her friends. When she was a high school, that's no longer a big factor.
Housing is discretionary spending once you get beyond ~1,000 square feet for a married couple plus ~500 square feet per kid. The high cost of living regions have already seen their once in a lifetime price run-up. Don't make the mistake of extrapolating the price increases of the last two decades since it's not sustainable. You will pretty much always do better saving/investing that discretionary income rather than tying it up in a more expensive home where your home ownership costs (100% discretionary spending) are far higher.
The exception to this is moving to a town with a better school system. Your children will benefit from living in a 2,000 square foot house in a leafy professional suburb with the gold plated school system where all the children have college educated, engaged parents. If you have the choice between an 1,800 square foot fix-er-upper in the town with the good schools versus the 3,500 square foot home in the town with the iffy school system, you should take the good school system since the school and the peer group make such a big difference in economic outcome.
If you're swimming in discretionary income, have no debt, have your 401(k) maxed, and are saving/investing 10% of your after tax money, by all means spend it on the bigger house instead of some other discretionary spending. I fling mine in other places.
Our current house, which is almost 50 years old, has about 2,000 square feet of space, and is OK for our family of four. However, we would like a newer and bigger home, and we're tempted to move up now, mainly because interest rates are so low, and we think a bigger house would be a good investment. Our current home is worth $400,000, and we have two more years left in our mortgage, so with the equity that we have, we think we can afford a $600,000 house. Also I have $30K now in the bank; can be used as a down payment or closing cost.
But is buying a bigger home a smart financial move? We'd have a bigger mortgage payment, moving costs, higher homeowner-insurance bills, and higher property-tax and utility payments. Should we stay put or move on?
One more thing my kids will be off to college in ten years.
Another idea is to rent the first home and we move to second home. But only problem is what if the rent doesn't come. I will not be able to pay two mortgage.
Any one took any risk like this before ?? Any idea. Thank you so much.
You have 2 more years left on your mortgage and you are looking to get the whole process again? We are definitely creatures of habits
Do you need a bigger house? That's a question only you and your spouse can answer (not your kids). How are your other finances? Buying a bigger home is not a smart financial move. It is a personal preference that comes with a cost.
Renting out your current home is a bad idea. Do you have experience in being a landlord?
I had an opportunities to take this route about 8 years ago and couldn't justify it. I have a family of four living in 2000sq/ft. It's plenty of space.. Sure.. my kids would say our house is small after visiting their friends or neighbors home that are 2 to 2 1/2 times the size.
You are probably seeing an increased in the value of your current home so you say to yourself, "hey.. if I get an even bigger and more expensive home, I will see the same appreciation".
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