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Hello , I find myself in a situation in which I do not know the best course of action. To start let me preface.
20k in credit card debt, of which almost 1k per month is going to minimum payments only. 60k yearly income. We have zero savings, no emergency funds, 2 vehicles with a questionable life expectancy. We are living paycheck to paycheck while my wife stays at home with our 6 month old daughter. Our House: Purchased in 2016 for $144,900. It's a 3br 2 bath, 1600 sq ft house built in 2005 with 2 acres of land. We have 3.25% apr 30 year fixed loan. Mortgage payment is 640$/month( $804 with taxes and int). The house is now estimated to be worth between 170's to low 180's.
The situation: Wife and I are debating selling our house for a hefty profit and moving into her parents guest house temporarily for free so we can save our entire income. I am in the process of working extra nursing shifts to pay off debt which could take over a year to do. We always wanted to sell the house to buy a bigger house in the future. The current housing market is making us want to do it a few years earlier than planned.
The concern: Is this a good idea to get relatively debt free and get ahead or a terrible idea or time to try this? I am worried the interest rates will increase for years to come and also the risk that the housing market may not go down hill after all. Both of which could make it harder to purchase a home in the future. I wanna do the right thing but I do not wanna uproot my family for nothing. Any thoughts would be greatly appreciated.
I understand this is debt related question as well as a real estate one.
Sorry for the book report of a post. Thank you!
60k yearly income.
We have zero savings, no emergency funds,
Our House: Purchased in 2016 for $144,900
How much were you all earning then?
Quote:
20k in credit card debt 2 vehicles with a questionable life expectancy.
We are living paycheck to paycheck while my wife stays at home with our 6 month old daughter.
Selling? Moving? Nope. You have an income problem. Fix that.
Sell some stuff, get a part time job until Mom can work again, take in a boarder.
The one thing that sticks out to me... Is I am assuming you think selling the home will net you a lot more than you think. As if you paid 145k for it in 2016 (5% down?) and have made regular payments for 2 years that hasn't hit much principle. So maybe you still owe ~135ish? Then you need to factor in the ~6% real estate commission fees of the price its sold for, making any inspection repairs or credits, covering any buyer closing costs, additional closing fees, and how long you lived in the primary home for taxes, etc.. You may want to have a real estate agent provide you a breakdown or something.
As say you still owe 135k and sale it for 180k. It simply will not be a profit of 45k when its all said and done. As real estate commission alone is usually 6% (or ~11k of 180k)
Another option you might consider is: move into her parents guest house and rent your home to a tenant. Pay off your credit card debt, save some money, then move back home. Thank your inlaws profusely for this generous opportunity to get on better financial footing.
On 60k per year, how much more house do you expect you can afford? Since you have no savings and 20k of credit card debt, you seem to already be in over your heads.
Agree that selling your house is not going to net you much. And then you will be paying all of those expensive closing costs a second time, and those beautiful 3.25% mortgages are no longer available.
Hello , I find myself in a situation in which I do not know the best course of action. To start let me preface.
20k in credit card debt, of which almost 1k per month is going to minimum payments only. 60k yearly income. We have zero savings, no emergency funds, 2 vehicles with a questionable life expectancy. We are living paycheck to paycheck while my wife stays at home with our 6 month old daughter. Our House: Purchased in 2016 for $144,900. It's a 3br 2 bath, 1600 sq ft house built in 2005 with 2 acres of land. We have 3.25% apr 30 year fixed loan. Mortgage payment is 640$/month( $804 with taxes and int). The house is now estimated to be worth between 170's to low 180's.
The situation: Wife and I are debating selling our house for a hefty profit and moving into her parents guest house temporarily for free so we can save our entire income. I am in the process of working extra nursing shifts to pay off debt which could take over a year to do. We always wanted to sell the house to buy a bigger house in the future. The current housing market is making us want to do it a few years earlier than planned.
The concern: Is this a good idea to get relatively debt free and get ahead or a terrible idea or time to try this? I am worried the interest rates will increase for years to come and also the risk that the housing market may not go down hill after all. Both of which could make it harder to purchase a home in the future. I wanna do the right thing but I do not wanna uproot my family for nothing. Any thoughts would be greatly appreciated.
I understand this is debt related question as well as a real estate one.
Sorry for the book report of a post. Thank you!
I think you need to set aside the dream of buying a larger house. The costs of selling and buying will burn through the profit. Not to mention you still have that CC debt hanging over your head. You may not even qualify for a new mortgage with $20k in CC debt and one income of $60k. Your goal should be to pay down your CC debt and build up your savings and emergency funds.
Perhaps the solution is to rent your house to cover the PITI, and live with your in-laws for a year. If your wife can work part-time or find some other way to bring in some income, that would be helpful as well. I know several SAHMs that sell things like jewelry, make-up, etc. through virtual parties on FB to bring in extra money. Some of them do really well.
Quote:
Originally Posted by MrRational
Selling? Moving? Nope. You have an income problem. Fix that.
Sell some stuff, get a part time job until Mom can work again, take in a boarder.
I disagree, somewhat. They have a spending problem. $20k in CC debt, $0 savings, and already trying to buy a bigger (IMO, unnecessary for a family of 3) house so soon after buying their current house.
Stay put! - Your house is only worth what you can sell it for, not some "estimated value." Plus, even if you sell it for $170-$180K and try to buy something else, you are unlikely to get another 3.25% mortgage, will have to pay out/in commissions and closing costs and, if your home appreciated $35K-$40K, so have other homes. Also, you are not in this situation because you are earning too little, but, because you are spending too much.
Yes, you could temporarily move to your parent's guest house, but, you are adults with your own family ... and nothing you have said indicates you are addressing the 'real problem' of living beyond your means. Time to grow-up and face the problems you have created. Running away will only postpone (and likely increase) your financial problems, not resolve them.
If you can tolerate living that close to your inlaws, I would sell the house and pay down your debt. Also, does your wife have skills. If she could make more than the cost of daycare, perhaps she could get a job. I would put the idea of getting a larger house on hold until you have more income. It's going to be hard to get ahead on your level on income.
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