Housing proceeds and increased housing costs (funds, pay, rates, credit)

[Thatsright19]

Right now, I am locked into outrageously cheap housing. We bought it new and refinanced at historic low rates during Covid. It’s about 10% of gross pay. Typically, I think anything over 30% of gross pay is too much as a rule of thumb.

Due to many changes in life circumstances, it’s time to move and to move back to a larger metro. With interest rates still high and housing costs still so high, this is causing me a lot of stress thinking it’s making a mistake. However, we/I can’t make decisions based on only money but rather quality of life and happiness. There is also massive risk for staying where I am with no alternative job opportunity.

I’d expect my housing cost to basically double or worse to get the expanded accommodations we’ll need now and in a much more sought after area.

How bad of an idea do you think it is to keep sales proceeds from a house sale rather than putting down money?

Against other peoples judgement, my first two starter homes were bought with nothing down as I rolled the dice to get into the market sooner rather than saving. I paid PMI, but I gained housing equity and it allowed me to have more cash to invest in the stock market when I was young and had major competing factors for my money.

Let’s say for the sake of simplicity, I will have $100,000 of net proceeds. I could roll it into the down payment. This will help lower my monthly payment some.

Or I was thinking…3 things to do as a group to take pressure off cashflow

I have student loans that restarted that have pretty high interest rates(particularly on the unsubsidized portions) from a much earlier time period. I have a decent amount of debt left. I could pay this down. This can free up cashflow going forward.

I could hold the cash in a CD at somewhat higher interest rates to ease this time of much higher housing costs.

I also do a particular aggressive form of using credit cards on zero percent interest 18 month windows and run them up 20-30k and free up cash, which I have then been parking in CDs. I could exit this strategy and get a reset. I have more cash than my debt but this strategy sometimes gives me heartburn when it gets so high.

What say you?

All this movement and uncertainty has me wanting to move my 401k funds to a hugely conservative position and exit my 90% equity position and lock in my gains…but I know that is a terrible, fear based idea and I’m trying to avoid it. I want to slap myself for even suggesting it as a 1-2 year “solution”.

Do you think this alternative decision is equally bad and short sighted? I’m trying to balance what I think/know is financially right with what my anxiety/stress is telling me I want to do to meet my risk tolerance.

[ncole1]

Don't try to time the market - a 401(k) is supposed to be a passive investment.

Also, be careful about tying up too much money in CD's especially if they are long-term and cannot be resold. You can, however, do a staggered or laddered approach where you keep 6 months' expenses in cash and then keep more money in a CD that matures once every 6 months. Just stop rolling it over when you plan to buy a house in less than 6 months.

[oneasterisk]

It kind of sounds like emotions are swaying your decision making process. I'd just put the proceeds into the next home. If interest rates drop, then refinance to lower the % of gross pay. Keep things simple instead of Rube Goldberg things.