In 2004, we bought our house for $916,000, put about $50,000 of improvements into it (e.g. finished basement, paved driveway, landscaping). In the last five years we have added a new baby to the mix and racked up $40,000 in credit card bills. Our current plan of attack is to sell the house for $789,000 (what it is worth now), pay off all of our debt, and buy a $500,000 house. This move will make us debt free and give us an extra $1,600 extra a month.
We are in the DC/Baltimore/Annapolis area in a highly sought after neighborhood. We have already had two offers (for 705k and 770k) and our home has been on the market for 41 days. We do have a bottom line which has not yet been met.
Is this truly the best financial move for us considering the huge loss in equity of our current house? Should we simply weather the storm with our huge mortgage and wait until the housing market stabilizes and home value increases before we move?
I’m assuming that at the $789,000 price you will have cash back from the sale after real estate commissions. That would mean you’ve substantially paid down the original balance.
I think this comes down to a quality of life issue. I know the D.C. area well, having grown up there. And ironically I have lived a path that is somewhat similar to yours. While we were living over in England we wound up selling our home in Rockville, Maryland. We then purchased a new home when we returned to the U.S. in North Carolina for half the price of our old Rockville home.
I was just thinking yesterday about what our Maryland mortgage payment would have been this year and completely thankful that things worked out for us as they have. I can’t tell you how much I feel blessed to have traded down. The financial pressure is so much less and it has given me the opportunity to do what I love to do most, help others.
Paper profits and losses are interesting and you’ll have to talk to your tax adviser about if the big equity loss helps you out or not.
Think about the move like this, if home prices are going to go back up then the new home that you purchase will rise in value. I guess the most important question here is to ask yourself, what kind of life do you want to live?
For me, downsizing was the best thing I’ve ever done and it made my life so much richer in so many ways regardless of the profit or loss. Call me crazy, I’ll trade money for happiness and a better life any day of the week.
You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.
- Is Coast Processing or Litigation Practice Group a Scam? - September 22, 2021
- Veterans United Overcharged the VA and I Want My Eligibility Back - September 22, 2021
- American Express Cancelled My Account and it is Not Fair - September 22, 2021