Might be selling the house
Along with the accomplishments I have made in my life, graduating college, getting married, buying a house, one of them may have been a mistake. Last year we made the choice to get out of renting an apartment and buy a house. This decision was proposed by my wife at the time and I was reluctant to make such a major move because of the cost increase. I think a warning flag should have gone off here.
We went to the bank to get pre-qualified so we could figure out what we could afford. I knew nothing about mortgages or how the process worked and basically learned as much as I could so I knew what was going on. Somewhere I heard that you should buy the most house for the money, so we used the upper limit of what the bank said we could afford. Being first time home buyers, what we wanted and what was available did not always match. Eventually we found the right house, got a pre-approval for a loan, and went into contract on it.
From that point there were issues with getting all the details together and problems with the underwriting process. I had to make some moves, like paying down the loan of my car so the bank no longer considered it as a monthly payment. Eventually all the financing was cleared and we closed April last year.
We are debating selling the house because it is costing us around the 40-45% mark of our current monthly take home income. That is all the cost for our two mortgages, property taxes, and insurance. Everything is current and that is not the issue, but the payment is about twice what our rent used to be. The idea was this might be high right now but would balance out once she has an actual salary job starting her career once she’s done with school. A majority of the money is going to interest anyways because the mortgages are so fresh, so very little progress is being made to actually afford the house. This is where selling the house and renting in the downtown Chicago area comes in.
The other side of this question is my wife is not happy with where we live because she feels lonely, no social life or friends. Simply put, she refuses to live where we currently live because she is unhappy where we live. I think she feels that if we sold the house and moved into the city, she’ll be happy, have friends, and plenty of stuff to do. I’m very bittersweet about selling the house and moving downtown because it feels like we’re starting over. The benefits of being downtown though would be lower house payment (just rent and insurance) would save money to put towards debt, I could sell my car (which I love but would not be necessary) and we would save on insurance and gas cost, and that extra money could go towards debt.
I think we’re viewing the extra money that would come into play with selling the house and renting again in different directions. The way I see it is we could really make some progress in paying off our debt while my wife would feel the extra money is no longer dedicated to something and can improve our lifestyle. The house does not have much equity in it so after all the fees and such are said and done, I don’t think we would make anything off it which sucks. We have moved every single year since 2001 and I thought we were done moving for awhile. At the time we bought the house, I never intended to just turn around and sell it a year later, but it looks like it has come to that.
Selling a house in this market might be tough but in the long run, if you can sell it and rent instead, it might help your financial situation drastically.
That is, if the difference is able to help with reducing your debt.
Unfortunately there is no “one size fits all” approach to finances. Each family must do what is best for them and taking a loss now might be a gain in the future.
If your wife is really bored and has nothing to do, maybe she should get a part time job. That would certainly turn your finances around pretty quick. I wouldn’t sell the house unless you can’t afford the payments. You probably have at least 5 houses with families surrounding you just waiting to be your friends.
You should be focused on reducing your debt, building equity in your home, and getting her graduated so she can start contributing to your household income. That will improve your lifestyle. I guess the question is, will selling it gain you anything? Will your rent be so much lower that you can quickly pay off your debt, contribute to retirement, and start building a down payment on a house? Or will it just end up funding dinners/parties with friends and other inner-city activities?
I don’t think my wife is lazy and I’m not trying to say that at all. She is working this summer full time and taking classes before she does student teaching in the fall. Right now she has it set up to do student teaching in the fall so she can finish her masters. She now wants to delay that to next year so we can focus on moving. Selling the house is for lack of a better reason, is getting rid of a huge asset/liability combo and bringing more focus on debt. This house could have some equity if we sold in a better market, but right now it will just break even, no gain or loss, just wasted time.
We’re young (25 and she’s almost 25) and I think it is almost that we moved too quickly compared to the friends we do have. They still rent, why do we own a house? They have parties and post pictures on the social network sites, we’re not in them? Most people in this particular area we bought in are younger and starting to have kids. Neither one of us are prepared for children, mainly due to debt. I guess I don’t know what direction or place we should be at right now, but she doesn’t think where we’re at offers enough of what we’re lacking.
Hi Jim,
I just wanted to say… I hope your wife comes to the party on your debt reduction efforts really soon. A little bit of support goes a long way!
B&B
Until your wife gets on board with the reality of your financial situation, you have to be in total control of how you live and how you spend. If you are on an adjustable rate mortgage, then it may be wise to cut your losses on the house and move one with a sale. With a fixed rate you also have fixed expenses and when your wife starts working, you will see some relief.
Great Blog and I know how tough it is to go through this. I am almost done paying off 32K in credit card debt and can only tell you to keep up the hard work, it is going to pay off in the end.
Hey, why not start evaluating (sorry I’m late with your blog) your spending habits? For instance, how high is your deductible on your car? Raise it and enjoy a lower premium. Are you paying mortgage insurance? Find out how to get out of that commitment? I think missing out on old friends is a poor excuse to move house, especially it’s not economically feasible at the time. An occasional visit should suffice.