Need advice on what to do about mortgage
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Anonymous
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12 years ago I bought my first home, a tiny SFH in Arlington. My PITI is $2,000 a month and I've rented it out -- I do not earn much on it at all after yearly expenses -- it's pretty much a neutral investment. If I were to sell the property today, I would net $300k after taxes.
I held on to the house and my DH and I bought another SFH in Fairfax that was larger 5 years ago. We put no money down and used a VA loan; we have a 3.5% interest rate with a PITI of $4500. Our current HHI is $320. We only have about $50k equity in the new house. Things have been working out great, and we have been happy to have the smaller "fall back" home in Arlington. But now it looks like I will need to move to another job. Our new HHI will be $200. I'm thinking the payment on our primary home will not be easy to make on that income. So I'm mulling over my options. I need advice from smarter people: FWIW We don't really want to move back into the fallback home. We have 2 small kids, plus my parents who live with us. (1) Sell our primary home and the fallback home. Buy something that's around $600-700 with a down payment of $300-350k. The interest rate will be higher and we will pay lots of transaction costs but oh well (2) Suck it up and try to make it work in our current situation. No more lawn mower or cleaning service. No more going out to eat. Reduce retirement savings just to the match. (3) Sell fallback home only and refinance our main home. We can't do a recast because that is not allowed with a VA loan. We will pay a higher interest rate than 3.5%, obviously. (4) Sell fallback home and put the $ in some sort of safe savings vehicle. Pull money from it as needed to help pay for main home so we don't lose our low interest rate. Am I missing any options? Any recommendations? |
Anonymous
| I'd probably do number 4. |
Anonymous
Yeah, 4). Soon you will make more in interest than mortgage interrst |
Anonymous
+2 but make sure you don't pull from this savings to keep financing a $320k HHI lifestyle. If you're keeping the higher mortgage you need to make cuts elsewhere. |
Anonymous
| Number 2. Just alter your budget. |
Anonymous
Same. I definitely wouldn't count on being able to do #1 - prices have gone up so much and there is so much competition at the 600-700K range. Even if something comes on the market, you'll be competing against other offers and may not get it. |
Anonymous
| I would probably do 4 but assume only a 4% withdrawal rate on the 300k and thus it can only generate 1000/month. Adjust your budget so you don't need more than that. |
Anonymous
| The thought of selling the investment property and having to pay capital gains on $300K makes me sick to my stomach for you. It’s better to keep it as a neutral investment. Are you seriously saying that you are a family of 4 with two sets of grands living with you!? If so grandparents should absolutely be helping with the mortgage. If they aren’t it’s time to have a discussion. |
Anonymous
| Are you seriously looking at taking a pay cut of $120K? What’s that about? |
Anonymous
| I never understand why people go for interest only, no money down loans for their home! Why not just rent? |
Anonymous
Never mentioned an interest only loan. |
Anonymous
| Just so I understand - you are going to take a $100K pay cut? |
Anonymous
Yes. |
Anonymous
I don't know what an interest only loan is. I put no money down, but I have a regular loan of 30 years at 3.5% interest with no pmi. |
Anonymous
I work at a law firm.I'm never going to be a partner. I have an opportunity to move in house. The base salary is significantly less. |