Need advice on what to do about mortgage

[Anonymous]

Tell DH to get a job?

[Anonymous]

Anonymous wrote:Tell DH to get a job?

He does have a job...

[Anonymous]

Start with #2. The general rule of thumb is to stay within 30% of your pre-tax income for housing. That's $5000 on a $200K income. That means it's totally doable--though your current lifestyle may need to be scaled back if you're going through $320K a year right now.

You need to live within your means whether you keep the fallback house or not, so start by cutting your expenses down to a reasonable budget for your income. Then if you still feel financially precarious, sell the fallback house.

Do you fully support your parents, or do they contribute something to housing costs?

[Anonymous]

I would do 3 or 4. You are overexposed to property for your income just with your main house. If the rental property is not significantly cash flow positive I would sell it and use the equity to make your current home more affordable.

[Anonymous]

Anonymous wrote:Number 2. Just alter your budget.

I would at least give this a serious effort/analysis. Keep in mind any expenses that are likely to drop or increase in A year or two.but really sit down with your budget and talk through what it would look like and what would change.

[Anonymous]

Would you have to pay capital gains if you put the 300K directly into your new home as part of the refi?

[Anonymous]

Rent primary home, move into the investment for 2 years and, then sell investment tax free and move back to primary home. That's worth the 75k you won't have to pay in tax penalty.

[Anonymous]

Anonymous wrote:Would you have to pay capital gains if you put the 300K directly into your new home as part of the refi?

You cannot do a 1031 exchange into your residence.

[Anonymous]

Do you need to make the house decision right now? Can you move jobs, plan on tightening budget and see what cash flow looks like?

I assume some incidentals will go away as it will no longer be working the hours, eating take out etc.

[Anonymous]

Capital gains are taxed at a pretty low rate but you do want to look into depreciation recapture to make sure you have an accurate estimate of taxes. Also if you wait til tou are in the bew job to sell the house you will have less income and may pay less in taxes on the house.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I never understand why people go for interest only, no money down loans for their home! Why not just rent?

Never mentioned an interest only loan.

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.

NP here and just a point of clarification for you but VA loans do have PMI but it is paid upfront in the form of the VA funding fee. I mention this because if you were to refinance in addition to having a higher interest rate you will have to pay the funding fee which is a percentage of the total loan value. It also varies depending on whether the vet has a disability rating as well.

[Anonymous]

Anonymous wrote:

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.

I assume your fallback home is a part of your retirement plan? and that you might have a government pension as well (VA loan?) If yes, I would recommend cutting retirement savings to the match level right now and tighten your budget for the next year to see what numbers really look like.

In 6 months, I would look at your Arlington Home and see if there are any changes you can make to make it more marketable / increase rent. I am surprised that a property purchased in 2006 is just covering costs for rent (I know you probably purchased at the top of the bubble - we did when we purchased in 2006).

You might be in better shape than you think you are and need to think about having an emergency savings (in care you have a repair for either property or the rental is empty for a month or 2)

Also - I assume you have maxed your SS for the year / 401K. Make sure you communicate that to your new firm so that you do not get it taken out twice.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

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.

I assume your fallback home is a part of your retirement plan? and that you might have a government pension as well (VA loan?) If yes, I would recommend cutting retirement savings to the match level right now and tighten your budget for the next year to see what numbers really look like.

In 6 months, I would look at your Arlington Home and see if there are any changes you can make to make it more marketable / increase rent. I am surprised that a property purchased in 2006 is just covering costs for rent (I know you probably purchased at the top of the bubble - we did when we purchased in 2006).

You might be in better shape than you think you are and need to think about having an emergency savings (in care you have a repair for either property or the rental is empty for a month or 2)

Also - I assume you have maxed your SS for the year / 401K. Make sure you communicate that to your new firm so that you do not get it taken out twice.

Yes, it's part of our retirement plan, and also a possibility to sell it to pay for kids college if they get into a pricey place. I have a longterm tenant who is great and could probably charge more. He does all the maintenance and pays for most things himself. The Arlington house is in an undesirable location, it's on Wilson Blvd, so very busy.

[Anonymous]

Plenty of advice already. When something like this occurs, there is not going to be an easy or obvious choice. One thing to consider, as others have noted, this is a big change in income and will likely be hard to adapt to, at least initially. For that reason, I would opt for 4, which I think would prove the least stressful option, and also seems to be financially sound. You will have to pay capital gains tax when you sell house #1 no matter when you sell it, not so clear why you would want to work so hard to avoid that at this point.

[Anonymous]

Do you co-own the investment property with your husband?