Downsize to townhouse?

[Anonymous]

There are huge beautiful townhouses in our area. I wouldn’t call moving to those as downsizing. It would actually be an upgrade compared to many of the SFH here.

[Anonymous]

Anonymous wrote:One thing that the shutdown has highlighted for us is that we need a much bigger emergency cushion.

DH and I have been discussing downsizing from our Fairfax County SFH (worth about $600K, we owe about $350K on the mortgage, current monthly payment is $2525 at 3.375%) to a townhouse (we can find a reasonably nice one slightly farther out in a good school district for about $465K). The idea would be to take a large chunk of the proceeds and put it in savings, and put the remainder toward the downpayment on the townhouse. With the lower price and the downpayment, we would also have a smaller monthly payment and be able to save more, even with a higher interest rate on a new mortgage--I am seeing 4.375% on a VA loan, so this would be only a percentage point higher than our current rate.

Our current SFH is a ranch-style house with a finished basement, and honestly we only use the upstairs, so in terms of space I am not sure it would be that different. Also, I think this probably makes sense financially. However, I find myself very resistant to the idea; to me SFH = middle class = not a failure.

Advice?

This move does not make much financial sense, if at all. Nor does the idea of SFH = middle class = not a failure.

[Anonymous]

Anonymous wrote:I guess here is my concern: so much of what would otherwise be our emergency fund is tied up in the house. Is the alternative when this shutdown mess is over to get a HELOC that we could tap in an emergency if this happens again? We already do many cost cutting things like have discount cell plans (Mint Mobile 2GB for $15 per month) but do not have enough of a cushion.

This is what I was going to suggest, but it isn't something we've done so maybe someone else can chime in. Otherwise, you're just moving the money around and not saving too much. It's possible that less lawn care, less utilities, and less property taxes would add up to significant savings over time, but that might get eaten up by less appreciation and higher commute costs. It's hard to know for sure.

I have the same urge to downsize now, but I've run the numbers and can't make them add up to the amazing financial freedom I'm imagining in my head. And we love our home and neighborhood. I figure the best time for us to move again is when our kids are in college and we're downsizing for just the two of us.

[Anonymous]

Anonymous wrote:There are huge beautiful townhouses in our area. I wouldn’t call moving to those as downsizing. It would actually be an upgrade compared to many of the SFH here.

x10000

[Anonymous]

OP here, and I am genuinely confused. I posted on a shutdown thread last week, and not only was I castigated for not having 6 months in emergency savings (I agree), I was scolded for not living in a townhouse or condo and told we needed to find a cheaper place to live. So how do we build an emergency fund if we have already cut expenses and our incomes are not rising (assuming no pay increase after this shutdown mess is over)??

[Anonymous]

And just to be clear, I am talking about moving to a smaller townhouse that is less expensive than our current SFH, not some of the "huge, beautiful" townhouses in the millions that others have referenced. Yes, we are the poors.

[Anonymous]

Anonymous wrote:OP here, and I am genuinely confused. I posted on a shutdown thread last week, and not only was I castigated for not having 6 months in emergency savings (I agree), I was scolded for not living in a townhouse or condo and told we needed to find a cheaper place to live. So how do we build an emergency fund if we have already cut expenses and our incomes are not rising (assuming no pay increase after this shutdown mess is over)??

Don't take advice on DCUM
If you were buying for the first time, or if you had to sell, then buying something cheaper might make sense. However, where you are now, the transaction costs, commuting costs, and interest rate likely would eat any savings.

You will eventually get a pay increase. You will have other opportunities to economize. You will get backpay, and can file for unemployment.

[Anonymous]

Anonymous wrote:And just to be clear, I am talking about moving to a smaller townhouse that is less expensive than our current SFH, not some of the "huge, beautiful" townhouses in the millions that others have referenced. Yes, we are the poors.

You currently have about 250K in equity on your 600K house. You still owe 350K.

If you sell now, you would get 250K- 36K (6% agent fees)= 214K - taxes...

How much are you looking to spend on a townhouse?

[Anonymous]

I have found a few that would be workable for $429-$465K with HOA fees less than $100 per month(Burke, Fairfax Corner).

[Anonymous]

Anonymous wrote:

Anonymous wrote:You’d go from. $2525 payment to what? 2000?

This seems like a horrible idea. You’re going to spend at least 30k on the realtor and taxes at closing. So you’re going to spend 30k to save $500 a month? It will take years to make the move worth it.

Plus every townhouse has HOA fee, so you have to factor that in.

Well I know someone in a townhouse and they pay no more than $100 a year.

[Anonymous]

Also, developers are buying and tearing down houses in our neighborhood. Is it possible to sell to a developer without real estate agent fees?

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP here, and I am genuinely confused. I posted on a shutdown thread last week, and not only was I castigated for not having 6 months in emergency savings (I agree), I was scolded for not living in a townhouse or condo and told we needed to find a cheaper place to live. So how do we build an emergency fund if we have already cut expenses and our incomes are not rising (assuming no pay increase after this shutdown mess is over)??

Don't take advice on DCUM
If you were buying for the first time, or if you had to sell, then buying something cheaper might make sense. However, where you are now, the transaction costs, commuting costs, and interest rate likely would eat any savings.

You will eventually get a pay increase. You will have other opportunities to economize. You will get backpay, and can file for unemployment.

I agree with this. Except people who are still working but not getting paid cannot file for unemployment. I don’t know of any options for getting money that don’t come with a cost. It is a very unjust situation that should not be legal.

[Anonymous]

OP again - Do the following facts impact the analysis: (1) this house has been a money pit (built in the 1960s, has had constant issues, and has sucked up almost all of the $75K in emergency funds we had when we moved into the house 10 years ago) and (2) an extra $500 per month is significant to us?

[Anonymous]

Anonymous wrote:OP again - Do the following facts impact the analysis: (1) this house has been a money pit (built in the 1960s, has had constant issues, and has sucked up almost all of the $75K in emergency funds we had when we moved into the house 10 years ago) and (2) an extra $500 per month is significant to us?

I know you posted in the money forum but I think you would be more comfortable mentally doing the move you proposed. Regardless of all the facts, figures, and calculations that others will post. Sometimes you just have to do what’s right for you, whether or not it makes sense.

[Anonymous]

Thank you, PP. I am trying to think about this in the right/smartest/most logical way, but it is impossible to remove my thinking from our current situation (shutdown, working without pay, non-working spouse with chronic health issues). I am not going to make any rash moves after the government reopens, but in all likelihood we will go through the same thing in October, or maybe even when it comes time to raise the debt ceiling, and I just need more of a hedge against uncertainty. But I also recognize that emotional financial decisions tend to be stupid ones.

Are there financial counselors that could help with this? Because it doesn't sound like something for a financial advisor.