Need advice on what to do about mortgage

[Anonymous]

We were in a similar position when my DH moved from consulting to a position as a fed. We had a drop in income (not the magnitude you are facing). About 6 months before he moved jobs, we had refinanced the house to a 15 year loan. We were concerned about being able to live within the cash flow that we had but we committed to waiting a year to decide what to do.

There were a few points where it was tight and we needed to leverage our HELOC for some major bills (needed a new AC).

We are now down to 8 years left on our mortgage and so glad that we worked through the adjustment through adjusting our spending.

[Anonymous]

These are really unrelated questions

Question #1. Should you sell the house rental. Yes. Your return is lower than you could otherwise get in an equally safe/ risky investment. But investments should stay as investments. You should 1031 into a better rental property.

Question #2. Can you afford to take a $120k paycut and stay in your house. You can but is it worth it to you. Fortunately you have an assumable va loan so try it for a year. If it is too tight rising interest rates will make your home more valuable and you will sell and downsize.

[Anonymous]

DO NOT SELL your rental property. I repeat, DO NOT SELL. If you are breaking even, hold onto it for a couple of years.
Arlington is booming. Amazon is coming and home values will skyrocket. Wait at least until after the Amazon decision.

[Anonymous]

Anonymous wrote:

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.

Say you have a rental in the DC area, but sell it and do a 1031 exchange to where you would like to retire in three years. Can you move into it then and convert it to a residential home?

[Anonymous]

Anonymous wrote: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?

How much time is left on the mortgage of the rental in Arlington?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

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.

Say you have a rental in the DC area, but sell it and do a 1031 exchange to where you would like to retire in three years. Can you move into it then and convert it to a residential home?

24 years. I have a 30 year mortgage at 3.5%.

[Anonymous]

I'd say move to a house you can comfortably afford. If that becomes possible with current house using option 3 or 4, then they are okay. Your investment property is likely not neutral once you account for tax issues and paying down the principal, so it would be great if you could hold on to it, but reducing your salary but 1/3 is a big thing, so it needs a big response.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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.

Say you have a rental in the DC area, but sell it and do a 1031 exchange to where you would like to retire in three years. Can you move into it then and convert it to a residential home?

24 years. I have a 30 year mortgage at 3.5%.

I wouldn't sell anything with a rate that low. We might not see 3.5% again in our lifetime.

[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?

Yes

[Anonymous]

I’d move back into the first house and kick the parents out. By my priority is my nuclear family and kids college savings. I wouldn’t let my parents dictate where I live. They already had 18 or so years to do that. Now it’s my turn.

[Anonymous]

Anonymous wrote:I’d move back into the first house and kick the parents out. By my priority is my nuclear family and kids college savings. I wouldn’t let my parents dictate where I live. They already had 18 or so years to do that. Now it’s my turn.

Your parents and the rest of the world wishes your kids learn values from you!

[Anonymous]

Anonymous wrote: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?

Do you have PMI on your va loan?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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.

Say you have a rental in the DC area, but sell it and do a 1031 exchange to where you would like to retire in three years. Can you move into it then and convert it to a residential home?

24 years. I have a 30 year mortgage at 3.5%.

I wouldn't sell anything with a rate that low. We might not see 3.5% again in our lifetime.

This didn't age very well.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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.

Say you have a rental in the DC area, but sell it and do a 1031 exchange to where you would like to retire in three years. Can you move into it then and convert it to a residential home?

24 years. I have a 30 year mortgage at 3.5%.

I wouldn't sell anything with a rate that low. We might not see 3.5% again in our lifetime.

This didn't age very well.

To elaborate -- we just got a quote for 3.25 for a VA loan.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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.

Say you have a rental in the DC area, but sell it and do a 1031 exchange to where you would like to retire in three years. Can you move into it then and convert it to a residential home?

24 years. I have a 30 year mortgage at 3.5%.

I wouldn't sell anything with a rate that low. We might not see 3.5% again in our lifetime.

This didn't age very well.

To elaborate -- we just got a quote for 3.25 for a VA loan.

Europe and Japan have 0-2% rates; and have had for a bit...

https://www.loanlink.de/mortgage-calculator/Mortgage-rates/

So we could be even lower...