Downsize to townhouse?

[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?[/quote]

If this is true then I Would suggest that you rent. You shouldn’t be buying a 400k home if $6k is going to make or break you.

[Anonymous]

Anonymous wrote: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.

No financial counselors will tell you to move.

Give us your budget. What is your take home pay each month? I don’t see how you can get much cheaper than your current mortgage.

The other problem is that home prices may drop significantly! Don’t buy a fownhome at the top of the market.

[Anonymous]

Once the furlough is over, can you look for a part time job in order to build your emergency savings? Or can you find a way to cut xpenses another way?

[Anonymous]

I know easier said than done, but why don’t you just leave the government job and go to the private sector? This shutdown without pay is beyond ridiculous and I would be looking for a better paying private sector job in a nanosecond.

[Anonymous]

Your idea doesn’t make sense given the transaction costs involved and the relatively small savings on mortgage, particularly since interest rates are going up.

If you sell you should rent. Personally I would stay, get a heloc for emergencies, and work on other ways to increase income or cut expenditures. Can the non working spouse do anything to earn money?

[Anonymous]

Anonymous wrote:Your idea doesn’t make sense given the transaction costs involved and the relatively small savings on mortgage, particularly since interest rates are going up.

If you sell you should rent. Personally I would stay, get a heloc for emergencies, and work on other ways to increase income or cut expenditures. Can the non working spouse do anything to earn money?

+1.

[Anonymous]

Yes downsize. It makes perfect sense financially for you based on your numbers.
Why do you associate TH with failure?
I would rather live in a small and cute TH than a old SFH. Your SFH is a money pit. Dump it.

[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)??

If you had not already bought in this area, and not already locked in a good interest rate, the advice to buy a cheaper place is good. But you have, I assume it's in an area you like.

But right now it sounds like you have a decent house that's not overly expensive. By the time you pay Realtor fees, pay moving costs, and then pay HOA dues every month, you may save very little on the monthly payments and have a less desirable house to sell when you are ready.

Sure, it's better to have a larger emergency fund. Can you rent the basement of your current house, for example? Can you develop a hobby that makes a bit of money to save?

Moving to a townhouse is fine, but I do think you are underestimating monthly expenses in a townhouse.

HOA, plus the cheap townhouse windows and insulation, was actually more expensive monthly in our townhouse than the payment plus bills on our 1970s sfh split level we now own. If you go through with this, make sure you know about all expenses and get current bill information on the house.

Our plan is to use savings and credit to get through this furlough crisis and then start job searching to find positions in a cheaper area and/or positions we can telecommute from and move to a cheaper area.

[Anonymous]

Actually, I just saw the renting idea and that may be so much better for.you than repuchasing at this point. Lots of our fed co-workers rent apartments and townhomes so they can get in better school districts and only buy once the kids have graduated.

Renting may be the win/win you need. You get to keep your money as an emergency fund / investment not spend youroney on maintenance, and the kids still get good schools.

[Anonymous]

It sounds like you overbought in the first place but look at the numbers others posted. By the time you add all the moving costs/fees, that will be a good chunk of money plus the higher interest rate and HOA fees. You will come out equal at best and if new townhome needs repairs you may come out worse. You need to cut back in other areas and save. DIY house repairs. We bought a shack and we slowly DIY. We will never be done.

A VA loan is only best when you have no money down or bad credit. If you look at it, we did, you can get far better rates if you have good credit and a down payment.

[Anonymous]

Anonymous wrote:

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?

There's no cap gains on the sale of a primary residence up to $500k.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

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?

There's no cap gains on the sale of a primary residence up to $500k.

There is deed tax and transfer tax.

[Anonymous]

Anonymous wrote:I don’t think it makes a lot of sense financially. Moving is VERY expensive. You’ll spend thousands moving and on commissions, taxes etc

Townhomes historically don’t appreciate like SFHs do, which is there is a stigma. HOAs will increase over time

You’re much better off looking at your budget and cutting costs somewhere else.

Also, as you age you might not be keen to have to be going up so many town house stairs?

Would the town house be walkable to things like shopping, a pool, the gym, trails, work though? That might make it attractive to me.

Also to consider - could you deal with having neighbors super close by on both sides of you?

[Anonymous]

We moved from a SFH to a TH (kids graduated) and all of our expenses went down. Every single one. Property taxes, utilities, yard,...
Not just the mortgage.


Also, unlike another poster, just because we are in our late 50s doesn make us old and frail and having to crawl up stairs. As a matter of fact I place mu sneakers up each day and jog a few miles-6 days a week. 3 days I head to the gym and life weights. My DH also runs, plays golf, and is not a tennis team. Retirement has improved our health. I feel better at 57 than I did at 45.

[Anonymous]

Anonymous wrote:I know easier said than done, but why don’t you just leave the government job and go to the private sector? This shutdown without pay is beyond ridiculous and I would be looking for a better paying private sector job in a nanosecond.

Lol! The reason why you feds are such a disaster is because you take your jobs for granted. My DH got laid off in 2016, it took him 4 months from getting laid off to starting his new job. We had to pay for childcare those 4 months. The feds lives are collapsing after only 1 missed paycheck. We always operate like the rug could get pulled out and for us there is no back pay.