Post Mortgage Options

[Rommey]

Looking to see what others think would be the best option to follow once my mortgage is paid off.

Our mortgage will be essentially be paid off in March (there might be a small payment due April 1). I had been paying every two weeks so it really accelerated the payoff (original 30-year mortgage was from 1992; refinanced to 15-year mortgage in 2002; mortgage will be done in 18+ years.)

We were considering buying a second home in a location we would eventually like to retire. With the interest rates and housing prices currently low, I would like to take advantage of that and possibly get a "bigger" house than I would normally be able to. "Bigger" not necessarily meaning more square footage, but getting a "$600K house" for $400K.

We have some savings but not nearly enough for any type of downpayment for any mortgage. I could be eligible for a VA loan, but since this new house wouldn't be occupied by me in a reasonable amount of time, I don't believe I would be able to get a VA loan. Therefore, it would be a conventional loan and zero-downpayment loans are non-existent. I do have stocks I could sell to provide the cash for a downpayment, but I'm not sure thats the wise way to go.

So it boils down to: do I use the available cash and stocks towards a house and take advantage of the weak housing market now...
-or-
do I save the money (i.e., the money I used to pay to my current mortgage) and possibly miss out on an affordable home 1-2 years from now (i.e. that "$600K house" is priced back at $600K 2-yars from now and not the current $400K)?

 

[Sydney]

You are going to buy another home, after you just paid off your current home? What are you going to do with the old house? Rent? Sell?

 

[Aerogal]

Instead of a new (or used home) why not look into property or a business with an apartment above/ attached in the area you want to relocate?

 

[desertrat]

Looking to see what others think would be the best option to follow once my mortgage is paid off.

Our mortgage will be essentially be paid off in March (there might be a small payment due April 1). I had been paying every two weeks so it really accelerated the payoff (original 30-year mortgage was from 1992; refinanced to 15-year mortgage in 2002; mortgage will be done in 18+ years.)

We were considering buying a second home in a location we would eventually like to retire. With the interest rates and housing prices currently low, I would like to take advantage of that and possibly get a "bigger" house than I would normally be able to. "Bigger" not necessarily meaning more square footage, but getting a "$600K house" for $400K.

We have some savings but not nearly enough for any type of downpayment for any mortgage. I could be eligible for a VA loan, but since this new house wouldn't be occupied by me in a reasonable amount of time, I don't believe I would be able to get a VA loan. Therefore, it would be a conventional loan and zero-downpayment loans are non-existent. I do have stocks I could sell to provide the cash for a downpayment, but I'm not sure thats the wise way to go.

So it boils down to: do I use the available cash and stocks towards a house and take advantage of the weak housing market now...
-or-
do I save the money (i.e., the money I used to pay to my current mortgage) and possibly miss out on an affordable home 1-2 years from now (i.e. that "$600K house" is priced back at $600K 2-yars from now and not the current $400K)?

Mine is also paid for. I figure if the market goes up by the time I'm ready to move I'll get more for the house. If not I'll get less, but have to pay less too.
If I had $300-400k sitting around it might be a different story.

Even less, I might consider a smaller down payment and a loan to be paid off when I sell this place. Once I build up some cash from not having a mortgage anyway.

 

[Annoying_Boy]

Rommey: "(i.e. that "$600K house" is priced back at $600K 2-yars from now and not the current $400K)?"

Let us know how that fantasy worked out?

People that take their financial advice from Internet forums from people that have a vested interest in telling them what they want to hear usually end up like this, and it isn't pretty:

Prices are low and you're STUPID if you don't buy now. Why the hell would you wait until the market picks up and homes cost more?

You wouldn't. Unless you're stupid.

There's a 5 BR, 3 BA right up the street from me that is a creampuff - great condition, hardwood floors, brick fireplace, family room, nice lot, fabulous neighborhood (if I do say so myself) for only $299,900. Mortgage payment of $1600 a month.

There's another one in Excuse the Eff Out of Me Society Hill in Ltown for $229,900, 3 BR, 2BA - $1200 a mo.

A big fat ol' house, 4 and 3, in Great Mills, for $1350 a mo.

And you'll OWN it!

You are TOTALLY not going to get that kind of deal a year from now.

Buy low. Sell high. Duh.

Prices are low so NOW is the time to buy.

If you have decent credit and can actually afford to buy a home, NOW IS THE TIME!

Don't be stupid and let this buyer's market opportunity pass you by.

So STOP that renting!!! Renting is for losers! The American dream is to OWN a home, not friggin rent one.

And NOW is the time.

 

[Rommey]

You are going to buy another home, after you just paid off your current home? What are you going to do with the old house? Rent? Sell?

Plan to live in my current house for another 3-5 years. I would rent out new house (hopefully getting a rent amount that comes close to
what the mortgage is). At some point, when we move, we would sell our current home and apply the proceeds towards the mortgage of the second house.

 

[Rommey]

Rommey: "(i.e. that "$600K house" is priced back at $600K 2-yars from now and not the current $400K)?"

Let us know how that fantasy worked out?

About two years ago houses around here (within a 1/2 mile of where we are currently at) were selling in the $550-$650K range. Today those same houses are selling for $350-500K range. I have no doubt that sometime in the future those same houses are going to be selling for 600K. That might be 1 year from now or 5 years from now. The area we are looking at has had much steeper drops ($800K houses now selling for $400K). I could afford the $600K house, but why shouldn't I try to get that house for $400K?

People that take their financial advice from Internet forums from people that have a vested interest in telling them what they want to hear

I haven't made a decision, so no one could tell me what I want to hear. Both the basic options I have listed have advantages and disadvantages.

 

[Annoying_Boy]

About two years ago houses around here (within a 1/2 mile of where we are currently at) were selling in the $550-$650K range. Today those same houses are selling for $350-500K range. I have no doubt that sometime in the future those same houses are going to be selling for 600K. That might be 1 year from now or 5 years from now. The area we are looking at has had much steeper drops ($800K houses now selling for $400K). I could afford the $600K house, but why shouldn't I try to get that house for $400K?

I haven't made a decision, so no one could tell me what I want to hear. Both the basic options I have listed have advantages and disadvantages.

Or it may be never. Or 30 years from now before that house sees 600k again...

I really don't think you know what you're talking about with your predictions, nor do you have any qualifications to make those predictions.

Highly unlikely, but what if they kill the mortgage interest deduction to help balance the budget or make significant cuts in the military budget?

What about the two year Federal pay freeze that just happened?

You live in a bubble around here courtesy of a wealthy military base.

Go read how the rest of America lives each day:

Housing Market News

 

[Rommey]

Or it may be never. Or 30 years from now before that house sees 600k again...

I doubt it will be never...I also doubt 30 years...

I really don't think you know what you're talking about with your predictions, nor do you have any qualifications to make those predictions.

My 1-year and 5-year statements were not predictions, merely hypotheticals.

Highly unlikely, but what if they kill the mortgage interest deduction to help balance the budget or make significant cuts in the military budget?

Who said anything about the mortgage deduction being a factor? How do the potential cuts affect my decision to buy a house? I am going to buy a house in the area I want to retire in. Whether I do it now or later...I am going to buy a house in the area I want to retire in.

What about the two year Federal pay freeze that just happened?

What about it?

You live in a bubble around here courtesy of a wealthy military base.

The area I'm looking at doesn't have much military presence anymore, so that area is outside the bubble you speak of. And I have been following the prices in the area for about two years now and have a pretty good idea of the trends. The question is where the bottom is.

Go read how the rest of America lives each day:

Housing Market News

I'll check this out...thanks for the link.

 

[rhenderson]

My advice would be simply starting socking the payments away in savings media such as short term CDs. I don't know if MB&T still has their 18 month no fee for early withdrawal CD or not. I did buy some about six months ago based on advice from my financial manager.

While you can buy a house that was $600K a few years ago for $400K today-
it is still a $400K today. As a previous pointed there's evidence that it will be $600K again anytime soon.

I am not saying you should not buy a house; however, you do need to be clear as to what your goals are.
Do not buy a house with the intent of renting it out until you're ready to retire unless you have a definite retirement date in mind - preferrably within a year. I bought a piece of waterfront property on which to build my retirement home about twenty five years ago. I have still not retired and realize now that I will never build there no matter when I do.

If you want to buy a house as an investment, you can eliminate your likes/dislikes for living there from the equation and make your decision on a business basis. Instead of buying one house for $400K you may decide to buy two at $200K. Business wise you are more likely to have only half of your investment vacant at any given time.

 

[Sydney]

You said you wanted to rent out the new house to cover the mortgage. Just remember you will have to buy this house as an investment, which will require a higher down payment, which is 20%.

 

[ProfMoneyWise]

Enjoy owning where you sleep and don't go right back into debt.

When you sell this house . . . as in when you have the money in your bank account . . . buy a home where you want to retire with that money.

Retiring with a mortgage is not advisable.

I'm not exactly sure how much my next home will cost but I know it will not cost more than I get for the one I'm in now.

 

[ProfMoneyWise]

Plan to live in my current house for another 3-5 years. I would rent out new house (hopefully getting a rent amount that comes close to
what the mortgage is). At some point, when we move, we would sell our current home and apply the proceeds towards the mortgage of the second house.

And when your renter decides to change their motorcycle oil in your living room, use your wall as a punching bag, stop mowing, quit paying rent and you have to take them to court to find out they really don't have to move out that quickly . . . or pay you . . . but you have to pay the lawyer . . .

Don't think it can happen? Check with more than one landlord and you will hear a story.

 

[stars24]

My advice would be simply starting socking the payments away in savings media such as short term CDs. I don't know if MB&T still has their 18 month no fee for early withdrawal CD or not. I did buy some about six months ago based on advice from my financial manager.

While you can buy a house that was $600K a few years ago for $400K today-
it is still a $400K today. As a previous pointed there's evidence that it will be $600K again anytime soon.

I am not saying you should not buy a house; however, you do need to be clear as to what your goals are.
Do not buy a house with the intent of renting it out until you're ready to retire unless you have a definite retirement date in mind - preferrably within a year. I bought a piece of waterfront property on which to build my retirement home about twenty five years ago. I have still not retired and realize now that I will never build there no matter when I do.

You're in a good position now. Whatever you would pay in a mortgage payment, I'd sock it away in some sort of higher yield savings account and make interest off of it. Then, when it's time to retire, I'd have that money, plus the money made from selling your current house to put towards the new one.

Although if you bought now you may very well be buying when the cost is lowest, I think between all the costs involved with getting a mortgage for a house that not be your primary residence and the hassles/costs of being a landlord, it just wouldn't be worth it to me. PLUS, if this is the place you want to settle down to retire, I wouldn't want renters there before me. A "more perfect" place could come along between now and then too and if you wait, you won't be tied into anything and you'll be ready to pursue that dream house when the time is right. But.... that's just me. Congrats on paying off your mortgage...