We struggled with selling our 1,500 sqft “big” house, which has been on the market since May 2015.
While we very much enjoyed the big house, it wasn’t the home we envisioned for the long haul. We have big plans for action verbs. We also hate mortgages, so we’re trying to eliminate our mortgages as soon as possible.
Well, I have some news on the big house front. We received an offer two weeks ago and we’re under contract.
The home inspection was last week and it was OK. I wait with bated breath for an appraisal and for the closing in May, assuming all goes well. If I don’t sound more excited than I should be, it’s because paying two mortgages was NOT part of our “crush all of our debt plan” for 2016.
Life doesn’t go according to plan, so why would I expect that trying to sell our house would be any different? It seemed like a simple plan, so what could possibly go wrong?
- Finish the small house.
- Sell the big house.
- Use any equity from selling the small house to pay off debt.
Thus far, we’ve only managed to achieve step 1. Our small, 536 sq ft house is everything we hoped it would be.
However, we still have two mortgages.
Because the 1,500 sqft house didn’t sell in summer 2015, we elected to take on another loan to cover the 500 sqft small or “tiny” house, thinking that it would be a short time until the big house sold and we could pay off both loans.
It’s nearly spring 2016 and we’re still paying two loans. And we’re nearly underwater in the first mortgage. Why?!
Our “big” 1,500 sqft house
Home values are fiction. Really. Comps are best guesses. Zillow has no idea that the elementary school in town was condemned and how that has obliterated the market. Your home’s value is at the mercy of the next buyer.
When it comes down to it, houses are only worth what other people are willing to pay for them when you leave. If you ever buy and sell a home, I sincerely hope that you will be in a situation where someone is willing to pay you at least as much as your mortgage balance.
Because of years of interest and PMI, we don’t have equity in the house. I wouldn’t wish this on my worst enemy.
If a mortgage is right for you, save for a proper down payment to avoid PMI and shop mortgage interest rates to get the best rate you can. Don’t let banks talk you into more house than you can afford or anything less than 20% down on a mortgage.
Know what you are getting yourself into before you start going to open houses because mortgages can be like tattoos — difficult to get rid of.
6 Reasons Why I’m Not a Fan of Mortgages
- Mortgages make you responsible for maintenance.
- Mortgages make you think you need Saturday afternoon home improvement projects.
- Mortgages make you think you need a job.
- Mortgages make you think you’re stuck at your job.
- Mortgages make you think you’re doomed to a life of soul-sucking corporate culture until 67 (or 62) when you can take meager distributions from an under-funded retirement account due to all of those years you were paying off your mortgage.
- And the absolute, very worst part about mortgages? You can’t take them with you because mortgages don’t care about your awesome new job opportunity in another state (or country).
Banks like issuing loans for houses since they have a permanent address, something that’s easy to foreclose and sell off. Many banks aren’t too keen on loaning thousands of dollars for a “tiny” house or an RV that lacks a permanent address.
Credit card debt is, at least, portable. While that’s true, I’m still not a fan of credit cards, so I wouldn’t recommend this kind of debt over mortgage debt.
3 Ways to Try to Eliminate Mortgage Debt
If you’re in a situation with your mortgage and you’re trying to get out of it, here are some things to consider to get out of a mortgage without getting into debt.
1. Use Your House to Make More Money
If you’re close to paying off your mortgage, you might consider staying in your house and renting a room to make more money.
You might also consider your location and if it’s worthwhile (and possible) to put your house on Airbnb for a week or a weekend to make more money.
When you don’t have a mortgage payment, you have more options. Consider putting your house to work to make extra money and pay that mortgage off faster so you can turn your attention to your next financial goal.
2. Sell Your House
Thinking about changing jobs? Moving out of the area?
You could consider renting your house, but then you’ll be an out-of-town landlord with a mortgage making you dependent on your tenant. Your tenant will have to pay rent on time, every time so you can pay your mortgage payment.
Consider cutting ties with the past, sell your house, and eliminate your debt.
3. Rent Your House
In the right situation, you might rent your house. It’s not right for everyone in every situation, but in some situations, it’s something to consider.
If the rental market is hot in your area and your mortgage payment is low, you might have extra money to make extra principal payments on a mortgage to payoff that mortgage early.
Check with real estate agents, real estate investors, and real estate property managers in your area to assess all of your options. If you want to get out of your house and be mortgage free, there are options, so gather as much information as possible about your area to make the right decision for your situation.
P.S. Close to paying off a mortgage? Wondering what to next after you paid off your mortgage?
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