Debt Advice: Unfinished House with No Mortgage?

[mycalling]

We are looking into selling our home and buying a HUGE house that is unfinished (int./ext. framed w/ a roof and siding) with an old single wide. The asking price is what we will have after everything on our sale is paid. We will be moving out of state, so DH will need to establish his business in a new location, but could still travel back here (10hrs) for large jobs. We don't want to worry much the first few months...but know we also have my mom, DH, myself, and probably an 8th child when we move into the single wide.:svengo:

 

What is the smartest plan:

 

No mortgage...no buffer money, finish things as we can afford it.

Tiny mortgage ($5000?) so we keep cash available for beginning bills, finish as we can afford it. ~Would closing costs double that? They're not based on a percentage of the mortgage, are they?

Small mortgage (<$20,000) for cash available to live on and do a livable portion of the finishing.

Mortgage most and finish all. More of our money will go toward interest.

No mortgage, but get a home equity line of credit. We don't know how difficult those are to get on a newly purchased unfinished home and would hate to end up broke with no options initially.

 

As for other money, we have enough savings to afford the move, which will be expensive. That will drain everything barring a large job coming through soon. We could get rid of a ton of stuff and leave a little for initial bills, but we've done that already and I've put a lot of effort into getting us to having the things we do now. I don't usually care about things, but I'm having big emotional reactions every time I think about getting rid of everything again, so we're keeping the stuff and paying to move it.

[Jean in Newcastle]

With your household and a new baby on the way, I would suggest the small mortgage.

[TwinMominTX]

Why would so much of your money go towards interest? Interest rates are extremely low right now.

[AuntieM]

With your household and a new baby on the way, I would suggest the small mortgage.

 

:iagree: You will need to still have a small emergency fund. The small mortgage option would give you a bit of breathing room. A friend of mine did things this way, and turned out the trailer needed to be refloored, an unexpected expense. Also, you'll need bathrooms and a kitchen and those are costly to finish out. Regular stud walls can go up a few feet at a time, that can go quickly, but when you have to call in a plumber (unless, by chance, your dh or one of your kids *is* a plumber?) more time and money are involved.

 

Just my 2 cents. You are brave to do things this way, but one day you will laugh about the old days in the trailer.

[Melissa in Australia]

I would go with the no mortgage and live in a unfinished house.

I have lived in an unfinished house for 17 years, it is fine. Slowly it gets closer to being finished. We have been able to live off a very low income because we have no debt.

 

 

I got interior door architraves last week.:party: one day I will get kitchen cupboard doors and draws. I am just grateful to have a bench.:hurray: I didn't have one for 16 years.

[Pamela H in Texas]

Jessi,

 

A couple thoughts.

 

First, you HAVE to have an emergency fund NO MATTER WHAT. If you were doing Dave Ramsey, he'd tell you to stop whatever you were doing and build that up since you have a baby coming AND probably at least a temporary decrease in income.

 

So, you probably need the small mortgage, but I would NOT finish out the house. Maybe do what minimum you HAVE to (like the poster above said, you can LIVE in an unfinished house (and that sounds like it'd be much more comfy than a singlewide with SO many people); but mostly, the difference should be emergency fund until hubby gets established and the baby is born.

 

Once hubby is pulling in a minimum you can survive on and the baby is born, then work down the debt like crazy (put the majority of the emergency fund into the debt). It probably won't take you long to do that as the majority of your emer fund is going there so that will leave you only a couple thousand to pay out of pocket. Then you can work the emergency fund up to what you need it to be fully funded and work on the house over time (hopefully it won't take 17 years, but...).

 

Anyway, this is just my understanding of what Dave Ramsey, who I really respect on this, would say. Being debt free would be nice, but it just doesn't sound like you're in the position to buy this property and remain completely so. A house with a small mortgage should be okay though as long as you're responsible enough not to start going into debt over one thing after another and your post made it sound like you were more than capable enough not to do that.

 

HTHs,

[WishboneDawn]

I'm with th small mortgage and finish livable portion crowd. Dave Ramsey and debt aside you don't want a situation that will drive you crazy, especially with a baby on the way. You've still got a family to look after and kids to homeschool and don't need to add tons of stress on top of that. Being debt free may be important but make sure you're not sacrificing other things on it's altar.

[elegantlion]

Another issue to consider is insurance and what you'd have to do to get a certificate of occupancy for the house.

 

With your dh moving a business, even if he can do the work, is he going to have time? or will he be scrambling to restart his business? Will he have money to put into the house or will all of that go back into the business?

 

My dh is a contractor and your scenario sounds wonderful and with just 3 of us we could move into a house with a lot of unfinished rooms and live comfortably. But if he were trying to move his business at the same time, we have to be prepared to live in the trailer for a much longer period of time.

 

However, depending upon how code is enforced in that county you might be waiting a long time. I would look into those details before making a decision. Would you be able to insure the unfinished structure?

 

I agree about the emergency fund too. Moving a business in this economy, I'd have to have living funds to survive for a few months with slow or no income.

[mycalling]

Thanks for the replies. Does anyone know anything about Lines of Credit? I was hoping that could be the best option, but I agree with everyone on the small mortgage sounding right for us.

 

Technically the single wide is attached and therefore they classify the whole thing as livable since they did it under an "addition". (Picture a 7000sf house with a parasitic single wide twin!:lol:) It sounded silly at first, but considering a Certificate of Occupancy, it now makes sense. It's also insurable this way.

 

PamelaH, we have about $4000 in savings now, but I think moving will eat up most of it.

 

TwinmominTX, you mean the whole mortgage option and interest? I just meant every month we'd have a huge payment and most will be going toward interest, not principle.

 

The more we keep out, the more we can do, but after a point DH will be working outside the home and only able to work a little at a time on the house.

 

This is where my $20,000 figure came from. I figure he'll be able to get through ~$15,000 in work (remaining $ to live on) before his business takes over most of his time, at which point our spendable income for materials will roughly equal his extra time he has to put into construction. (I'm sure that was clear as mud!;))

[StephanieZ]

7000 sf?

 

Unfinished?

 

Money tight?

 

Honestly, it sounds like a money pit to me.

 

I can hardly imagine the utility bills. Makes me shudder just to think of cleaning it, let alone heating & cooling it! Let alone FINISHING it!

 

Flooring for 7000 sf??? UGH!

 

I would think long and hard about it, and resist unless you truly need all that space.

[KnitWit]

7000 sf?

 

Unfinished?

 

Money tight?

 

Honestly, it sounds like a money pit to me.

 

I can hardly imagine the utility bills. Makes me shudder just to think of cleaning it, let alone heating & cooling it! Let alone FINISHING it!

 

Flooring for 7000 sf??? UGH!

 

I would think long and hard about it, and resist unless you truly need all that space.

 

I agree. My dh is in construction. I don't know which state the house is in, but with that much square footage, you need to be willing to spend the $$ up front on things that are not *pretties*....like extra insulation, good windows, good doors. If you don't, it doesn't matter how much you spend on your heat/air system, your bills will be crazy! Also, I'd look into radiant floor heating for that large a home.

 

Also, be sure you find out if the all the trades that are there were done properly...referring to well/septic/wiring/plumbing. Was this a DIY home? Do your homework. Find out what kind of codes the county has and if they were followed. The mere fact that there is a trailer *attached* to an unfinished house makes me think the codes are pretty loose...which *can* be in your favor...but it can also come back to bite you in the rear if all the things I mentioned previously were not done properly.

 

Do you have a bank that is already willing to give *any* type mortgage on *that* particular piece of property? The banks we work with are being VERY stingy on issuing mortgages right now. Find out on the FRONT END if that is *truly* an option for you.

 

I hope any of that is helpful. I wish you the best and congratulations on your new addition to your family!

[kathkath]

I agree. My dh is in construction. I don't know which state the house is in, but with that much square footage, you need to be willing to spend the $$ up front on things that are not *pretties*....like extra insulation, good windows, good doors. If you don't, it doesn't matter how much you spend on your heat/air system, your bills will be crazy! Also, I'd look into radiant floor heating for that large a home.

 

Also, be sure you find out if the all the trades that are there were done properly...referring to well/septic/wiring/plumbing. Was this a DIY home? Do your homework. Find out what kind of codes the county has and if they were followed. The mere fact that there is a trailer *attached* to an unfinished house makes me think the codes are pretty loose...which *can* be in your favor...but it can also come back to bite you in the rear if all the things I mentioned previously were not done properly.

 

Do you have a bank that is already willing to give *any* type mortgage on *that* particular piece of property? The banks we work with are being VERY stingy on issuing mortgages right now. Find out on the FRONT END if that is *truly* an option for you.

 

I hope any of that is helpful. I wish you the best and congratulations on your new addition to your family!

 

 

Yes. If you can get that unfinished with no mortgage, I bet you can find yourself a pretty 3000sf place ready to go. I would look that route instead.

[mycalling]

It's actually half the price of anything 1/2 the size.;) It's also on 25 acres. Everything had been done professionally until the owner died. We are looking into radiant heat and it has windows. The great room, the recording studio (an Elvis impersonator started it!), and a downstairs bedroom are finished, but no HVAC yet (maybe wall AC?). We find out more Thursday when we see it.

 

My husband's an electrician and his best friend is a plumber. His friend has offered to come for a week and do all the plumbing for free. We figure we can close off the upstairs and focus on completely finishing the downstairs after electrical and plumbing are done. Each floor will have it's own HVAC, so that bill will be half until the upstairs is done.

 

In our area (more expensive) it works out to ~$100mo per 1,000sf for electric. We don't have gas. Without a mortgage, that's doable. Of course, we'd like to do to solar and through my husband's business he is set up to buy wholesale from a company overseas and can install the system himself. We're also looking into Geothermal.

 

We know it'd be a huge undertaking.:svengo: I've got a conservative estimate of $100,000 to make everything basic, but we currently waste $20,000yr to a bank in interest. If the Duggars can do it, we can do it!:D

Edited June 23, 2010 by MyCalling