Moxie Posted March 18, 2011 Share Posted March 18, 2011 (edited) I'm going crazy thinking about this so I thought I'd just put it out there and see what other people think. ~We're big DR fans and we're committed to taking on no new debt except for the purchase of our next home. ~We own a small home in a bad neighborhood. The section of the street we live on is fine but there was a shooting yesterday 2 streets over. Our house was also broken into over Thanksgiving. It has been steadily going downhill since we moved in 8 years ago. ~We're worried that, given the condition of the neighborhood, our house is going to go down in value no matter what the economy does. I doubt we have any positive equity right now. ~We owe a small fortune in student loans, over $100,000 but we've paid off $100,000 in the past 7 years. I know, I know, DR would tell us we're crazy to think about buying a new house. ~DH has a good, solid career and his income will continue to improve. ~EVERYONE thinks we're nuts to keep living here because 1) the neighborhood and 2) I think people think we make more money then we do. But like Dave says, everyone has an opinion and everyone is broke. ~The main concern is that we're throwing our money in a hole due to the neighborhood situation. Would we be better off buying a reasonable house in a better neighborhood while prices are down and interest rates are low? Should we stick with the DR plan and either rent (it could be 5 years before we're debt free; hopefully less) or stay where we are? ETA: DH thinks we should cut and run; I'm the one who listens to DR every day so I'm the one that is saying that we need to stay. But, DR isn't God and neither and I. I could be wrong. Edited March 18, 2011 by Moxie Quote Link to comment Share on other sites More sharing options...
Annie Posted March 18, 2011 Share Posted March 18, 2011 (edited) Goodness, that's a hard situation. I think I would sell the house, rent, and pay the debt off as fast as possible. However, in many areas, safe, fair quality, and reasonably priced rentals are getting harder to find. ETA - Over the last couple of weeks, I've had some personal experiences that really make the fact that the borrower is slave to the lender resonate with me. Our mortgage is our only debt, but house will be on the market next weekend. Edited March 18, 2011 by Annie Quote Link to comment Share on other sites More sharing options...
WVNA Posted March 18, 2011 Share Posted March 18, 2011 We're also big Dave Ramsey fans too and I generally think his advice is good. In this case, can you do the following: 1. Sell your house 2. Rent somewhere nicer 3. Payoff debt with whatever profit you make on the house 4. Save up money for a down payment while you are renting Quote Link to comment Share on other sites More sharing options...
Excelsior! Academy Posted March 18, 2011 Share Posted March 18, 2011 I would put safety first. I'd look into a new house. Are you afraid yours won't sell? What will you do if it doesn't? Quote Link to comment Share on other sites More sharing options...
blakereese Posted March 18, 2011 Share Posted March 18, 2011 I would try to sell your house asap, especially if you think the neighborhood will only get worse. And then rent. Work on paying off the debt and later revisit buying another home. I'm just not convinced that owning a home is a good investment anymore. Hopefully that will change, but as soon as we can rid of our house I will happily rent for awhile. Quote Link to comment Share on other sites More sharing options...
gingersmom Posted March 18, 2011 Share Posted March 18, 2011 Are you just going to walk away from the house you are in now or are you planning on trying to sell/rent? Quote Link to comment Share on other sites More sharing options...
Liz CA Posted March 18, 2011 Share Posted March 18, 2011 Here is my 2 cents and I am no financial advisor but I like debt free living. If your children or all of you are increasingly endangered by activities in your neighborhood, I would move asap - either rent elsewhere or buy. If you are not panicked or very worried about things going further south, you can look around and take a little time. Rush purchases are rarely good, rushing into a rental is not as bad as you can move again without huge losses. Determine what you can buy and possibly pay off within 7 or 10 years - I believe this is DR's usual timeline. This includes that you still repay the student loans, of course and add the mortgage to the expenses. Ask a realtor to give you an estimate of what the sale price for your house would be. This does not mean it's going to sell at this price but it gives you a clue if you are underwater or not. Quote Link to comment Share on other sites More sharing options...
Moxie Posted March 18, 2011 Author Share Posted March 18, 2011 Are you just going to walk away from the house you are in now or are you planning on trying to sell/rent? Oh no, we would sell. Quote Link to comment Share on other sites More sharing options...
Moxie Posted March 18, 2011 Author Share Posted March 18, 2011 I would put safety first. I'd look into a new house. Are you afraid yours won't sell? What will you do if it doesn't? I don't feel unsafe (maybe I'm naive) although it really isn't a great neighborhood. My main concern is that we're going to stay here another 5 years and then wish we had sold in 2011 when it was worth more. I'm also a little concerned that if things get worse we will have trouble selling. Quote Link to comment Share on other sites More sharing options...
RanchGirl Posted March 18, 2011 Share Posted March 18, 2011 I think safety would be my first priority in this situation. Hopefully you can find something that also fits in with your financial goals! However I would not sacrifice my children's safety in order to pay off debt faster. Quote Link to comment Share on other sites More sharing options...
justamouse Posted March 18, 2011 Share Posted March 18, 2011 Prices around me are staring to creep back up and people are starting to buy again. I think we've seen the lowest of the low. I would buy soon (within the next two years) if I were you. You'll be selling low, which isn't that great, but you'll be buying low, too, which you may not see again for many years to come and will be worth every penny if you can move up. We had the opportunity to buy in the last recession and though we sold in this one we made enough that we were able to significantly improve our situation (along with what we had saved). Quote Link to comment Share on other sites More sharing options...
tammyw Posted March 18, 2011 Share Posted March 18, 2011 I'd be one to say SELL asap. We were *this* close to making an offer on a house (San Diego) but a good friend of mine, who is also a real estate investor strongly suggested NOT to do so yet. There are so many things happening right now in the world, and I do fear that prices are going to plummet again (of course no one really knows this, but I am not willing to risk 10-30% decrease in property on such an expensive item). I've been obsessively reading patrick.net which is essentially a compilation of various articles from all over the place, mostly highlighting why it might not be a good time to buy, BUT it really, really depends on area. Some areas have bottomed and some have not yet (San Diego has somehow been artificially protected from falling as much as it should really, and that is why WE are scared -- we could be wrong and regret it, but we also aren't tied to San Diego, and are looking at a possible move to another state). But definitely, SELL, and then maybe rent until you figure things out. If you can rent a house for cheaper than your monthly payments, you will be coming out ahead, and can use it to pay off debt. Quote Link to comment Share on other sites More sharing options...
DawnM Posted March 18, 2011 Share Posted March 18, 2011 I would sell if you can and get out. I think it is important to live in a place you feel safe. There is no way to predict the real estate market, I think none of us expected the huge rise in prices and then the sharp drop. We sold a home in SoCal in 2005 and bought here. The price of our house here went way up and then has come back down to about what we paid, but of course, once you add in realtor fees, etc....we would be losing $$. We struggle with knowing what to do ourselves. We are out of debt other than the house though. We have paid off all loans after getting very involved with Crown Financial in 2006. From Dec. of 2006 until now we have been very diligent with following a debt free living lifestyle.....but this house is more than we should have purchased and we wouldn't have bought it had we taken Crown first! Dawn Quote Link to comment Share on other sites More sharing options...
creekland Posted March 19, 2011 Share Posted March 19, 2011 Safety would be 100% first for me so I would sell. I would also be looking at what is out there and see if there are any rent to own types of places I liked or places you could rent where the owner wants to sell (in general) so you could buy it from them if you liked the new place. Around here, housing has started to go back up and our local real estate columnist has said interest rates will likely go up due to the economy as well. In that light, if I found somewhere I was sure I liked, I'd buy. I should add that our area of the US typically does not see as big of a recession as other areas. We were hit with this one - the first one we've been hit with out of all the others in my adult lifetime. I'm happy to see things coming back (albeit slowly). So, our housing might be rebounding quicker than other places. But no matter what, I wouldn't stay in an area where I was concerned for my life or property. Quote Link to comment Share on other sites More sharing options...
TravelingChris Posted March 19, 2011 Share Posted March 19, 2011 I would sell. Whether I would buy or not would depend on a few things- are you really, really sure your husband won't be transferred or want to move to another area? IS buying going to be cheaper for you then renting? If both of those are yes, I would sell and buy. Otherwise, I would sell and rent. Quote Link to comment Share on other sites More sharing options...
chicagoshannon Posted March 19, 2011 Share Posted March 19, 2011 I'd buy soon for sure. The interest rates are creeping back up and houses are starting to sell again. I"d get out and get a good deal on a house now while you can. Do some research on neighborhoods that you'd like and then go for it. Your safety is more important than anything right now. Quote Link to comment Share on other sites More sharing options...
.... Posted March 19, 2011 Share Posted March 19, 2011 We're also big Dave Ramsey fans too and I generally think his advice is good. In this case, can you do the following: 1. Sell your house 2. Rent somewhere nicer 3. Payoff debt with whatever profit you make on the house 4. Save up money for a down payment while you are renting :iagree: We're having a house built right now and we're supposed to move in early June. We've been renting here (in a really tiny, cheap house) for over a year to save up for the down payment. Anyway, even tho I'm excited about having a permanent place to live, it's scary to buy a house right now with the economy. If I didn't have 300 kids crammed in here, I would just keep renting until things get a little more stable. The gas prices are skyrocketing, the housing market is not getting any better and there's still a lot of people looking for jobs or underemployed. I have a house in Missouri that we couldn't sell (so we rent it out). I owe $180,000 and I looked on Zillow the other day...my neighbors foreclosed on their house and it's listed for $120,000. There's no way I'll be able to get rid of that thing. Anyhoo, those are my 2 cents. If you can sell your house and rent for a little while, you would be in a good situation. Doing this was probably one of the best money moves we've ever made. Quote Link to comment Share on other sites More sharing options...
Stacy in NJ Posted March 19, 2011 Share Posted March 19, 2011 I would get out of your current situation ASAP, but I wouldn't buy with your current debt level; I'd rent until most of those student loans were paid off. Quote Link to comment Share on other sites More sharing options...
katemary63 Posted March 19, 2011 Share Posted March 19, 2011 (edited) This is NOT a difficult decision. If you ask me, it's a no-brainer. No doubt, I'd leave the bad neighborhood. No doubt I'd buy another house. My DS is buying a house right now and he got 4.2 % for his morgage interest rate. Rates are going to go up. You will save a huge amount over the long haul by getting a low rate. Renting is stupid with rates this low IMHO. edited: Of course this assumes your credit is good and you can sell the other house or at lease rent it out and have a down payment for the new house. Also, I wonder if those encouraging renting realize that because of the low mortage rates, it is possible that you could have a mortgage payment lower then a rent payment. In that case, what is the incentive to rent, even if you carry debt? Edited March 19, 2011 by katemary63 Quote Link to comment Share on other sites More sharing options...
lea1 Posted March 19, 2011 Share Posted March 19, 2011 I would get out of your current situation ASAP, but I wouldn't buy with your current debt level; I'd rent until most of those student loans were paid off. :iagree: The economy is too unstable right now to safely have that much debt. Fuel prices are going to continue to go up, as well as food prices. I would work on paying off the loans before taking on another mortgage. Quote Link to comment Share on other sites More sharing options...
tammyw Posted March 19, 2011 Share Posted March 19, 2011 In an economy like this, unless you KNOW you will stay in a house for say 10 years, then it's not necessarily the best idea to buy when interest rates are low and things are so unstable - sure interest rates are low which means a lower monthly payment, but as interest rates rise, house prices will fall, leaving you underwater. If you can weather the storm for ten years, you should be okay, but we are not going to see the crazy property value increases that we did in the past, at least not for a long time. There are just too many things happening in our country to hold values down, IMO. For us, our rent is high, but to buy the type of house we want to stay in long-term, our mortgage (even with these rates) would be substantially higher, so until we are sure, we are better off renting. Quote Link to comment Share on other sites More sharing options...
FriedClams Posted March 19, 2011 Share Posted March 19, 2011 We're also big Dave Ramsey fans too and I generally think his advice is good. In this case, can you do the following: 1. Sell your house 2. Rent somewhere nicer 3. Payoff debt with whatever profit you make on the house 4. Save up money for a down payment while you are renting :iagree::iagree: Quote Link to comment Share on other sites More sharing options...
creekland Posted March 20, 2011 Share Posted March 20, 2011 Also, I wonder if those encouraging renting realize that because of the low mortage rates, it is possible that you could have a mortgage payment lower then a rent payment. In that case, what is the incentive to rent, even if you carry debt? Around here buying is cheaper (monthly) than renting. I'm amazed that so many are encouraging renting, but then I remembered that many people live in different areas, so it might not be the case where they are. It's good that you brought it up. Here it would be better to BUY and use the extra saved each month to pay off debt. ;) Quote Link to comment Share on other sites More sharing options...
tammyw Posted March 20, 2011 Share Posted March 20, 2011 Here are some good calculators to help you decide what makes sense financially: Should I buy or rent calculator: http://www.nytimes.com/interactive/business/buy-rent-calculator.html Sell the house or rent it out: http://www.forbes.com/fdc/rentorsell.shtml What should you pay for a house: http://patrick.net/housing/prices.html Quote Link to comment Share on other sites More sharing options...
mrs.m Posted March 20, 2011 Share Posted March 20, 2011 There are a number of things to consider when trying to decide to rent over buying. A house doesn't just cost the house payment. So I think both options should be carefully considered. But I think either way, you are better off moving on from that house. Quote Link to comment Share on other sites More sharing options...
blakereese Posted March 20, 2011 Share Posted March 20, 2011 And even if your mortgage payment would be less than rent payment, there are so many other costs involved in owning a home, as we all know. Insurance, taxes, general maintenance, and sometimes certain utilities are covered by a landlord when you rent....etc. And of course there is tying up a lot of money for the down payment. Not to mention the risk of being stuck with the house later on...it is still very unstable out there. I'm not saying that it is better to rent than buy in all cases, only that it isn't "stupid to rent" when rates are low. :glare: There are so many other incentives to rent. Quote Link to comment Share on other sites More sharing options...
KatieJ Posted March 20, 2011 Share Posted March 20, 2011 I was listening to part of a Suze Orman talk on PBS yesterday. She was talking about buying houses ( Or not)..but I got interupted and didn't hear the whole thing. I gathered she was not advocating that everyone get into buying a house at this point in time. She said to buy only if you get an unbelievably good deal, you can put 20 percent down and you have 8 monhts of emergency money saved up. If you can't meet all the criteria ( And there may have been more) then don't buy. Real Estate is not the investment it was, and don't worry about not owning your home. There is a book available to go with her current show on PBS. Quote Link to comment Share on other sites More sharing options...
creekland Posted March 20, 2011 Share Posted March 20, 2011 And even if your mortgage payment would be less than rent payment, there are so many other costs involved in owning a home, as we all know. Insurance, taxes, general maintenance, and sometimes certain utilities are covered by a landlord when you rent....etc. And of course there is tying up a lot of money for the down payment. Not to mention the risk of being stuck with the house later on...it is still very unstable out there. I'm not saying that it is better to rent than buy in all cases, only that it isn't "stupid to rent" when rates are low. :glare: There are so many other incentives to rent. :iagree: The prices I was comparing around here considered the payment, interest, insurance and taxes (PITI). Any maintenance would have been extra. For rental houses (vs apartments) all utilities are almost always paid by the tenant, so there's no difference there. BUT, know your area and the specific house. I'm sure it's not the same everywhere. Quote Link to comment Share on other sites More sharing options...
ChristusG Posted March 20, 2011 Share Posted March 20, 2011 Safety first. I'd be out of there ASAP. Quote Link to comment Share on other sites More sharing options...
caitlinsmom Posted March 20, 2011 Share Posted March 20, 2011 I would sell the house, rent and pay off debt, then reevaluate the situation in a few years. 100K is a lot of debt and I personally don't like being that in debt to the government (we have 40K). If you rent for a few years and pay off the debt you will be able to breath easier when you do purchase a new home. You will also have the option of going bigger or higher priced if that is what you wanted. Right now with lending as it is 100K is a huge liability and you might have to settle on something you may not want in a couple years. Rent and pay off the debt. Quote Link to comment Share on other sites More sharing options...
jenL Posted March 20, 2011 Share Posted March 20, 2011 I think safety would be my first priority in this situation. Hopefully you can find something that also fits in with your financial goals! However I would not sacrifice my children's safety in order to pay off debt faster. :iagree: We are DR fans here, and we are working our debt snowball as I type this; however, DR doesn't live in all of our neighborhoods. Sometimes the reality of life/safety of our surroundings is more important than being debt free. Quote Link to comment Share on other sites More sharing options...
Alicia64 Posted March 20, 2011 Share Posted March 20, 2011 I just want to put a vote in for moving to a nice apartment. That's what we did after being in our own home for ten years. We moved and thought we'd only be in our apt. for six months, but we've saved money and thoroughly enjoyed the pool, the no yard care, the "free" exterminator etc. etc. So, we're still here. There are definitely moments when I long for a house, but a friend just told me that her electric bill in Jan. was $500. So, right away, I scurried back over to I-love-the-apartment. I should add that we're in a nice apt, in a very nice part of town. Our neighbors are great. I wouldn't move to crummy, scary apartments. Alley Quote Link to comment Share on other sites More sharing options...
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