UPDATE: Dealing with debt...sell the house or tough it out?

[gardenmom5]

about the deck - dd had to replace hers last year.  as long as it had the same footprint- plans/permits with the city weren't required.

check the posts, beams, etc. to see what parts have to be replaced.    if you're going to be able to charge an additional $1200 PER MONTH - that could pay for a deck repair/replacement fairly quickly- though it would have to be done before you could rent it.

a small home improvement loan that will add to the value of the home, would be more likely to be approved - especially as the bank wants their money and it would be worth it to them if they ever went into foreclosure.  (this is how the bank thinks)

[Lecka]

We rented before we bought a house, and in a strong market it is hard when the landlord wants to raise the rent.  Then you have to pay to move everything and hope you can find something to move into.  It’s very stressful.

This is why we bought a house.  We bought a house when the landlord gave us 3 months notice that our rent would increase $250/month when the lease renewed.  

It is stressful and if there is not much available, you have to pay anything to move, adjust furniture, etc......

I would not want to rent in a strong housing market At All.

I think it would be different if you were looking at relocating to a cheaper location.  But when you have built up a job in this location I don’t think that makes sense at all.

I am curious too what kind of rentals you could get and what they would cost, comparable to your basement.  It might be more expensive for you to live in a rental than in your basement.  I don’t know, you would have to see what things are renting for.

But if housing prices are going up, rents are going to go up too.  At least anywhere I have ever rented!  I have heard of places with rent control, but never lived somewhere that had that.  

Another thing with the last places we rented.  The windows were so cheap, the cheapest, hardly even real windows, that we had quite high heating bills to live in a cold, drafty house.  Our hearing bills went down by hundreds of dollars when we bought.  We weren’t expecting that, it was a nice surprise!  (Edit — I estimate we saved about $400 over the winter, we saved a little over $100/month for 3-4 months.)

I think it could really be trading one set of problems for another, and 5-10 years down the road, maybe the renting set of problems is worse.  

I don’t actually know, but I think do look ahead to where you would be financially in 5-10 years and how you would do bouncing around between rentals or just accepting rent hikes whenever the housing prices go up.

Right now that benefits you!  It will be a detriment to you if you are renting and trying to save a down payment.

 

[HS Mom in NC]

I've lived in the market that went up quickly.  It was a bubble that burst and the house that was worth double what we paid about 5 or 6 years after we bought it was underwater for quite a few years shortly after the peak.  So many people just walked away from their houses because they couldn't sell them for anywhere near what they owed and they couldn't afford to keep them because of job losses and under employment. So I would be very careful to keep in mind that it's possible your house is increasing in value and will continue to do so, or it's possible it's a volatile market that could drop sharply at some point in the near or not so distant future.  What will you do in each of those situations?

It seems to me that if you sell the house now and pay things off you'll be stable but in a housing market you can't afford to get back into, assuming it doesn't crash.  It seems you can't afford the housing market you're in now because of your irregular income.  That looks to me like you need a lower COL area if you continue to have your own businesses, or you need a higher, more stable income if you plan on staying.

When my husband started his business 5 years ago it was feast or famine at first.  We budgeted according to famine.  He's thriving now but those first several years were very financially challenging. It was good for us because it gave us better perspective on life.  I'm very thankful for those famine years. We did sell when the market starting rising again, we paid everything off, we rented for 3 years, and now we're moving to a lower COL area and downsizing because our older two are launched. The housing market where we're moving to has a history of being much more stable and it's growing with new people moving into the area. The market here might be bubbling again.  The same model house in the neighborhood we're renting is now is selling for $500,000+.  It was selling for $400,000 when we moved in 3 years ago.

[caedmyn]

This might seem like an odd suggestion, but is there any chance that you could find a rental in your area similar to your basement apartment but a bit more suited to your needs and live there for a year or two while renting out both parts of your house?  If you could it seems like that would bring in a good bit of extra income with less living-space stress than moving into your own rental.  Maybe even deal with a commute for a year to do this?

[SeaConquest]

My out-of-the-box idea is that you rent both the house and the basement out, and move into an inexpensive, used RV while you pay off debt. We have been living in our RV for the past 2 years while waiting out a hot market and saving for an investment property. Even buying a brand new, luxury fifth wheel, and living at a campground on the beach, we are still paying less than renting. 

[kitten18]

8 minutes ago, SeaConquest said:

My out-of-the-box idea is that you rent both the house and the basement out, and move into an inexpensive, used RV while you pay off debt. We have been living in our RV for the past 2 years while waiting out a hot market and saving for an investment property. Even buying a brand new, luxury fifth wheel, and living at a campground on the beach, we are still paying less than renting. 

If they rent the whole home and live somewhere else will they lose the mortgage interest deduction?

And if they ended up needing to sell after not living in the house, would they have to pay capital gains?

Just a couple things that popped into my head. 

[plansrme]

I also will throw out, in favor of keeping the house, that having a paid-for house can be quite important when it comes to retirement. You wiped out your retirement, and there is no real way to make that up.  If you can retire in a paid-for home (this one or one you buy with its proceeds when you retire), though, you can live on a lot less cash.  

[gardenmom5]

1 hour ago, Homeschool Mom in AZ said:

I've lived in the market that went up quickly.  It was a bubble that burst and the house that was worth double what we paid about 5 or 6 years after we bought it was underwater for quite a few years shortly after the peak. 

 

depends why the market is going up. 

[Catwoman]

Larla, if this is too personal and you’d prefer not to answer, I certainly understand, but how much total debt is involved here? I know you mentioned a credit card with a balance of $18,000, but is there a lot more than that?

Without knowing how much debt you have, it’s difficult to make suggestions. (If you already told us in another post and I missed it, I’m sorry to sound so clueless!)

 

[Hannah]

Another vote for moving into the basement and letting the top floors.  If the deck on the 2nd floor is completely unsafe, then I'd consider removing it, but locking the access door.  The house is available without a deck.

A year is not a long time to get your head above water again.

[Lori D.]

So very sorry about the job loss, MIL insanity, and financial stress, but glad you are on the road to recovery.

Before deciding about selling/not selling your house, can you try contacting charitable agencies that help with debt, or who help you reorganize credit card debt to something less onerous: there are a ton of links to helps at this website: Need Help Paying Bills: Get Help with Credit Card Bills. Also possibly this non-profit debt counseling service: InCharge Debt Solutions (although, do be careful, as many of these organizations apparently are just organizations that help you file for bankruptcy, which is NOT what you need at this time). And also check out Catholic Charities -- some dioceses have debt help.

Also consider doing a google search for 2-1-1 assistance programs in your state -- for example: Colorado 2-1-1 -- as you might be able to get aid in other areas, which reduces your expenses, and makes debt pay-back easier. Things like a food pantry, clothing pantry, and school supply drives, as well as things like Freecycle that you can make use of to help reduce living expenses so that the debt payback is not so stretched out.

As far as saving -- if you can put a bit aside each month for in case a car/house/health emergency comes up that would be super idea. And start saving towards retirement, as best you can/if you can.

As far as college -- quite honestly, college costs SO much now, that it's doubtful you will be able to save enough to make much of a difference. Far better to use what you might have saved toward college to pay down debt faster and get totally out from under debt by the time your oldest child enters college to have those funds that were used for paying debt now free to pay towards college. To give you perspective: right now, typical state universities run $12,000-16,000/year in tuition + expenses, and even if a student qualifies for a full pell grant (free federal aid) + a partial tuition scholarship, you're still looking at $4-9,000/year -- and that's with attending in-state AND living at home. Selling your home will NOT help as far as college, and in fact, loses you the one asset that is NOT counted against you when you apply for federal aid on the FAFSA form -- your home.

Once you know what you're doing about your house and get that settled, THEN you can start looking into alternatives for college -- things like: 
- free or reduced cost dual enrollment for high school students at your local community college, for knocking out college credits cheaper in advance, and reducing overall time (and cost) at a university for a 4-year degree

- if your student is good at self-studying and is a good test-taker, knock out a lot of college credits in advance with CLEP tests

- earn an AAS degree at the community college while in high school that could be used for a higher-paying job, and student works/saves for several years after high school and then attends college for a 4-year degree

- work for a company that contributes towards college tuition

- attend a work-for-tuition college

When you have time for research, these two past threads have a lot of alternative ideas for paying for college: "s/o: Cautionary Tale: High Cost of College -- a brainstorming $$ ideas thread!" and "How are YOU managing to pay for college?" BEST of luck! Warmly, Lori D.

[Kim in Appalachia]

I would stay in the house.  You have a renter, and it's helping. If everything else fails, you can always sell later.  But for now, I would work on another way to slowly get that debt down.  

If you sell, you have nowhere to live and will have to rent.  It will not work out for long.  And what everyone is saying about FAFSA is true.  The house won't count much, but cash in the bank will.  It will really bite you in the end if you do that.

And ((((hugs)))) I'm glad you're getting to the other side of a long mess.  I hope things stay on the upswing for a while.

 

[cjzimmer1]

I'e seen several mention locking the deck door and make that space unavailable to the renter.  But around here that would be illegal. The deck door is part of the emergency escape features (along with size of windows etc), and blocking an exit would be considered a fire hazard.  So I just wanted to mention that as something to check before so you know exactly what you are getting.

 

We've been in those tough places before, not only did we wipe out our savings account, we had to wipe out everything out of the kids savings account (we didn't have any retirement accounts, but the kids had money that relatives had given them over the years for the college savings account) as well.  We looked into selling the house but we would have needed to get at least a 3 bedroom apt due to laws about how many can stay in a bedroom.  Everything we looked at was $400-600 more than our mortgage was.  It would have put us into debt faster by moving than just staying where we were.  Even if selling the house might provide a short term gain (and I'm not sure how much that would be by the time you go through the time effort to list, sell it move, rent, the loss of tax deductions plus the capital gains taxes I would assume you would owe on the profit of the house), it doesn't seem light the best long term plan.  

[Junie]

You wouldn't need to fix the deck to rent.  I've seen plenty of homes with doors that lead nowhere.  They put a type of fence up to keep people from using the door.

https://www.google.com/search?q=patio+door+barrier+railings&tbm=isch&tbo=u&source=univ&sa=X&ved=0ahUKEwi5ro2Wh73aAhXIVN8KHZVWBV8QsAQIiwE&biw=1920&bih=984

[ThisIsTheDay]

7 hours ago, LarlaB said:

We have seriously considered living in the basement apartment.  It would be a huge move and lot of work which is exhausting to consider on top of all of our current responsibilities, but again- so is moving.  We'd have to retrofit some basement aspects (unfinished space to become office and bedroom).  I'm excited by it to be honest. Just intimidated by the work. ANyway- the top two floors would rent for $1200 MORE than current basement rental.  Again, the rental market is very strong here. I think we could do it for a year.  

After reading through everything, I think this is an excellent option that would get you out of debt the most quickly AND allow you to keep your house. A pain and a sacrifice in the short term, but worth it all in the long run.

 

 

4 hours ago, gardenmom5 said:

oh-  and because the effluent had hit the fan . . . but we were still in our house .... my girls went to a far better college than we ever could have afforded - on full scholarships.(there was one year the school audited us becasue they didn't believe things could have gone from that bad to that much worse.   dh's background is finance and he has excellent records. they never bothered us again.    so - my girls went from the lowest tier income wise for students - to >95th percentile for income for their age of female graduates.)

so - don't discount the paying for college advantage.

sure- they could have gone to our good local state university - but they received a much better education where they went.

 

and our market is now insane and according to redfins' #'s - one of the top hottest in the country.  we would have been out of it if we hadn't managed to keep the house. 

Your college choice will definitely impact your costs. My son received a full tuition scholarship to a good state school. Not the best state school, but a school that would have given him an excellent education. (For unrelated reasons, he ended up choosing to stay at home and attending our CC and graduating this spring before transferring to a different school.)

 

3 hours ago, kitten18 said:

If they rent the whole home and live somewhere else will they lose the mortgage interest deduction?

And if they ended up needing to sell after not living in the house, would they have to pay capital gains?

Just a couple things that popped into my head. 

Good thoughts, particularly with the large gains they'd have.

 

[HS Mom in NC]

3 hours ago, gardenmom5 said:

 

depends why the market is going up. 

Yes, and we don't know about the market she's in, so all the possibilities need to be considered, which is why I asked her what she would do if it went each way.

[Ausmumof3]

Given the house has increased in value do you have the option to refinance or redraw and pay off the credit card with the extra money.  If you continue to pay extra off the home loan as though it was a credit card but with the lower interest rate of a home loan you should make more progress.

im sorry about the family situation. Have friends going through something similar and it's awful. 

[Annie G]

Converting the house to a rental still maintains the ability to deduct mortgage interest and property taxes from federal tax forms - it just goes in a different place. They can deduct expenses but if they do improvements they probably have to deduct that via depreciation.  (Painting, repairs, etc. are not considered improvements)

‘When we moved and converted our house to a rental our homeowner’s insurance nearly doubled and that surprised us!  Also our mortgage lender COULD have called our loan due when we were no longer living there. We informed them of our plan and all they asked was to be sent a copy of the lease every year. I don’t know if mortgage companies still have that right to call the loan due but it’s something to check out if the OP ever rents out the whole thing. But for sure I’d contact the insurance company to clarify they have coverage for tenant damage. 

[Scarlett]

55 minutes ago, Annie G said:

Converting the house to a rental still maintains the ability to deduct mortgage interest and property taxes from federal tax forms - it just goes in a different place. They can deduct expenses but if they do improvements they probably have to deduct that via depreciation.  (Painting, repairs, etc. are not considered improvements)

‘When we moved and converted our house to a rental our homeowner’s insurance nearly doubled and that surprised us!  Also our mortgage lender COULD have called our loan due when we were no longer living there. We informed them of our plan and all they asked was to be sent a copy of the lease every year. I don’t know if mortgage companies still have that right to call the loan due but it’s something to check out if the OP ever rents out the whole thing. But for sure I’d contact the insurance company to clarify they have coverage for tenant damage. 

Interesting about the rental insurance..... I called State Farm about the cottage and was shocked to find it would only be about $540 a year!  Granted the replacement value SF came up with is only 106K, but still a premium of 548 on that amount seems low to me.  High deductible though.  

[LarlaB]

OP again.  Intense weekend here.  Chilling out ON MY DECK today LOL catching some sun and finding peace. For liability reasons the deck would need to be majorly repaired/fixed to rent.  DH is in insurance and we are very aware of how that stuff goes. 

 

Yes we have more than 18k in CC debt.  

If there was any means to refinance or get a line of credit of equity we would have already done so. 

Yes our income will be increasing. This is a crucial aspect i didn’t mention- I realize now.  This coming year projections will be about a 30% increase from last year which is emotional to even type out.  We added two new part time jobs in the last 4 weeks for an additional 2k a month, plus expanded the one business by 20%.  That’s huge.  We have invested a lot of cash into our main rental business to set up passive income to support DHs main job. 

DHs “main job” for the 20 years is an insurance firm.  He’s a bit over 1 year in, and it takes 3-5 years for it to mature to a sustainable income- meaning all of our income now is from other sources.  We are right on track and he is doing great. We get nothing but a few hundred (maybe) a month from insurance business.  He took a part time job with insurance friends to continue to learn the business.  That will change- especially now as he rolls into his second year. So it’s set up that his main job income is icing on the cake and extra money.  It’s a weird way to do it and has obviously cost us in the way of debt.

We never sat down and planned it this way, it evolved.  We are huge planners, educated and have run things in the past.  All of this just overtook and stunned us.  No excuses just realization. But it is really a great story of God leading the blind fools that we are....We’ve been flying blind until about a year ago with NO idea what the future held job wise.  Slowly and by Gods grace it has come together. 

So the more I consider and discuss the more I realize this is really a short term issue.  IF we can consolidate debt and see a doable plan long term pay off plan without it continuing to increase due to interest charges, we can do this.  Of course it’ll be hard. I think we are just realllly worn out form the last 4 years and scared we don’t have much left fight and selling seems easier and quick resolution. But....creates a host of other issues. 

Neither of us want to sell.  Or rent.   I don’t want to sell and rent- at all. It’s not a good long term plan. But we want to collect ourselves.  And not be stubborn and foolish by overly clinging to a house.

Moving into the basement is being seriously discussed again.  I’m more open to it than DH- prob because he would have to do SO much work. 

I’m in Denver CO and housing market and population have majorly been on the upswing for 7+ years.  Steady 10% increase every year. So yes that’s intense to consider dropping out to rent for even 1.5 years.  

[KungFuPanda]

I think closing costs, fixing up, first and last month’s rent, and moving costs . . . not to mention work hours lost end up costing more than we think. Also, the expected family contribution for college is a big, sobering number. You want to plot your financial maneuvers to accommodate college expenses. 

Have you plotted out the exact numbers and time it would take to pay off your debt if you start with the highest interest debt aggressively and the minimum on the rest?  Will it take 4 years? 8 years?  How many years until your House is paid off?  I think if, in ten years, I could have my home paid off, by debt paid off, and a kid through college, I’d hunker down and not move. I might sell after that, but right now I can’t imagine finding a rental for 40% of your current mortgage. 

[gardenmom5]

1 hour ago, ThisIsTheDay said:

Your college choice will definitely impact your costs. My son received a full tuition scholarship to a good state school. Not the best state school, but a school that would have given him an excellent education. (For unrelated reasons, he ended up choosing to stay at home and attending our CC and graduating this spring before transferring to a different school.)

 

 

ironically - it was cheaper for them to go to the more costly out of state school because of the aid due to our circumstances.

1dd and I were talking yesterday about how much more opportunities for her education, growth, opportunities she obtained because of where she actually went.

[KungFuPanda]

18k is not the end of the world. ONE year of college in a state school is more than that. If you could figure out a way to scrimp, pinch, work, hustle, and come up with $1500 a month you’ll be clear in about year. What does that number look like if you give yourself 3-5 years to do this?

[LarlaB]

22 minutes ago, KungFuPanda said:

18k is not the end of the world. ONE year of college in a state school is more than that. If you could figure out a way to scrimp, pinch, work, hustle, and come up with $1500 a month you’ll be clear in about year. What does that number look like if you give yourself 3-5 years to do this?

I agree.  But....our debt is more than 18k 

[Meriwether]

2 minutes ago, KungFuPanda said:

I can’t imagine finding a rental for 40% of your current mortgage. 

This is what I can't get past.

 

 

When I was growing up, my parents bought a farm. Dad (the whole family helping) built our house. While he was building it, we lived in dumpy rentals. Then we moved into our unfinished basement so my parents wouldn't have to resign the lease. We had one functional spigot, which we used for drinking, cooking, washing up, and to fill buckets to carry up to the unfinished bathroom for the toilet. Mom cooked with the top of the wood stove, a crockpot, and an electric skillet. It sounds rough, but it was...pleasant. We also spent the summers in the hayfield because that was sometimes our biggest cash crop. That was less pleasant. LOL But even that was fulfilling. One year after Dad filed taxes, he announced that we had made a profit of 7 dollars on the farm. Like you guys, my parents hustled. My dad drove school bus and did construction work. My mom cleaned houses and helped dad. Dad would commit our whole family to odd jobs like painting a house. We really had no money. My childhood was fabulbous.

I know the stress can be difficult. It took 20 years for my parents to make decent money from the farm. 20 years of blood, sweat, and tears - quite literally. In retrospect, it was fine. At the time, I'm sure my parents worried.

I don't really have a point to this. Just, maybe, encouragment that living tight while building a business can turn out well.

[Katy]

Check with your daughter's high school guidance counselor about state university scholarships.  Some states have an automatic formula - this GPA combined with this test score for an in-state student nets this much scholarship, for example. In other states that's not as likely a factor and you might want to apply to smaller private colleges, who will grant full merit scholarships to honors students in order to get them to boost the college's academic ranking. As long as the school is academically well regarded in many cases it makes more sense to graduate from the state university.  When you know what the deal is in your area you can better direct DD.  And because not every guidance counselor is good, check the major state universities in your area too.

I would definitely call at least one of the non-profit debt negotiation places and see what the terms are.

I would move into the basement when your current tenant's lease is up.

I would look for different jobs.

I would stop charging up ANY more debt. Oatmeal for breakfast, rice and beans and frozen veggies for lunch, similarly cheap options for dinner.  If you have extra money that month buy next month's groceries and put money in a savings account for an emergency fund.

[LarlaB]

Yes OP here...of course we can't find a rental for 40% of what we're currently paying. That's not the point and is a simplistic reduction of the situation to say "why would you pay more in housing?".  That's one aspect.  

In selling, yes we would lose the rental income and therefore have to "pay more" per month.  BUT- looking at it differently, we would also completely eliminate debt repayment monies allocated in our current budget by paying it off completely.  From a pure cash flow stand point, we'd have more money left per month if we're not paying debt (and not making progress) even if not having rental income.  We are paying more in debt repayment than we earn in rental income.  

There is equity, long term and moreso our possible inability to buy back into the market quickly. Those are the factors preventing us from selling.  Not 'paying more per month'. 

 

[KungFuPanda]

If you were 100k in debt, I’d say go the drastic route. 18k just doesn’t seem worth uprooting your life. You could easily spend half of that just moving. If that debt was one student loan, would you sell to pay it off? If you could scrape together the funds to fix the deck, you could put that money towards the debt instead and be halfway there. 

Unless you want to move, downsize, and be done with the house anyway, I’m not sure it makes sense to let go of your biggest investment right now. In a lot of ways, your home is a forced savings plan. It might be better to save that option for when you’re too old to work and hustle like you’re doing now. 

[Catwoman]

47 minutes ago, LarlaB said:

I agree.  But....our debt is more than 18k 

Without knowing how much debt you’re dealing with, we can’t really advise you. 

If your debt is $20,000, we would probably give you entirely different suggestions than if it’s $200,000... or $2,000,000.

[KungFuPanda]

52 minutes ago, LarlaB said:

I agree.  But....our debt is more than 18k 

Ack. I’m sorry. I thought that was the number you were panicking over and it didn’t make sense to me.  Which begs the question WHY did I make up THIS number for you? I have no idea where it came from. 

[Carol in Cal.]

So, I'm hesitant to say much more, because we don't know all the details (not asking, either.  It's pretty personal stuff.)

But, Chase does have some credit cards that have 0% interest for 15 months and no annual fee.  If you're not incurring any new charges, that might be a way to get some traction in dropping total debt.  If you ARE incurring new charges, though, it just helps dig further in, which is very detrimental, leaving one worse off that before.  This is also true of those other types of interest rate reduction plans.  It's very important in any debt consolidation to really, really know which category you will be in for sure, without question.  

[Catwoman]

13 minutes ago, KungFuPanda said:

Ack. I’m sorry. I thought that was the number you were panicking over and it didn’t make sense to me.  Which begs the question WHY did I make up THIS number for you? I have no idea where it came from. 

Don't worry — you’re not losing your mind!  Larla mentioned owing $18k on a credit card in her OP.  :)

[LarlaB]

6 minutes ago, Catwoman said:

Don't worry — you’re not losing your mind!  Larla mentioned owing $18k on a credit card in her OP.  :)

Indeed! Earlier, I gave that as an example of paying an extra $500 on an $18K balance with a high interest rate being more like treading water.....  You're not losing your mind KungFu!  LOL  

DH & I have made a deal to not talk actual numbers with anyone other than our accountant/tax attorney.  Simple as that. In our high success moments we didn't share our investment returns or bonuses or income.  So in these lower moments I have chosen to preserve the same dignity. 

For this discussion, its enough to make us consider drastic measures to bring an end to this emotionally and physically exhausting 4 years. 

We are not going further into debt.  Again, its the interest rate hike that is starting to feel like its crushing us insofar as making progress in paying it off. 

[SKL]

Honestly?  $18K credit card debt isn't that much if it is decreasing.  Your OP is a little confusing, as it says in one place the interest is growing faster than you can pay it, and in another place you mention paying $500/month above the current expenses.  If you are paying it down now vs. watching it increase, I would keep doing that, and keep looking for ways to spend less and earn more.

[ksr5377]

Have you called your credit card company to try to make a different payment plan or a settlement?  Instead of using a debt management company you can deal with them yourself.  If they say they can't work with you, ask for their supervisor.  

[rebbyribs]

If you are able to chip away at the debt for a while, your options for paying the rest of it down may get better as your credit scores improve and your business incomes begin to look more reliable to lenders.  

It sounds like your house is one of the best things you have going for you in your current financial situation, so I wouldn't want to sell it now.  Moving into the basement apartment when your kids head off to college and renting out the main floor of the house could be a possibility for helping out with their tuition costs.

[Bootsie]

If you have $18,000 in credit card debt on a card with an 18% APR and pay $500 per month you will have the card paid of in 52 months.  It sounds as if renting might increase your expenses by more than $500 per month.   Moving has expenses associated with it, also.  I would tend to stay in the house since it sounds as if it is the most economical housing arrangement for you at the time and then put as much as possible toward paying off debt each month.

[Scarlett]

6 hours ago, jdahlquist said:

If you have $18,000 in credit card debt on a card with an 18% APR and pay $500 per month you will have the card paid of in 52 months.  It sounds as if renting might increase your expenses by more than $500 per month.   Moving has expenses associated with it, also.  I would tend to stay in the house since it sounds as if it is the most economical housing arrangement for you at the time and then put as much as possible toward paying off debt each month.

They have more than 18k in debt.

OP I do lean heavily toward keep the house.  Since you aren't adding more debt, and your income is increasing and you have the option of moving into the basement apartment.....and since your home is in a great area and easy to find renters....all of those things lean me toward staying put and hanging in there for the long haul.

[KungFuPanda]

Hey, is that back deck the only back door? If it’s not, you can put a railing over the slider and call it done. It’s good enough for a renter. 

[G5052]

I'd recommend looking into the real estate situation in your area.

Our family home goes on the market later this month. It is a good market, and the house is in excellent shape other then the kitchen. We are a light remodel of the kitchen and expect full-price offers. The realtors we interviewed said we should have no problems with getting offers in May.

The rental situation here is another matter. A realtor friend told me to start looking in January because by mid-March the better ones are snapped up within hours. Thankfully we found a place in February and moved in March. If we had to move today, it would mean leaving the area. Rents are also horrible. Rents in our immediate area are now 50% or more what they were earlier.

Tough decisions!

[LarlaB]

So upon much discussion AND pitching it to the kids we are going to move into the basement apartment this summer. For 2 years.

Dh and I talked about again and really looked at the work upstairs (deck, painting and light fixtures) that would NEED to be taken care of and also looking at spacing options for basement. We drew out a rough sketch for the basement (we’d have to somewhat finish out a storage area to make it a third bedroom).  Kids saw the sketch and asked what it was about and I told them....and was shocked to see their excitement . 

I mean real excitement.  As in start “designing my new room” (what furniture to take etc) and what stuff would we take with us and how would we organize things? What color would we paint? And “I’ve aways wanted to live in a smaller house” LOL 

 I knew they’d be decent because they are decent kids...but never thought they’d be happy and excited for this and it blows me away! We said we’d commit for 2 years since it’s a BIG move to pull off.   And it is.  And looking at comps, with amenities and WiFi included I think we can charge $1700 MORE that what we are earning now.  That’s incredible. 

Long term storage space is likely available for free with SIL because we are going from 2800sf to 1100sf (plus 200 storage)and I don’t want to waste money just giving stuff away when we plan to move back. But we will downsize for sure because that’s what you do when you move. 

Thanks for your input and perspectives that helped me take another look at a previously dismissed idea.  

[Liz CA]

Sounds like a good plan! You are leaving all options on the table and yet it will ease the financial stress. Win win strategy. How is the foot?

[LarlaB]

30 minutes ago, Liz CA said:

Sounds like a good plan! You are leaving all options on the table and yet it will ease the financial stress. Win win strategy. How is the foot?

Yes the actual hard work of moving (and how much it will take from our work) and losing a dishwasher is 90% of the battle- so says DH.   LOL  

 

 Foot is about the same.  I’m not convinced it’s NOT a fracture.  Still unable to bear weight except on heel so using crutches.  Swelling is down due to wearing a compression bandage.

Whining and TMI but have had to cancel $800 worth of work so far due to the injury (plus whatever UrgentCare costs).  Here’s hoping I can work on Monday. 

[alisoncooks]

Such a hopeful update!  How wonderful that you have this option. I bet you feel like a load has lifted, already!

[LarlaB]

33 minutes ago, Arctic Mama said:

Oh Larla, that’s a fantastic update!  Not just on the financial side of things but that the kids are really genuinely in favor of it for a time.  

It really is!  We are Christians and I believe I see the grace of God all over this and am so thankful. It makes it so much easier to be genuinely excited and willing and then see the kids respond with such enthusiasm.

Wait till they have to pack!  Is been 7 years since we moved and they don’t remember ?

[Tsuga]

On 4/14/2018 at 5:54 PM, Carol in Cal. said:

Something to consider is, if you have a lot of money in the bank or investments rather than in the equity in your house, the FAFSA is going to show you as able to contribute a chunk of it to your kids' college expenses.  Whereas if it's in the house, they ignore it.  Are you sure you can buy a house before you have to starting showing your finances to the FAFSA people?

In your shoes I am not sure what I would do, but I'm leaning toward keeping the house because of that and also because it's going up in value, and also because you are getting such a good income (and one that in a rising market might also go up) from your tenant.

I'd look pretty hard for a zero interest rate credit card deal to see if you can stop the interest accruing spiral.

+1000

I know where to find a great credit card that does balance transfers.

OP: The 60% of mortgage paid means that you're basically paying something like 40% of market value for your home. Could you possibly find something that low anywhere else?

When your daughter goes to college, you can rent her room, too, possibly bringing mortgage to zero.

We started over mid-30s, we have a kid going to college now, uni in two years. Then three more. I feel your pain. You are not alone. Sometimes I feel like there is this whole lost generation who did everything right and nobody understands that it doesn't work anymore, and how depressing and terrifying it is not to know "what is right" to make it work. When you buy your crappy $200 of clearance groceries on a credit card for two years and then antibiotics and a vaccination for your kid because your job doesn't even pay rent much less medical insurance, and after five years you finally look at the balance and it takes your breath away and all the advice articles are about "not buying a new pair of shoes or going out to fancy restaurants" and you just want to scream. Big hugs to you. I hope you can continue to raise your income. If you have a degree, substitute teaching can be very lucrative in bigger cities, at least, more stable than side jobs.

[LVG]

We have been on the road to getting debt free since 2016 using the Dave Ramsey program.  We’ve made some radical decisions to make it happen, but it’s working for us.  Our craziest decision thus far has been to live in a camper!  We are a family of 5...kids are 6 and under.  It’s actually amazing how many people do this...mostly to travel with their husbands for work, but some to get debt free too. If you don’t love your house, and don’t plan to live there forever, and it’s draining your finances...I would say sell it, and get creative!  

[Lady Marmalade]

What an exciting update!

And long term beyond that, after your 2 years are up if you decide to move back into the bigger part of the house, you'll have a much improved basement rental that you'll be able to ask a higher rent on.  

[LVG]

Oh sorry...totally missed the update that you decided to move into the basement!  Great plan!  The house we rented was 2300 sq ft.  Our camper is roughly 400.  So it’s totally doable for you to make the basement work!  I hope everything works out smoothly and you’re able to make some major headway on your debt!!  

[Chris in VA]

Larla that is an exciting and lovely update. I think it's amazing when our kids get enthused about things that we see as tough for them! IIWY, I might take a moment and thank them--and let them know the impact of their positive attitude and gracious willingness to change their lives, and how they are small people but so important and helping in such a big way. 

And as a Christian, thanks for giving the glory to God.