‘The big step‘is a MarketWatch column that covers the pros and cons of real estate, from finding a new home to applying for a mortgage.
Do you have a question about buying or selling a home? Do you want to know where your next step should be? Email Jacob Passy at [email protected].
I lived in my house for 40 years. I live on 5.25 acres and went to town to divide the country into a subdivision and let it pass.
I like where I live, but the house is getting old and the kids are gone. I am a 58 year old nurse. I pay $ 800 a month in property tax plus my mortgage, which adds up to $ 2,500 a month.
More than two years ago, I was offered a pretty good sum to sell my house for $ 500,000. I had another house that I liked and wanted to buy, so I wanted to sell. But the sale fell through to my house, so I had to walk away from the house I wanted to buy.
Now there are no houses for sale and I haven’t found anything I like. So I’d have to rent until I find something. Should I do this Or just wait for more houses to come on the market and sell when I find something? I probably won’t get that much, but the houses won’t be that expensive to buy either. Doesn’t that make up for everything?
It would be nice to spend money, go on vacation and not have to work so much. But neither do I want to get stuck in a rent that pays as much as it did when I owned my house and be unhappy because I’m renting in a place I don’t want to live.
I like my house i live in! But property taxes are just too expensive and I’m about to retire and have to sell. I still owe money on my house and I won’t pay it back until I retire unless I move.
With best regards,
Dreams of downsizing
Dear dreamer,
Homeownership costs are rising rapidly across the country so you don’t feel burdened on your own.
A Recent study Real estate data company Attom Data Solutions found that home ownership is affordable for the average household in only 41% of counties nationwide. In other words, in the other 59% of the county’s counties, the average family would have to spend more than a third of their takeaway salary on housing costs, including mortgage payments and property taxes.
Many salespeople are in exactly the same boat as you. They’d sell right away – if they could find a house to buy. The inventory of homes for sale is at a record low, creating a vicious circle. Home sellers are reluctant to bring their properties to market as there is little guarantee that they will have an apartment once the sale is complete.
Renting may seem like a one-way savings ticket, but that’s far from safe. They don’t say where you live, but there’s a good chance the rent isn’t much cheaper. In fact, rents in suburbs and rural areas have risen sharply amid the pandemic as families have sought more housing outside of the big cities. A separate report Attom Data Solutions found that owning a three bedroom home (median home price) is cheaper than renting a three bedroom home in nearly two-thirds of the country.
Of course, renting has other disadvantages. You have no control over your future housing costs. While you may be able to afford the first year rent, nothing prevents the landlord from jacking it up if you renew. And when you own a home, you are building on a valuable financial asset.
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A recent study found that despite rising home prices, owning a home is still cheaper than renting in nearly two-thirds of the US.
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With renting, the money you spend doesn’t come back to you. Even if you have lower monthly costs, a lot depends on what you do with those savings. Ideally, you would invest it or save it for a rainy day and not spend it.
However, you are not helpless. Given the low mortgage rates – although they have risen in the past few weeks – I would suggest that you consider whether a refinance is right for you. But considering how long you’ve been home and still working on paying off a mortgage, I’m assuming you’ve gotten some refinancing lately.
They don’t say what you did after going to your local government to subdivide your land, but if it sits there I would consider selling it. However, since you have a mortgage, it isn’t necessarily a straightforward process.
If land is split, you’ll need to get written approval from the lender or servicer of the mortgage underlying the property, said Tom Trott, branch manager at Embrace Home Loans in Maryland.
“This requirement is included in most mortgages and in standard language on the Fannie Mae and Freddie Mac Trust Deeds,” Trott said. In order to sell part of the property, you will need permission from your lender. But if that’s hard to come by, you still have options.
“Assuming they couldn’t get timely approval, another option would be to sell and refinance the remaining balance at the same time,” said Trott.
If you want to sell, use the money wisely. Everyone wants to have a nice vacation and treat themselves to a night on the town, especially after a long, stressful pandemic. But the proceeds from the sale of your land will be a lifeline for you.
Save some of this money – not only so that high property taxes are not so burdensome – but also to pay the down payment for your next dream home.
