I’m upside down in my Northeast Florida home, but want to move up to
a bigger home, what can I do?
This post is actually inspired by a friend of mine whose situation I’m about to describe, minus anything that would give away their identity. She finds herself in the situation of wanting to sell her home, but in the current market, is upside down. They want a bigger house and is no longer happy with the location. They don’t want to let the house foreclose or do a short sale. They would like to keep their credit in good standing. Anyone else find themselves in a similar situation?
What I suggest below, some of you may or may not agree with and that’s okay! Tell me your opinion, it could very well help someone else out, by giving us another angle to look at.
This blog post is about coming up with solutions to your situation, not whining about how unfair it is. Yep, the economy has hit painful bumps in the road the past few years. Some people have paid their mortgage on time every month and hasn’t gotten them into the mess of using their home as an ATM, or running up debt. And YES! It does seem like you can’t catch a break or only the poor managers of money are the only ones getting bailed out. Feeling sorry or whining won’t get you out of the situation you’re in. Only a plan, then action of that plan will. Oh and my friend I mentioned in the first paragraph, this is not her. She is a fighter, not a whiner.
What should your plan be?
Well, I don’t care who you are or what your plan is, but everyone’s goal should be to be debt free, including your mortgage. That’s right, including your mortgage! How sweet would it be to have no monthly mortgage? You could sell your house at any time, during any market. You would not be a slave to your lender. How would that feel?
When will the market bounce back in Northeast Florida? Who cares right now! Ok, I know you do, but that’s something you can’t control. Paying extra on your mortgage is something you do have control in and that’s the focus. Yes, eventually you will see prices bounce back, it’s starting to happen right now as I type this, but don’t put all your eggs in that basket….again.
I hope I didn’t lose you when I said pay extra on your mortgage. I know that doesn’t sound very exciting or sexy, but hey the day you can sell your house and move up to the one you really want, that will be a very exciting day! Let’s start the planning…..
I was searching for a mortgage calculator where you can put in a dollar amount to pay extra every month, then a lump sum once a year and I found it. Yeah Pam Graham! Go check it out, I’ll wait for you to get back here. 🙂
Now, if you you’re back or you never left, cos you didn’t want to check it out right this second, I’ll give you an example. Let’s say Barbie and Ken bought a house in 2009 for $150,000 and let’s say their mortgage is $150,000 as well. I know that in 2009 no money down was a thing of the past, but maybe they did a USDA loan. Work with me. 🙂 So, let’s look at some numbers:
Term: Fixed 30 year
Starting Month/year: Jan 2009
Monthly Extra payment: $100
Annually paying one lump sum: $1000
Savings for Ken and Barbie: 51,280.36 Shaving off 9.83 years!!! Sweet!!!!
I know, some of you may not want to wait 20 years or even 10 years. Maybe 5 years is your max wait time. Just think, and I know this may be a stretch, what if Barbie and Ken could swing an extra $700 a month, plus the annual lump sum of 1k. They would have their mortgage paid off by Jan 2019. Of course, if their goal was to sell, then they may not have to wait that long if they start to see positive equity again.
So, should you do any upgrades while you’re trying to pay it down? Normal maintenance items most definitely. Putting in the 50k inground pool, complete with outdoor kitchen, not such a good idea. Unless of course you’ve changed your mind and want to stay there for a very long time. Go check out homes around you, what are the typical upgrades? If you’re in a typical first time home buyer house in Northeast Florida, then you probably don’t need to install granite countertops. You may want to install some laminate flooring, but don’t go crazy and spend a ton of money that could actually go to paying down your mortgage.
If your wanting to pay off debt, but not sure the best way to go about it, I would suggest checking out Dave Ramsey. He’s been there and done that, so it’s good advice coming from someone who is no longer broke!