The Economy: Maintain a mortgage or pay it off?

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  #16  
Old 01-17-2008, 03:59 PM
Boomer Boomer is offline
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Default Re: The Economy: Maintain a mortgage or pay it off?

Villages07,

That is great advice.

Again, it's all about the ROI -- and the perception of ROI is different for each situation.

Even though the rent for a short term would likely be higher, the return on the investment for those extra dollars a month could be huge.

But you are so right. You don't want to not be able to make a move when the move is what needs to be made. Thanks for filling in the blanks.
  #17  
Old 01-17-2008, 04:07 PM
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Default Re: The Economy: Maintain a mortgage or pay it off?

I know the original question here had to do with mortgages and we have covered it from lots of directions, but I am looking forward to reading more opinions.

I have to say though that my own bottom line for a mortgage at this age boils down to one pretty simple thing: Never borrow money that you don't have.
  #18  
Old 01-17-2008, 06:42 PM
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Default Re: The Economy: Maintain a mortgage or pay it off?

Sold our home up north and bought in TV with equity from the sale. No mortgage for the first time in our married life. Wow what a great feeling. We only have the usual taxes & insurance payments. Even payed the bond upon closing. No mortgage and peace of mind is the way to go.

Staying "young in TV!!!
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  #19  
Old 01-17-2008, 07:22 PM
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Default Re: The Economy: Maintain a mortgage or pay it off?

Regarding the question about renting before buying, I believe home ownership should be viewed as a long term investment, and the oddities of the current market won't have a real effect on the outcome.
What I am trying to say is this: If you rent in TV for a few months as a way to make a decision on what neighborhood you like, what house you want, etc, you may be doing the right thing. Although agonizing over this decision may be a waste - it's almost a place where you can't go wrong - and minimal study worked for me. We visited TV with the intention to buy if we liked it, and assumed we could sell if we decided later we didn't. We did buy, and I doubt we'd ever sell it as it's a great home in a great neighborhood. I can rattle off 10 things I like about my neighborhood as I'll bet almost anyone else can about their's.
So if you rent for say 1 or 2 months as a way to assure yourself it's the right place for you, it could be a good decision.

However, if your intention is to rent for a long time waiting for the bottom of the slump to come, I think it's a mistake. A years worth of rental at $1500/month is $18,000, $2000 per mo is $24K. You'd need the market to drop $18K to $24K more to make that decision a good financial decision. Depending on the house you ultimately wind up buying, it would be a minimal 10% additional drop on a Patio Villa priced at $180K today, or 5% on a Designer with a view ($360K). It's a gamble that may or may not pay off.
Buying that same house now allows you to avoid throwing that $18K to $24K away, allowing you on paper at least to say you saved that money.

In time, your house will be worth more than it is today. No question about it. Prices will rise. Nothing about the current economy will change that overall fact. Certainly, there have been dips in both home prices and the overall economy before. But over some time it will rise.

Two real estate adages always worked for me:
1) There are 3 important factors in real estate decisions: location, location, location.
2) The time to buy is now.

So do your part to improve the economy now - buy that house in TV!
  #20  
Old 01-17-2008, 07:53 PM
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Default Re: The Economy: Maintain a mortgage or pay it off?

Thanks Steve,

One thing that you didn't take into consideration though, is the money from the sale of our current home. I have had offers of less then $1500 a month for a really nice 3 bedroom well maintained home in TV. But I'll use your figure of $1500 a month or $18,000 for the year. Lets take a figure of $300,000 from the sale of our existing home, @ 5% in a year that would be $15,000 without compounding which would add some more to the final figure. Hypothetically, I would be renting for an entire year for approx $2,000. If I decided to rent for another year then based on compounding I would be living rent free and if I continued to rent I would not only live rent free but, I would have a surplus. I also would not have to worry about the turnover from the developer or assessments or increases in amenity fees. All this is based on only 5%. Traditionally my portfolios have done much better then that. I can not imagine that we would want to rent for that long but, this is a very plausible scenario. ( if one really wants a better nights sleep )
  #21  
Old 01-17-2008, 08:11 PM
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Default Re: The Economy: Maintain a mortgage or pay it off?

Good Point Beartrack.
Right, I didn't take that into consideration! My reasoning - I will be using the proceeds from my house sale to pay off TV mortgage! My analysis was flawed by my already made decision! :redface:
My apologies. Yes, in that scenario, you could live rent free. Another thought though, your $300K would be tied up and unusable for anything else, right? You'd need to not touch it for it to continue producing that rental expense. You could buy a reasonable house in TV for quite a bit less than $300K today, say $225 for a nice CY Villa? (Do they rent for $1500?). Buying in that scenario would give you no mortgage and $75K to squander, and theoretically, your house would appreciate making your investment most probably worth more at the end. Your $300K investment to make rent wouldn't really grow (using these very simple numbers).
But is certainly is a personal decision that needs to have your individual situation factored in, along with your desire to sleep well!
  #22  
Old 01-17-2008, 08:43 PM
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Default Re: The Economy: Maintain a mortgage or pay it off?

Steve,

I really enjoy this back and forth with you. Good stuff ! Probably because we are both from New York and everyone knows how calm, patient, low key and laid back we New Yorkers are. Fortunately for us, we do not need the proceeds from the sale of our home for living expenses. We fully intend to buy a home in TV. But, TV is so different and so large, we are finding it difficult to decide how to approach buying right now. In addition there is this crazy housing market. I think that by renting long term, with an escape clause, will give us the time we need to let the dust settle and make a better informed decision.
  #23  
Old 01-17-2008, 10:02 PM
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Default Re: The Economy: Maintain a mortgage or pay it off?

Beartrack:

How did you know I was from NY? ;D

  #24  
Old 01-17-2008, 10:45 PM
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Default Re: The Economy: Maintain a mortgage or pay it off?

SteveFromNY,

You said that patio villas are now priced at $180,000. Are they selling at $180,000?

  #25  
Old 01-18-2008, 01:40 AM
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Default Re: The Economy: Maintain a mortgage or pay it off?

Quote:
Originally Posted by Boomer BeBack
SteveFromNY,

You said that patio villas are now priced at $180,000. Are they selling at $180,000?

Sorry Boomer, I was just using $180 as an example. I couldn't tell you for sure what they are selling at.
Although, if you know a specific address that did recently sell (and it's in Sumter county), you can get all kinds of details about sale prices and taxes from the Sumter county tax site.
  #26  
Old 01-18-2008, 03:05 AM
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Default Re: The Economy: Maintain a mortgage or pay it off?

StevefromNY,

Just a wild guess !!!!! :dontknow:
  #27  
Old 01-18-2008, 03:41 AM
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Default Re: The Economy: Maintain a mortgage or pay it off?

New patio villas are selling for less than $140,000!

COLONY
VNH706048
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$140,631

New ranch homes sart at less than $140,000
http://www.thevillages.com/specialof...ngs-200801.htm
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