View Full Version : housing dilemma
Our only debt is the mortgage on our home. We have 5 children and live on one income. We were debt free until we added on. After reading the book, combined with now being very house poor, I am convinced that we should have made do without the huge addition. But with the real estate market being what it is, and my husbands job is right down the road, we will probably be staying.
My question is, how do you reconcile yourself with a possession that you now feel is over the fulfillment curve. I try to keep our stuff simple, our lives simple, but the house is huge. We do use it all daily, but I know we could get by on so much less, not to mention electric, tax and heat bills would be less.
I am hoping by the program we can reduce our income the 20% and then start to put more toward the principal, but with 5 children and only one job, that will be slow beans! We do homeschool and the children are not average modern children who want it all (thankfully) so its not like I have any obvious expenses that will just fall off.
I also wonder if we really would be loosing money if we sold it at a loss, because a 30 year mortgage will take lots of our money as well. Just not sure how to numerically figure out what the best thing to do is.
Not sure if this is the right place for this post, so please move it if it could fit in another category better.
Simplemama. My best advice to you, stay put, and embrace the expansion you and your husband seen-through. The market will come around again, and as you say, with your husbands job right down the road, you aren't pressed to pull-up your roots or anything, and so long as you are comfortable, enjoy what you have worked and are working for. :)
P.S. A big warm welcome to our home! Would be so nice for you to call this place "your home", too! Hope you settle-in and become a regular! :)
I think you are doing great. You have about 15 years yet with the kids at home, and between 5 kids and homeschooling, you are using that house all the time. If you can just pay a little extra each, you will have it paid for about when they are gone. I think the numbers say that only 1-2 extra payments a year drops a mortgage from 30 to 15 years. If I were you I would plan for a major downsizing at that time. You can give most of your pessessions to your kids, keeping only what the two of you really love, and live in a tiny house then.
Like the others, I would stay put. If there are rooms you can close off to the heat or AC then go for it. Or get everyone to bundle up or wear shorts and t-shirts. Have fans to circle the cool or hot air. Consider your house to be your castle, and keep it maintained and livable. If there are extra rooms that you do not use, think about renting the rooms. Or not.
I think you are doing a good job, if nothing else, you found us here at Simple Living Forums. You are bound to get more tips and ideas as well. Good Luck!
try2bfrugal
8-5-12, 3:11pm
I think the only way to decide on the best course is to create a spreadsheet, model different scenarios and see which one ends up better in 30 years. We also had a much bigger house than we needed while our kids were growing up. I get that now after reading books like Stop Acting Rich, Your Money or Your Life and The New Normal. Unfortunately, I didn't read the books until later on in life and even then it took a while for the message and the actual dollar costs of the larger home to fully sink in.
You might want to make several spreadsheets and see how you would do financially staying in your house versus selling it at a loss now and moving to a smaller home. On one hand if you sell it is a hassle to move, especially with kids, you would take a loss on the house and you would have to pay the transaction fees associated with buying and selling homes. On the other hand if you downsize you can buy a less expensive house, and have lower insurance, property taxes, repairs, heating, cooling, and furnishing costs possibly for decades into the future. If you made a spreadsheet that went out 30 years or so you could model different scenarios and see which ones gave you the best 30 year outcomes. We currently have about 5 different spreadsheets going between staying in our current house and moving to different areas. For example, one city we could move to we could get a newer home with a view lot for half the price of where we live now, but we would have to pay bridge tolls to get to the main metro area, spend more on car depreciation and gas because of increased driving, property taxes would be higher than where we live now, and the house would not appreciate as much and it is further out from the main job market. So we have all of that in a spreadsheet. Then we have other spreadsheets for other areas we are considering moving to. I think for us that is the only way to go to see how to come out ahead financially, otherwise there are too many factors for us to keep straight in our heads, especially over a 30+ year time frame.
We took out a second mortgage to afford some critical needs - an atty to get kids away from abusive stepfather & neglectful mother, braces, and med expenses. We also spent some of it on lifestyle home improvements. Though we are now under water on paper due to that second, we're both still glad we took it out, because we are in a home we enjoy, and will continue to enjoy for many years - not to mention that our kids were able to have a safe, secure place to live in! I view our home as first & foremost a place to have our family life, not as an investment.
Since our mortgage is affordable still, and the amenities are here, I just enjoy them. Since you cannot change what's already been done, I encourage you to stop second guessing it, and enjoy it. The cost of fretting and berating oneself for decisions already made are much more expensive than any other choice, IMHO. No spreadsheet can account for the emotional costs of regret and upheaval.
You need a place to live.
Not many houses will allow for 5 children to have space especially with home schooling supplies and activities. Don't second-guess your earlier decisions as it will only make you very unhappy with no gain.
Watch you spending and look forward to getting small extra payments where you can find them.
Welcome and enjoy being part of a wonderful community online.
Simplemama, were you with us on the old boards? Your username seems familiar. Welcome back if so, and if not, well, welcome for the first time.
I think with underwater properties, especially if one is planning to stay there for a while, there's not too much point in fretting. We don't yet know what the real estate market will do. It appears to be improving in our area, so that's good. What if you sell and end up kicking yourself later? Or what if the market continues to struggle, you sell at a loss, move into another place, lose money on it, etc.?
Is a refi a possibility? DH and I just bought only nine months ago and we're already looking to refi - the rates have changed that much in nine months. That would help with some of that (painful) interest effect.
I'd stay where you are and throw extra money at the mortgage to pay it down faster. Close off unused rooms for heating and cooling to save money where you can. Remember that your kids will at some point be teens and for some reason teens seem to take up twice the space younger kids do, even when they don't have a lot of stuff. My son loved to just spread out and could take over the entire living room just playing his guitar. Sheet music would be spread out everywhere. Take time to enjoy the home you have. Once the kids have moved out on their own, then consider downsizing.
If you sold the house at a loss you would still need a place to live that would accomidate the needs of five growing, homeschooled children.
I would stop second-guessing yourselves for now, especially since you would likely lose money if you were to move soon. That means this is a sunk cost. It isn't fun to have a mortgage, but in most places property values will eventually start to go up again if they haven't already, and once you are not underwater and have had some time to see how you use the space, maybe it will be a better time to reevaluate. Not sure what ages your kids are, and homeschooling means your time is limited, but maybe there are ways you could eventually generate a side income to help tackle early payoff of the mortgage.
We bought what seemed like a ridiculously expensive/extravagant apartment in an upscale development in Beijing a few years ago, and I agonized over taking out a mortgage to do so. But in the end it was definitely the right thing to do. Our monthly mortgage payment is about $1900, but over $900 of that is principal already. There is no way we could rent a comparable place for that -- at current market rates, we could probably rent our place out at $4000-5000/month (very desireable 3br/2bath + office+ play room). The property has more than doubled in value since we bought it, and we could never afford it if we were trying to buy now. Bubble, maybe, but even if it pops we should still get back what we put into it and we've had a lovely place that has made living in Beijing tolerable.
lhamo
simplemama
8-5-12, 11:37pm
Thank you for the nice welcome, and it is neat so see folks from all over the world!
I was not on the other board with this name, I am new here.
We have children ranging from 14 down to 17 months. before our addition, we had 4 children in a tiny bedroom and baby with us. We were squished, and there was nowhere for me to find quiet when I had my last baby. We knew we had to add on, but I think I went overboard because I had been so cramped for so long. We could have added on less and not taken on such a big load...BUT I think this was all just heavens plan to teach me a lesson. We had it so good before, never had to worry about buying groceries, or going camping. It didn't matter how many simple living books I read, I think I just had to really understand what it was like to live paycheck to paycheck and have to really work to save to get the materialism and consumerism out of my system. So I am trying to be grateful for this as a spiritual learning experience.
My dh and I started out 15 years ago buying our first home with a college fund he never used. But we made SO MANY mistakes (dumb kids) that we lost so much money. We bought this home in fall 2006 right before the markets went down the toilet. The plan was to sell our previous little home and 40 acres for a profit and to add onto this teeny place on 5 acres and be debt free. We thought we'd trade equity in land for indoor space. No luck, we lost at least 40 thousand and the place sat for 4 years! Only good news was we lost so much we didn't have to pay capital gains! So we were squished in this teeny little 1000 sq foot home for 6 years, when "the plan" was to have added on by fall of 2007.
1-2 extra payments a year drops a mortgage from 30 to 15 years, this idea gives me hope!! I can do this at least! I have ideas about a side job, but the reality of being a loving attached mama, being a loving wife, homeschooling, raising our own meat and some veggies, cooking all our food from scratch and trying to have a bit of time to do something I love like sew, I don't see how I will fit anything else in. I have ideas of getting a CNA and working overnight at a nursing home, but when will I sleep? not to mention find time to get the CNA.
I agree with the idea that my home is a place to live and raise my family, more than an investment. I have to remember that and not be so scrupulous. We have been blessed with the space and can use it well, believe me. I asked my dh the other night if he though we were using all of the space in our home daily. He thought a minute and then replied "well, there might still be a few unused corners somewhere." funny guy :o)
Don't try to spread yourself too thin. Be all the parent that you can be, raise some of your food and you will be earning a lot on that effort tax-free. Any savings that you can find in the household will also be tax-free so you are still earning money but in an indirect way. Time will come when you can go out for further schooling. To everything there is a season... kind of thinking.
Welcome simplemama! I am a homeschooling mom of five also. Like most of the others I think staying put is probably the right answer. Throw what you can at the debt and see what you can do to reduce your other expenses. Join us in the monthly frugality thread. It's a great motivator.
fidgiegirl
8-7-12, 10:43am
I agree with razz, SimpleMama. If you have not checked out Your Money or Your Life yet, it has a worthwhile exercise where you calculate your Real Hourly Wage. Let's say you may make $10/hr. as a CNA. But you have to buy scrubs, so you deduct that expense from your earnings. Perhaps you have to drive 30 minutes each way to find an overnight job that meets your schedule. So add an hour to your working hours, and deduct the cost of the wear and tear on your vehicle. Then maybe you don't have as much time to cook for your family and find that your grocery bill starts to creep up. So YMOYL would have you deducting that from your wages as well, since that's a result of the Job. All theoretical, of course, but YMOYL encourages people to look at the real cost of working. I'm guessing that the savings you find in being home with your children equal or outweigh the money you'd bring in as a CNA. But only you can do the math!
I also second Stella's suggestion to join the monthly frugals. Often when faced with an expenditure, I find myself either excited about posting it over on the monthly frugals board, or ok with it not truly being a frugal. Either way, it keeps me mindful. I'd say I have very little mindless spending anymore. Oh, we spend . . . don't get me wrong there. . . but we're pretty aware and deliberate about it.
We did a thread not too long ago (http://www.simplelivingforum.net/showthread.php?4560-Gettin-More-MONEY&highlight=money) on ways to earn extra money . . . perhaps some of the ideas would fit well in your current lifestyle.
Here's another similar one! (http://www.simplelivingforum.net/showthread.php?3544-24-ways-to-earn-100-00-bucks&highlight=earn)
try2bfrugal
8-7-12, 1:03pm
You have to do what works for you, but you could probably make a spreadsheet in an hour or two and do the 30 year cost calculations. We live in California where prices are high, but for us the 30 year difference between one house and another is hundreds of thousands of dollars of after tax money between mortgage interest, home price differential, repairs, heating, cooling, property taxes, insurance, and everything else. The books the New Normal and Stop Acting Rich really go into detail on how much you can save with a smaller / less expensive home / less affluent neighborhood (to avoid having to keep up with the Joneses). If you earn more money you have to keep working every year to earn the same amount of money, but if you downsize the savings is pretty much built in to a downsized lifestyle.
I am not sure how big your house is now. You may need all the room for your kids. According to an article in Yes magazine (http://www.yesmagazine.org/issues/making-it-home/weve-got-some-big-houses2014that-we-could-share), 60 years ago, the average American had 291 square feet of living space per person. Now it’s close to 1,000 square feet. How much space do you have now per person in your family for comparison purposes? If you are at the 291 figure you may want to use that as a benchmark and not go any lower than that.
You might want to run the numbers and see how becoming a CNA would compare to downsizing in terms of saving money. The downsizing savings is usually after tax money. The amounts for us were pretty impressive when we compared downsizing + retiring early compared to staying where we are at + having to work more years.
Ha Ha! Our Joneses to keep up with are all Old Order Amish! We don't have much to keep up with around here:)
Thank you for the links, ill check them out. I have read YMOYL, and that is what got me thinking. The "Stop acting rich" and "New Normal" sound like they have to go on my reading list!
I did the math, we have 357 sq feet per person in my home, and someday our numbers may grow, so we may get close to the the average of 60 years ago!
I know if I worked out of the home, or even in the home, my food expenses would skyrocket. Right now I cook most of our food from scratch as well as raise some of it and can and freeze. Cant do that while working outside the home and keep the sanity.
try2bfrugal
8-7-12, 2:10pm
Ha Ha! Our Joneses to keep up with are all Old Order Amish! We don't have much to keep up with around here:)
Thank you for the links, ill check them out. I have read YMOYL, and that is what got me thinking. The "Stop acting rich" and "New Normal" sound like they have to go on my reading list!
I did the math, we have 357 sq feet per person in my home, and someday our numbers may grow, so we may get close to the the average of 60 years ago!
I know if I worked out of the home, or even in the home, my food expenses would skyrocket. Right now I cook most of our food from scratch as well as raise some of it and can and freeze. Cant do that while working outside the home and keep the sanity.
It actually sounds like your house is what you need for your family size plus possible future additions then as it stands. With old order Amish neighbors you also have the not having to keep up with the Joneses issue as about well under control as you could possibly get. :)
I agree it probably isn't cost effective for you to work outside the home. I only mentioned it for running the numbers in a spreadsheet because you brought up the CNA position as something you were considering in a prior post.
You probably would not get much out of Stop Acting Rich or The New Normal because you are probably already living the way the authors suggest.
simplemama, I can see why you are looking to downsize. No one (or at least no rational person, in my opinion) wants to be living right on the edge of being just able to afford their monthly bills. Especially when surviving on just one paycheck would make it unnerving to think about how quickly things could go wrong if your DH were to lose his job or suffer a major illness, etc. But the reality is that it sounds like you're already working really hard. homeschooling, cooking everything from scratch, raising food, etc, all take time and any outside job you do at this point in your life will 1) take time away from your family, and 2) leave you exhausted during the time you do have with your family, and 3) will probably result in you spending money on things you don't spend on now simply because you won't have the energy to keep doing it all. I agree with the others who've suggested to enjoy your home. It's obviously an important place where your family's life takes place so it SHOULD be enjoyed. If you can make an extra payment or two each year then over time you'll wind up in a really great place where you'll be able to make changes to suit your lives at that point. Just as life is a journey (yes, I know, how cliche...) so too is becoming FI.
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