Should I cash out my golden ticket?
September 13, 2014 3:00 PM   Subscribe

My home is worth at least 2x my mortgage. Should I sell or hold on?

I live in the house I grew up in, it's technically a condo but is 4 bedrooms 2 baths, 2400 sq ft in a very, very sought after neighborhood in Boston. My condo is easily worth 2x what my mortgage is (my ex-husband and I bought it from my family at below market rate), so I have been toying with the idea of selling and using the profit to buy a smaller place in a less desired location. I can barely afford the mortgage because the interest rate I have is crazy (7% I pay a nickel towards the principal every month) and I haven't been able to refinance despite the equity because I have very bad credit. I have looked into different programs (like NACA) and I haven't been able to qualify for a lot of different reasons. I have boarders who live with me and my kids to help me pay the rent, this can be annoying because we always have people in our house and some of the boarders have been incredibly frustrating. I barely do any upkeep on my house because I can't afford to. My mom lives in the condo downstairs and we have a less than ideal relationship and owning the condos together has made our relationship even more difficult.

However- it's the house I grew up in and I have some total sentimental attachment to the house. It is an amazing amount of space- no one I know lives in a house this size or in a location like this- it's what everyone aspires to in the city but no one can afford any more. If I sell I will never get back into a house like this or back into this part of town. I will be moving to a 2 bedroom condo in an area of Boston that has yet to be revitalized (I have to stay in Boston for my job and my kids school). It is an incredibly ideal location in terms of city livability- great public transit, beautiful outdoor spaces, awesome shops and restaurants within walking distance. My kids have close friends who live on either side who they have known since birth with who they have had a very ideal childhood (it's a dead end street and the kids played outside in that old fashioned way where we would call them in for dinner when the street lights came on). I love my neighborhood and I feel like it defines me (which I know is a bit silly, but it has that small town feeling where everyone knows each other and I feel well known here). Do I stick it out and hope I can someday refinance and can afford the house, or do I sell because it makes financial sense?
posted by momochan to Work & Money (18 answers total) 4 users marked this as a favorite
Do I stick it out and hope I can someday refinance and can afford the house, or do I sell because it makes financial sense?

Constant money woes versus owning a place free and clear and no boarders? I think we both know the answer. If you'll have enough to buy some place that's reasonably safe and clean albeit less spectacular (and it sounds like you will), it's pretty obvious.

Your neighborhood will still define you even if you no longer live there-- the region I grew up in still contributes to my character even though I left as soon as I was an adult. It also sounds like your relationship with your mom will improve if there's some distance, which is great because your kids won't be cutting ties completely with the neighborhood.

Here's some anecdata from a similar place-- I recently left a ob that I loved, that gave me immense pride, that in some sense defined me. Much like your neighborhood. I left because my non-profit employer didn't compensate me well enough. I felt a sense of initial loss, but I got over it pretty quickly when I realized that I wasn't sick with worry from the time I woke up. I'm still wistful, but I'll live longer and I'm a better more attentive parent because I didn't side with sentimentality.

I get the impression that the house is causing you a lot of stress and worry. Any impact that the move will have on your kids will be more than negated by their mom losing a chunk of emotional weight. Having only what you've said to go on, I'd swallow my sentimentality and sell in a heartbeat.
posted by Mayor Curley at 3:22 PM on September 13, 2014 [2 favorites]

I would vote to move, if you can get enough money to buy another house free and clear. Having that financial weight off your shoulders will probably open up a lot of other things for you.
posted by xingcat at 3:28 PM on September 13, 2014 [1 favorite]

As long as you are certain you can buy the new place free and clear, and be able to pay taxes etc. As long as you look into the details of selling the current place, and won't have to pay a huge amount of tax on the profit you make. Just check out details thoroughly and make sure its as simple as you hope.

Alternately, if you were to move out and rent the whole condo out, would that cover the mortgage payments plus rent on another cheaper place? If you were open to that idea, you would be keeping a long term investment (but it would require you to have savings to use on upkeep when necessary).
posted by Joh at 3:33 PM on September 13, 2014 [2 favorites]

However- it's the house I grew up in and I have some total sentimental attachment to the house.

Quantify that. I know it sounds dumb, but it's apples and oranges. Even if you can't settle on a definitive number, forcing yourself to attempt will be helpful to leveling it as a variable. Same goes for the headaches you would be selling with the house. Expend some effort putting a dollar figure on those things. It may get you closer to a decision.

I'm speaking from relevant ("If I sell I will never get back into a house like this," etc) albeit not identical experience. From reading your question, my inclination would be to advise you to sell the house and move on to the next wonderful chapter, but that's just Internet pennies. Good luck with your decision.
posted by cribcage at 4:05 PM on September 13, 2014

Is it at all plausible to split your 4BR place into two smaller units? I am guessing not since you call it a condo, but just a thought, just in case.
posted by ktkt at 4:30 PM on September 13, 2014 [1 favorite]

I would look into whether you could add a kitchen and convert part of your home into 1-2 studio apartments. Or maybe there is some other way to contain the boarders, so you don't interact. But, really, you have identified so many dynamics that maybe you'd be better just to go.
posted by Chaussette and the Pussy Cats at 4:37 PM on September 13, 2014

i would crunch the figures and look at moving out and renting it.
posted by Jubey at 5:04 PM on September 13, 2014 [2 favorites]

Could you clarify the relationship between your condo and your mom's?
Are you just in the same building or is there a financial tie between the two of you?

Also take a good look at the "bad credit" aspect of your situation.
Be certain that any remedy you take also includes specific steps to repair/regain a good credit status rather than taking on more and different debt.
posted by calgirl at 5:41 PM on September 13, 2014

I would sell in a heartbeat.

Put the money in the bank and find a place you can afford to rent in the neighborhood.

You will go from stressed to serene instantly.

Owning a house isn't always the best. A place you can't afford the upkeep on isn't a home, it's a new roof away from bankruptcy.

Know what's great about renting? EVERYTHING! If something breaks, I call the office. If my neighbors are noisy, I make notifications until they get evicted. If the place gets run down, I give my notice and move. If I get a new job in Paris, I give notice and move.

You've been house-poor for so long you're brainwashed about what really matters. What matters is having a safe place for you and your kids, in a neighborhood you like.

Owning a house isn't cheaper than renting. Not always.

Think about it.
posted by Ruthless Bunny at 5:43 PM on September 13, 2014 [9 favorites]

I was going to suggest what Jubey said. Would it be feasible to rent out the house entirely and rent another cheaper place elsewhere. How would this change your financial equation?
posted by Gomez_in_the_South at 5:56 PM on September 13, 2014

I am super confused about why you will never afford a house like this again. If your house is worth twice your mortgage, when you sell, you would have in cash the amount a house like this is worth. You could use that to buy another house exactly like this one in terms of location and size, in cash, without needing finance. Then you would also be free of your mortgage payment and live happily after after.

What am I missing???
posted by lollusc at 6:07 PM on September 13, 2014

If you have to stay in Boston anyway, stay where you are. You can only cash out once. You may not be contributing much to the principle now, but as long as you can afford the payment, you're maintaining ownership. Sounds like there are a number of reasons to move, but just as many reasons to stay. At least you've got the devil you know, rather than the devil you don't know.
posted by rikschell at 6:08 PM on September 13, 2014 [1 favorite]

Response by poster: Thanks everyone for your answers so far- I have been so deep in my head about this, and everyone I know has an opinion I wanted to put it out there to some neutral opinions. These are all helping me think.

To clarify- my mom condoed a two family house, and my ex and I bought one unit and she retained ownership of the other- she didn't always live in that unit (and I actually at various times haven't lived in my unit either) now that we are both in the house, and having to make decisions jointly about what work should be done and when, things have become more strained. Our condo fees barely cover the month to month expenses, and we can't come to any sort of agreement on how to tackle that issue.

And @lollusc- small condos in my neighborhood go for $500K plus (and mine could sell for between $700k-$900k), my mortgage is 1/2 of what I would hopefully sell it for, so after paying back my mortgage I wouldn't be able to afford that much house without an additional mortgage that I wouldn't qualify for with my credit/pay. The housing market in my area never totally burst, and because the houses are old huge victorians buyers often offer above asking, with no contingencies and usually they offer cash.
posted by momochan at 6:57 PM on September 13, 2014

For whatever perspective it's worth, that's less cash than I thought you were talking about. I'm unsure what neighborhood you are talking about, but those prices put an additional spin on my earlier "quantify it" advice: consider also talking to a realtor and making sure that you have an accurate understanding of your home's placement—dollarwise and demandwise—in the area market, both your neighborhood and larger.

I guess what I'm saying is the military adage, "When in doubt, develop the situation." Good luck.
posted by cribcage at 10:08 PM on September 13, 2014 [3 favorites]

200k is a huge difference in what you think the house is worth. You need to get a better idea of what your house is actually worth, talk to a number of realtors and do your own research about what's selling in your neighbourhood. I can tell you with forty grand what my house is worth, and you should be able to get into that zone. Compare like with like, a house that needs work, even minor, and doesn't present well is not comparable to an identical house that needs no work and presents well. Good luck,
posted by smoke at 3:41 AM on September 14, 2014

Also, a buyer is going to have to want to own a condo in conjunction with your mother, and your mother gets a vote on your buyer.

There are a lot of moving parts here. Your first step is to get a Realtor to give you an assessment of your condo, your situation and what you might expect to clear once you sell.

The places selling in your neighborhood may be in perfect condition, or perfectly unencumbered. Your condo is not in this condition.
posted by Ruthless Bunny at 6:34 AM on September 14, 2014 [1 favorite]

Another vote for move out, rent it, and use the rent to pay the mortgage. You can move somewhere you can afford *and* keep your childhood home.
posted by If only I had a penguin... at 11:27 AM on September 14, 2014

Would you even be able to get a different condo, if your credit is so bad that you can't refinance?

In your position I would try my hardest to stay where I was, because a dead-end street in a good neighborhood with friends nearby is such a great thing to have.
posted by The corpse in the library at 7:18 PM on September 14, 2014 [2 favorites]

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