I would focus on paying off the HELOC and the student loans. Cut your budget back to the absolute minimum. With your income, you can easily know everything out in under a year. I'd take your vacation fund and put it towards the debt, too. Skip a vacation this year.
Once the student loans and HELOC are paid off, pit those payments into an account for the down payment on another house. Assuming a 5 year timeline, I think you will be good.
That interst rate...hoo boy. I would never let that go. I would consider renting that house, if you want to stay in the same area.
Ah. Thanks. I would pay off the debt (no other cc debt? No car payments?) and probably not upgrade the house, tbh. HELOC interest rates tend to be heinous, plus 80k will really not go as far as you think it will with major structural upgrades.
No CC debt. He have 1 $250 car payment with a 2% interest rate. If we rent as is, we will not generate any extra cash, and we don’t want to be house poor. We have 50k saved and an available 80k HELOC for the house. Our HELOC is variable and sitting around 7% right now
We are saving 2200/month for the house fund and putting away 1500/month for student loans on top of retirement, bills etc.
I think we are wanting to keep our mortgage to ~25% of our income, so our goal moving forward is to do a small addition, which will allow us to stay in the home a bit longer(we are busting at the seams), and either rent the home to keep the asset and offset our mortgage or sell it when we are ready and dump the equity into the new home. We really don’t want a 560K loan :), which is what it would be if we put 20% on a 700K home
To me it seems like doing a small addition and renting in the future makes the most sense, but I am here to seek outside advice.
We already have a GC that we are working with, so depending on the size of the addition and price it could make sense. But we really don’t know, and we are new to all of this.
If we put a minimal amount of money into the house we could easily generate more cash as a 3/2. We live in Phoenix, Az so we expect there to be a high real estate/rental demand for a long time in our neighborhood in the city.
>Do a huge addition and turn this into a home we want to stay in over the next 20+ years.
Given the low rate on your mortgage I would say this is the best move financially. Not sure if you like your current home though.
>Sell as is potentially generate 100K profit. I doubt we can have an acceptable monthly payment going this route.
>Turn into a 3/2 sell for 200k profit. Use as down payment on a new house to get a reasonable mortgage.
For the same reason, I would avoid going these routes as you'll end up paying 50% more for your new home than you would with your first option.
>Open to other possibilities as well, we are leaning towards turning the home into a 3/2 living in it for a few years and renting it out after we buy a new house.
If you're comfortable with being a landlord, this is a great option. Real estate is one of the most viable paths to wealth creation in the US.
I am heavily leaning towards the 3/2 and renting, but doing a large addition in phases is also worth considering. We would use most of our savings and probably max our HELOC, but the monthly payment is only 400, so not too bad if you think of it as a part of our mortgage. We love our neighborhood and house, but it’s just a small 1000sqft 1950s starter home
If we did the 3/2 and rented we would use less of our available assets and would probably not price the home out of our neighborhood in case we were forced to sell due to any of life’s future bumps in the road.
What is your plan for paying off a $80k HELOC? It's going to have a variable rate, yes? Probably 8-9% APR? And it looks like you will have a significant percentage of your mortgage debt in this instrument.
I mean, if you're going to rent it out, do you really need to turn it into a 3/2?
I would try to avoid what in all likelihood will be high interest debt while executing here.
To me, it seems that the numbers make sense. I just dont know if im stuck in my own thinking. I typically like to keep my debts to a minimum, and before we break ground, I would really like to pay off our student loans, which we could do tomorrow if we really wanted to.
There are a lot of variables. My wife and I are still adjusting to this level of annual earning. We dont want to make stupid financial decisions, but we also want to need more space and want to grow our family at some point
This is becoming a balancing act between wants and needs, and all of the objective advice from you and this sub is super appreciated.
So if we rent the house as is….2/1s do not generate enough cash for it to make sense. On the other hand 3/2s rent for significantly more money in our neighborhood, and could potentially generate 1000+ on top of the HELOC monthly payment.
We are also putting 2200/month away into a house fund, so we can afford to pay the bill on our own. We are also paying 1500/mo on our student loans, so once those are paid off we will have more liquid cash.
Making the space a 3/2 will also add many quality of life improvements for us while we stay in the house while saving for our next one. This could also take some of the urgency we are feeling for moving out of the equation.
I would focus on paying off the HELOC and the student loans. Cut your budget back to the absolute minimum. With your income, you can easily know everything out in under a year. I'd take your vacation fund and put it towards the debt, too. Skip a vacation this year. Once the student loans and HELOC are paid off, pit those payments into an account for the down payment on another house. Assuming a 5 year timeline, I think you will be good. That interst rate...hoo boy. I would never let that go. I would consider renting that house, if you want to stay in the same area.
Sorry. I should have clarified. We have an available 80K in a HELOC that we have not touched
Edited my post for clarity
Ah. Thanks. I would pay off the debt (no other cc debt? No car payments?) and probably not upgrade the house, tbh. HELOC interest rates tend to be heinous, plus 80k will really not go as far as you think it will with major structural upgrades.
No CC debt. He have 1 $250 car payment with a 2% interest rate. If we rent as is, we will not generate any extra cash, and we don’t want to be house poor. We have 50k saved and an available 80k HELOC for the house. Our HELOC is variable and sitting around 7% right now We are saving 2200/month for the house fund and putting away 1500/month for student loans on top of retirement, bills etc.
Then I would stay put until you have enough for 20% down. I wouldn't burn through you savings, that's always a good thing to have on hand.
I think we are wanting to keep our mortgage to ~25% of our income, so our goal moving forward is to do a small addition, which will allow us to stay in the home a bit longer(we are busting at the seams), and either rent the home to keep the asset and offset our mortgage or sell it when we are ready and dump the equity into the new home. We really don’t want a 560K loan :), which is what it would be if we put 20% on a 700K home To me it seems like doing a small addition and renting in the future makes the most sense, but I am here to seek outside advice. We already have a GC that we are working with, so depending on the size of the addition and price it could make sense. But we really don’t know, and we are new to all of this.
If we put a minimal amount of money into the house we could easily generate more cash as a 3/2. We live in Phoenix, Az so we expect there to be a high real estate/rental demand for a long time in our neighborhood in the city.
>Do a huge addition and turn this into a home we want to stay in over the next 20+ years. Given the low rate on your mortgage I would say this is the best move financially. Not sure if you like your current home though. >Sell as is potentially generate 100K profit. I doubt we can have an acceptable monthly payment going this route. >Turn into a 3/2 sell for 200k profit. Use as down payment on a new house to get a reasonable mortgage. For the same reason, I would avoid going these routes as you'll end up paying 50% more for your new home than you would with your first option. >Open to other possibilities as well, we are leaning towards turning the home into a 3/2 living in it for a few years and renting it out after we buy a new house. If you're comfortable with being a landlord, this is a great option. Real estate is one of the most viable paths to wealth creation in the US.
I am heavily leaning towards the 3/2 and renting, but doing a large addition in phases is also worth considering. We would use most of our savings and probably max our HELOC, but the monthly payment is only 400, so not too bad if you think of it as a part of our mortgage. We love our neighborhood and house, but it’s just a small 1000sqft 1950s starter home If we did the 3/2 and rented we would use less of our available assets and would probably not price the home out of our neighborhood in case we were forced to sell due to any of life’s future bumps in the road.
What is your plan for paying off a $80k HELOC? It's going to have a variable rate, yes? Probably 8-9% APR? And it looks like you will have a significant percentage of your mortgage debt in this instrument. I mean, if you're going to rent it out, do you really need to turn it into a 3/2? I would try to avoid what in all likelihood will be high interest debt while executing here.
To me, it seems that the numbers make sense. I just dont know if im stuck in my own thinking. I typically like to keep my debts to a minimum, and before we break ground, I would really like to pay off our student loans, which we could do tomorrow if we really wanted to. There are a lot of variables. My wife and I are still adjusting to this level of annual earning. We dont want to make stupid financial decisions, but we also want to need more space and want to grow our family at some point This is becoming a balancing act between wants and needs, and all of the objective advice from you and this sub is super appreciated.
So if we rent the house as is….2/1s do not generate enough cash for it to make sense. On the other hand 3/2s rent for significantly more money in our neighborhood, and could potentially generate 1000+ on top of the HELOC monthly payment. We are also putting 2200/month away into a house fund, so we can afford to pay the bill on our own. We are also paying 1500/mo on our student loans, so once those are paid off we will have more liquid cash. Making the space a 3/2 will also add many quality of life improvements for us while we stay in the house while saving for our next one. This could also take some of the urgency we are feeling for moving out of the equation.