Need financial advice

ErikaB123 · July 2014

Hi everyone, I will try to make this short and sweet. My husband and I recently bought our first home (we closed in Sept of 2013) here in Southern California. We put down 20% and are currently putting an extra $175 a month towards our mortgage in order to pay it off sooner. We have our prop tax and insurance already included into our payment btw, so the $175 is going straight towards the principal. We bought this property as a starter home, it is only a 2bd 2ba and will not be sufficient for too much longer since we plan on having kids. My question is this: since we agree that this is not our forever home and just a starter/potential income property, is it smart to be trying to pay off this property early? We are still saving 2K every month, so the extra $175 isn't really hurting us. Please explain your reasoning, I see benefits to both sides but would like some more perspective. Thank you all for your time!

Erika

brij2006 · July 2014

Do you have any other debt besides the home?

CuriousKiddosMama · July 2014

I would probably continue the payment. In theory whatever you are paying extra is going to save you interest, and you will just get that back at closing when you sell.
That depends though on several things- like if you have other debts and if you are able to save towards moving/closing/downpayment on a new house while continuing the $175 extra. It kind of sounds like you are able to do both, so I would!

formerlyGDaisy09 · July 2014

is there anyway you could enhance the house to stay in it longer? my H and I bought a 2Br 2BA home 2.5 years ago as a starter, we're planning to stay there at least another 5 years, and start a family in that time.

We are already saving to add another bedroom and maybe bathroom (upflow-plumming-pricing dependent)in the basement to serve as a guest room so my parents can come visit and the current guest room can become a nursury. we're also planning to add a play room and craft area to the basement. those investments should yield a much higher home value once we do decide to sell as well.

emily1004 · July 2014

AprilH81 said:

Why did you buy a 2-bed/2-bath if you are going to start a family soon? It seems very short sighted...

I disagree with this. Kids don't take up a lot of space. Small children can share bedrooms. Also a bigger home is a want, not a need. SoCal is super expensive, so you buy what you can afford. I always laugh at people who say, "we have two kids, we NEED a 4 bedroom house." I bet they could get 5-7 years in a home that size with a family of two adults and two small children.

To OP, I don't see any point in paying extra on a home that you don't plan on living in for the rest of your life. I would wait 5 years before I try and sell, but that's up to you and H. We've all learned from the past the market is very unpredictable.

hoffse · July 2014

I wouldn't be paying extra on principal if your rate is good.

I also wouldn't be moving in less than 7 years.

Wulfgar · July 2014

Since you are already saving 2k a month, I would keep on putting the $175 a month towards your mortgage. I also agree with most of the other people that you should plan on staying in your home for between 5 to 7 years.

ta78 · July 2014

She never said how long they plan on staying in the home, so I wouldn't jump on her about how they shouldn't have bought it in the first place.

As far as the extra money, I don't think it really makes a difference if you plan on moving. I would just save it and pay your minimum payment.

ErikaB123 · July 2014

Hi everyone, sorry I forgot to check back in for so long. We live in Ventura CA, the market here is outrageously expensive. At the time we were looking, there were about 10 bids on every house that came on the market because interest rates were so low. My husband and I just wanted to get IN on the market before interest rates changed and saw this property as a good starter home. We do intend on living here for at least another 5 years. Since we bought the property it has increased in value by about 50K. We do not have any other debt, but I do realize that once we have children our expenses will definitely increase. I think that since we are able to save a good chunk while making the extra payments monthly, we should continue doing so because we are saving on how much interest we pay. However, my plans may change drastically once the kids are here...that extra payment just might become diaper money instead!

mbecker03 · July 2014

What's the interest rate on the mortgage? If you just bought the house and you're planning on moving soon, you're likely to be better off if you save that money elsewhere. Paying down the mortgage is better than spending the money, but most of your payments right now are going towards interest, not principal, so you might actually end up paying more interest this way. That wouldn't be true if you stayed in the house for the full duration of the mortgage, but it could be true in shorter time periods.

Need financial advice

Re: Need financial advice

Choose Another Board

Search Boards