Would you like another one? A bigger one? A fancier-schmancier one? Do you have two teenagers? Do you therefore long for a house with 3 bathrooms instead of the constantly clogged 2 you now have?
Well, wait no more my friends! What would you say if I told you that you could move up into a bigger, nicer home for not too much more than you are paying now?
What, what WHAAAA?? How can that be, Jules?
Take a little gander at my last market report for Hamilton County. Go on, click over there, I’ll wait ’til you get back.
Well, did you notice anything? Like maybe that houses in the price range you’d sell yours for are moving. Not like the proverbial hotcakes, but moving nonetheless. Did you also notice that homes in the price range you’d be looking for are sitting, moving more like the proverbial molasses? And maybe you’ve been looking at the interest rate that shows up every month on your mortgage statement. And maybe you’ve even been thinking about refinancing down from that 7.5% you’re paying now. Because there are SCREAMING deals on interest rates these days (think high 4’s, low 5’s, seriously, this is not something I would joke about).
So here’s what you should do (in my ever so humble opinion). Sell that house of yours. Are you going to get what it would have sold for 2-3 years ago? No, probably not. But if it’s in the under $150,000 range, and it’s reasonably updated and fairly priced you’ve got a good shot at selling it pretty quickly for not too much less than 2006 prices. The lower to mid range of the Chattanooga real estate market hasn’t really taken much of a beating. At least not anything like you’re hearing on the national news. You’re going to take that equity from the house you are selling (you do have some equity, right?) and put it down on that new, bigger, fancier-schmancier house. You know, the one with the value that has fallen a good bit more than yours has just by virtue of it being more expensive and out of that first time buyer range. And you are going to get it at a lower interest rate and therefore you might just end up spending not that much more than you are paying now.
Are you a numbers kinda person? Here’s how it all pans out: You paid and financed $125k for your house in 2000, it was worth about $150k in 2006; now we think it might sell quickly for a net of about $130k. You are paying $874/mo on a current loan balance of $108k at 7.5%. You take the $22k in equity you have and put it down on a house selling for $225k (that would have sold for $275k in 2006) and your new payment is $1074/mo on a balance of $203k at 4.875%. Did you ‘lose’ $20k in equity since 2006? Yes. But you also ‘gained’ $50k in equity on your new place.
Because I’m a realist I like to point out the downsides to all my nefarious schemes. Contrary to my detail oriented self, I’m painting with a broad brush here. So take the total cost of ownership into account before you hit the sell button.
My other disclaimer? The home values I used above are gut feeling numbers that I can’t back up with hard statistics. In real estate, the hard numbers are always averages and a single, unique home can’t be valued on an average. Just sayin’.