Tag: future

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On Renting, Part 2: Our Future

Posted on January 29, 2008 by Him

Hey, you'll need to read the previous post to figure out what's going on here!

Yes, we're strongly in favor of moving away from Chicago in 2 years. I love Chicago, but I've been here all my life. I want to experience something else to see what else is out there.

With that in mind, buying property right now doesn't seem to be in our favor. Not taking any market conditions into consideration, let's assume that we purchase a $250,000 home with a $30,000 down payment (the amount we have in cash savings now) and a 30-year fixed mortgage at 5.5%. In 2 years when we want to move we would pay down $6,094.47 in principal; therefore we would have $36,094.47 in equity. None of that includes any maintenance, closing costs, or other stuff like new furniture. Therefore, if we sold our home at the price that we paid for it, we would have some money to put down on another home and cover any costs.

But, if we take current market conditions and some pessimistic future predictions into account, the situation looks worse. Everyone and their mom is predicting that home prices will go down in the next few years; some are even predicting up to a 30% decrease in value. Assuming the above calculation, that would introduce the very real possibility that we would be upside-down on our mortgage, or we would owe more than what our house would be worth. Therefore, if we wanted to sell our place in 2 years, we could actually LOSE money just on the price of the house, not to mention have to spend more to purchase an entirely new place. That of course, assumes that we can sell our place right away; a quick look at the Chicago MLS listings (is that redundant like ATM machine?) for condos in that price range in our neighborhood reveals a glut of properties that have been on the market for more than 3 months. There's no way I would move unless the old place was sold; I wouldn't want to pay 2 mortgages for any period of time.

Now I know what people are saying: I can't time the market. I know that. But is waiting 2 more years to buy property really that bad? I believe that money that is currently going towards housing is not going to waste; after all, we do have to live somewhere. The alternative is to not spend any money on housing and live on the street, right?

As for the argument that we're making our landlord rich - even with a mortgage, aren't we going to make someone rich? The lender? The builder? The person who we bought the home from? It's not like I'm hacking away at trees, forging my own tools, and making a home from scratch. Money is changing hands - the mortgage process simply abstracts who is receiving it.

In the end, we're not against buying a home. We're just not going to purchase a home right now. We're renting now because it gives us the short-term flexibility that we need for our future plans. We also want to wait a few years so that we do it right. What's wrong with that?

Future Outlook: Some Random Thoughts

Posted on November 29, 2006 by Him

A few months ago, Her posted that we'd be free of credit card debt in 24 months. That was almost five months ago, so that would mean we have 19 months to go to pay off our credit card debt (I am a math GENIUS). Since then, we've quietly decided to put more money into credit card debt, upping our contribution to our credit cards from $500 extra a month to $700 extra a month, for a total of about $900 going towards credit card debt per month. After the holidays, we probably will allocate a little more. That will accelerate our credit card debt reduction by at least 7 months or so, leaving us credit card debt free in December 2007 at the latest.

So what are we going to do with another $900 a month in 2008? Here are some random thoughts.

- Pay more towards the student loans. Obviously.

- Max out Roth IRAs for both of us. The 2008 maximum contribution is $5,000. That would mean $833 per month would be diverted to those accounts.

- Save for a house.

- Buy a pony.

It is quite liberating to think of what could be done with extra cash. I guess this is a taste of that so-called "financial freedom." That's good stuff.

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