• Posts Tagged ‘housing’

    Is Owning a Rental Property Worth It?

    by  • January 13, 2016 • Tagged:   • Comments

    The buy-to-let market should be going through something of a boom. With first time buyers still finding it hard to raise the required mortgage deposit, often 25%, the housing rental sector continues to increase with almost 3.5 million people today living in private rented accommodation in the UK. But is owning a rental property worth it?

    On the face of it, buying a property to let appears to be a good investment and with home ownership at a 25 year low, there are greater numbers of people seeking rental accommodation today than ever before. There is, however, a shortage in the housing market for rental properties. To discover the reasons for this, we must first look at the recent economic history of the UK;

    The crash of seven years ago saw many of the big property renters off-loading their property portfolios, and the recent new tax laws, due to come into force in 2017, have also proved off-putting for many considering a buy to let mortgage. With many landlords already finding margins wafer thin, the new legislation restricting what can be claimed against tax is enough for some to make property renting an unviable proposition.

    The National Landlords Association claims 31% of private landlords owning one property, and 17% those who own two to four, either just broke even or lost money between April and June of 2015.

    As a property landlord you have a duty of care to your tenants with annual gas and electrical safety checks having to be carried out. Furniture has to be fire resistant and the place fit for purpose. These regulations are being tightened up and wear and tear legislation is changing. From 2016 out goes the annual allowance and in comes tax relief on replaced furniture only. All these moves have been designed by the government to specifically reduce buy to let mortgages. So is the whole thing worth it?

    Providing you realize the pitfalls, and take the time to research the area of your proposed purchase, buying-to-let can still be an excellent investment in the long term. The usual buy-to-let property hotspots continue to apply; London, Bristol and Birmingham lead the pack, with Slough, Reading, and Southampton seeing the biggest monthly rental yields outside of Greater London. Cities with high student populations also do well, with the vast majority of those students living in rented accommodation.

    As with any business, minimizing overheads is the prime concern. There are a plethora of financial institutions offering financial incentives for those enquiring about buy to let mortgages, so always make sure to do a little research on the different mortgage providers. That said, all will probably require you to be an existing customer with a high credit rating, or at least have a good level of property collateral or liquidity.

    If you already have a private mortgage, have never missed a payment, and have accrued a level of collateral on the property, approaching your current mortgage provider is always a good starting point and cuts out any middlemen. Failing that, find an unbiased Mortgage Broker to talk to, or a fully regulated Independent Financial Adviser.

    Comparison websites can provide an idea of what’s on offer but beware, seeking good advice is paramount. Buy-to-let mortgage providers do not have to be regulated by the Financial Conduct Authority (FCA) and as such you could be open to what might be termed unusual practices.

    Finally, even with all the doom and gloom, in a recent survey of buy-to-let landlords, only 10% said they were considering selling their property.

    When Should You Buy Your First Home?

    by  • November 20, 2014 • Tagged: ,  • Comments

    Are you thinking about purchasing your very own home for the first time? Perhaps you’re sick of renting or you’d just like a permanent place to call your own. Whatever the case may be, make sure you’re certain that you’re ready to buy your first home and are doing it wisely. Follow the helpful tips below and your first home buying experience should be a breeze.

    1) Check Your Credit

    One of the first things that banks will do when offering you a loan is check your credit. If your credit is poor, they will either deny you a loan entirely or they’ll hike up your interest rate and down-payment amount to protect themselves in case you default.

    Before you even head to your bank or credit union (or HomeStart Perth for that matter), do yourself a favor and check your credit yourself. CreditKarma.com is a great place to do this since they’ll provide you with a free report from Transunion (one of the major three credit report companies) and they will tell you why your score might be low and what you can do to improve it.

    2) Save Up 20%

    If you really are serious about buying a home and making it your long-term residence, then I would suggest that you save up 20% for your down-payment. With this 20% you can basically insure that your home value will never fall below what you owe the bank and you can therefore avoid PMI payments to the bank as well!

    I understand that saving up 20% of the purchase price might take quite a long time, but this process will teach you to scrimp and save and to live within a budget, which is very important for when you own a home and have unexpected items that are in need of repair. Make a plan to sock a large amount of money away each month and save up that 20%!

    3) Find a Deal

    So during what time of the year should you buy a home? The absolute best time is when demand is low and house prices can be found for cheap. For many areas in the north, this means winter time. Nobody wants to buy a house during the holidays and they certainly don’t want to move their stuff in the snow. If you don’t mind this and would be willing to make a purchase in the winter to save a few thousand bucks, then I would certainly encourage you to.

    If you want to find even more of a deal, don’t be afraid to find a fixer-upper home. Ideally, you’d like to find a home that is appealing on the outside, but could use a few updates on the inside (ie. carpeting or flooring, vanities, etc). If you are fairly confident that you can repair or replace the rundown areas of the house, then that means you can probably do fairly inexpensively as well. By purchasing a fixer-upper, you can save yourself another 10%-20% off the fair market price.

    Are you ready to buy your first home?

    Fixed vs Variable – Which Home Loan to Choose

    by  • May 12, 2014 • Tagged: ,  • Comments

    I couldn’t imagine that when we started this blog on New Year’s Day in 2006, that I would ever be writing that we are now homeowners. As far as blogs go ours is fairly ancient. We started out as young-ish 20 somethings with a net worth in the red, and now we’re older, have a family, have a positive net worth, and now own property. Actually, the bank owns the property and we’re borrowing it from the them.

    Is there still a crisis going on?

    Buying a house never really entered our collective brains until recently, and I hadn’t been keeping track of how the mortgage situation was going since the crash of 2008. Were people still being foreclosed upon? Were more homes being built and bought? So off I went to do some research. After realizing that really not much has changed, I plugged in our numbers to various housing calculators and landed on a price of house that both Her and I could agree upon. After that, we went about seeking out vendors to provide to us a home loan. This was harder than we thought it would be.

    Take my money

    On the advice of every financial resource out there, we went comparison shopping to get a loan. We started by getting the recommendations of mortgage brokers from trusted family and friends (as opposed to our shady underground ones, I guess) and started calling around. Weirdly enough, it didn’t really seem like any of them really wanted to talk to me. I would ask about their mortgage products (what a silly term) and they seemed like they were very, very exasperated that I didn’t do my homework. Well then, I’ll do my own homework.

    There’s really only two main options: Fixed vs Variable

    At the end of the day, what you’re looking at are fixed-rate vs variable-rate mortgages. Interest rates in fixed rate mortgages, if you haven’t figured it out by the name, stay constant for the life of the loan, whether it be 5, 15, or 30 years. They’re nice if you don’t like surprises (I generally do, but not BAD surprises) and like to pay the same amount for a very, very long time. Variable rate mortgages have interest rates that can…wait for it…vary over the life of the loan. Of the most well known are the adjustable-rate mortgages, in which the rate low and stable for a short amount of time (a teaser rate), and then changes yearly based on the moon cycles, tides, and the prime rate (okay, only the last one). An example would be a 5/1 ARM, where the interest rate stays fixed for the first five years, then may change every year after that.

    Interest-ing things to consider (haha get it?)

    With a fixed-rate interest mortgage, you’re actually paying less over time, assuming that inflation takes its toll. Also, like I said above, your payment will never change over the life of the loan, which makes cash-flow predictions and budgeting easier.

    With a variable-rate interest mortgage, the increase in interest rate after the initial teaser period might increase your monthly payment to an unsustainable amount. Some may ride out the teaser payment period and try and refinance at the end of the period, but then if you’re doing that then you may have bought too much home. These loans are popular among those who buy homes and flip them, as they assume that they’ll unload the home before the interest rate resets.

    Our decision

    As we were looking for our “forever” home, we didn’t want any surprises in the long run. After I did my due diligence, I decided that a fixed-rate mortgage was right for me and my family. I still called around to find the best rate, and definitely negotiated both the home and mortgage costs. We’ve now been in our home for a few months, and I can say that it’s been the right decision for us.

    Getting Rid of the For Sale Sign: How to Get Approved for a Home Mortgage Loan

    by  • November 24, 2013 • Tagged: ,  • Comments

    The dire straits of the economic recession are still taking their toll, especially within the struggling real estate market. There are millions of people throughout the United States who are eagerly searching for ways to qualify for a mortgage loan so that they can get the keys to their new home as soon as possible. Studies have proven that there are several key steps that can be taken in order to make this process fly by from start to finish much sooner than the average consumer might realize.

    Save Up a Lump Sum of Money

    Keep in mind that getting approved for a mortgage loan is only going to be half of the battle. In most cases, you can improve your chances of getting approved for a great interest rate and overall deal by saving up a substantial sum of money as an upfront down payment. Even if you need to save money for several years, the great deal you will qualify for with a substantial down payment will truly be well worth the wait.

    Search for the Best Interest Rates

    Another vital step that needs to be taken in order to make it much easier for you to get approved for a home mortgage loan is to search for the most competitive interest rates that are currently available. Many homeowners seem to search for competitive mortgage refinance rates years after they have purchased their home just to be able to gain some financial relief from the higher interest rates they signed up for initially. You do not have to subject yourself to these astronomical rates if you take the steps necessary to get a great rate today. Do not hesitate to shop around for estimates from a wide variety of mortgage lending institutions before finalizing any deal.

    Do Not Forget About Your Credit

    Several case studies have been able to prove that credit issues are the main reasons why there are so many American adults being rejected by mortgage lenders throughout the country. Keep in mind that less than 40 percent of adults in this country have actually checked their credit report within the past year, according to Experian. Therefore, checking your credit report should truly be one of the first steps that you take if you are serious about qualifying for a competitive home mortgage loan.

    A good credit score to have in order to qualify for a conventional mortgage loan is 680, based on a study conducted by the Home Loan Learning Center. If your score is nowhere near that figure, then you need to put your dream of home ownership on hold so that you can have plenty of time to address your credit issues right away.

    The Bottom Line

    The next time you drive by your dream home with the “For Sale” sign posted in the front yard, keep in mind that there is a chance you could be the one who finally removes that sign after purchasing the home. However, qualifying for a competitive mortgage loan today will help you to get the keys to that dream home, or a comparable model, tomorrow.

    We’re Buying a House…Sooner or Later

    by  • September 19, 2013 • Tagged: ,  • Comments

    Sadly, after almost nine years of renting an apartment and stable rent payments, we’ve decided that we need to get a bigger place to live. Our financial lives were pretty simple the past few years, even with the addition of a new family member. We’ve decided to turn our world upside-down and look for property to purchase. Of course this is going to be THE biggest purchase in our lives, so we sat down to look at the strategy we’d take in purchasing a home.

    The first thing we had to do was pull our credit reports and our credit scores. That’s easy and straightforward. Both of our credit reports were free of any errors or suspicious activity and or credit scores were above 760. We definitely started the process feeling pretty good and that when we went looking at getting a home loan we could 1) qualify and 2) get a good rate.

    The next thing we did was to get referrals from friends and family on mortgage brokers and other lenders. It turns out that everyone wants to offer up their particular mortgage person, so we weren’t short on referrals. However, it’s the next part that surprised me.

    I had been reading some books on how to shop for a mortgage, and even before we landed on a price of house I called up some of the lenders to see how they would react to some questions. I was surprised at the lackluster attitude of some lenders as they seemed like we would be too “high maintenance” of clients since I sort of knew what I was talking about. The lender we ended up going with was SUPER attentive with our questions and was available at any hour to make sure that anything that needed to get done was done.

    The home buying process so far has been a roller-coaster ride. For some reason it seems that the “perfect” place is always just out of budget. We’ve seen some magnificently awesome places (and magnificently out-of-budget) and dumpy wtf were the owners thinking kinds of places. It’s quite amazing to see what the housing bubble has done to raise the prices of a lot of crappy housing. We hope that we can get into a new house before it snows.

    Green-Eyed Monsters

    by  • December 10, 2012 • Tagged: ,  • Comments


    I'm Like That Little Girl in the Background, Throwing Bitter Glances

    Despite having what one might call a healthy sense of self-confidence, there are moments when I feel overwhelmed with envy for what other have. If I’ve been eyeing a dress online and deemed it irresponsible to purchase it, I’ll seethe just a little bit when I spy a co-worker wearing it the next week. This is particularly acute with some things more than others – when I see people planning weddings, for instance, without much stress or monetary consideration, I recall my own less-than-thrilling year of being engaged, and envy them for their stress-free experience. Why does SHE get the chiavari chairs without a single thought of expense or waste? Why couldn’t I?

    More often than not, these are stupid emotions that do little but allow me to wallow in self-pity and waste some time. Circumstances, I have to remind myself, are always different. Would I have picked the fancier wedding chairs, even if cost weren’t an issue? Probably not, because that’s not how I think about money. If I want that dress so badly, I could make room in my budget for it, surely. And beyond that, these financial moments of jealousy are often without a full picture of how the object of envy really lives. It’s very likely, based on my conversations with her, that the coworker with the dress can’t really afford it, and has put that new frock on credit. Just because others appear to have what we want doesn’t mean they’re any better off than we are.

    But this kind of envy has a way of feeding itself into anxiety, and it’s worrisome enough that I’m trying to keep an eye on it. My husband and I visited family over Thanksgiving, and as we were driving around, we noticed a number of houses that were for sale.

    “How much do you think these go for?”

    “Maybe $500,000.”

    “Well that’s nice for whoever can afford that but WE NEVER WILL.”

    Will we be able to afford that much house one day? I certainly don’t know. I know what our current savings goals are, and while it sometimes feels like we save and save and never get to those hugely far away numbers required for quaint houses in the suburbs, I have no idea what the future holds, so why the glum attitude? Why the jealousy of people in houses whom I’ve never met? People who may not even be able to afford what they’re living in, or if they can, have nothing to do with me?

    It’s a financial conundrum of a different sort, and I’m working through it. How have you handled financial jealousy?

    image: Ktoine

    Save Money by Abandoning Your Ancestral Home

    by  • August 15, 2012 • Tagged:   • Comments

    new york city street

    Not for me, anymore

    If you like our blog, please cast a Plutus Award Ballot for us for Best Personal Finance Blog for Young Adults and/or Best Debt-Focused Personal Finance Blog!

    When I was a (younger) person, living in in a town not far from Manhattan, I spent much of my time fantasizing about how wonderful my life would be as an adult. I would, of course, live in New York City, where everything good in the world resides, and where I would have an exciting, lovely life doing something creative and interesting and drinking gin cocktails (I read a lot of Dorothy Parker in my tweens) with my creative and interesting friends. I would live in a perfect apartment somewhere along the Upper West Side, and spend long Saturdays on the roof deck of the Metropolitan Museum of Art. I would live in New York, because where else would you live?

    This wasn’t such a crazy, out of reach idea to me at the time. My family has been in New York for as long as they’ve been in the country. My grandmother, mother, and I had been born and raised in the Bronx; except for a very brief move to Maryland in elementary school, I’d been in New York my entire life. I had spent my childhood going to museums with my grandmother, eating the milk and cookie plate at Sarabeth’s in Manhattan, and seeing musicals on weekends. I consumed bagels weekly, had lunch at diners and Jewish delis, and stopped for a slice of pizza at corner shops with regularity. All family events had chopped liver and tongue sandwiches (they’re delicious, be quiet) and Dr. Brown’s cream soda. I was (and like to think I still am), as a friend put it, a dyed-in-the-wool New Yorker.

    Then, I went to college. I started getting internships in New York. I learned how little publishing pays, and how expensive everything about New York City is. I graduated, and lived at home for a year to save money. I cringed every time I bought a metro card, and couldn’t get over what my friends were spending in rent. I thought about what I wanted out of life (a little more quiet, a little more money, a little less difficulty, a different career), and moved to New England to start a new job and to rent an apartment for an amount of money that wouldn’t get you a closet in New York. I married my husband, who is from one of the most rural places in America and can’t conceal his disdain every time he steps foot in New York City. And I slowly realized that I will likely not be moving back to New York to live out that long-ago idealized version of my life.

    Perhaps most interesting to me about this development is how okay with it I am. We all gradually realize what we want out of life, and I’ve gradually realized that I don’t want to live in New York. I love the city, and I will raise my children to understand that their mother is a New Yorker, and that it’s in their blood, and that it’s a wonderful, amazing place filled with more things than you can do (or eat) in a lifetime. But I do not want to raise my children there. I do not want to join the ranks of so many families struggling to make sure they’re in the right zone for public schools, or trying to get their children into the right preschools, or unable to save any money because so much of it is going towards rent and food and general necessities. I want a house with a yard, and some quiet when I want it, and the general understanding that I can take my kids to the local school and it will be good.

    Clearly, a lot of this is tied to the idea that I will one day have a family. When my grandmother and mother were growing up in New York, everyone in our family lived in a three-block radius of each other. The local schools were great, your family was close by, and you could live in a nice apartment and be comfortable. You could be middle-class and make it in New York. I don’t think that’s in my future. Even my mother has acknowledged that it’s insanely expensive, and our family has gradually relocated.

    This isn’t to say I want to retreat to a farm. I like being in an urban area, and particularly in a college town. I would like to keep living in places where I can go grab a good drink and some food with friends when I want to. I would like to be able to see museums and shows, and to generally be around some bustle. I just don’t think New York is part of the picture anymore.

    Have you reconsidered what you want out of life based on expense?

    Image: Amanda Tetrault

    Happy Family of Renters

    by  • September 26, 2011 • Tagged:   • Comments

    for rent

    Our place is a little nicer...a little.

    image: Number Six (bill lapp)

    While in the past year much has changed, you know with the baby and all, much has stayed the same. Yes, we’re still renters, baby and all.

    Remember that unbelievable rent increase of $8 that we faced in 2008? Since then, our rent has not increased ONE PENNY. Yes, in a followup post, I said that we would probably be moving away from Chicago (the city proper, 606xx, suckas) in about two years. But hey, look at that, home prices plummeted BIG TIME since then, and are still falling! If you followed our blog back then (and why wouldn’t you have?) then you would have known that we were not in the best financial position to purchase a home. Best case scenario for us would have been a variation of “house-rich, cash poor.” Purchasing a home then, combined with the decrease in home prices, would have probably have led to us being underwater on a mortgage now. Not only that, but rent prices have been rising, which makes our place even more of a steal.

    Just to remind you – the amount we pay in rent is $1000 per month for a 3-bedroom apartment on the north side of Chicago. Not only have we been saving money on rent, but we’ve also saved on maintenance. Recently, our toilet broke (float arm broke); replacing the whole flush assembly is relatively cheap and easy (under $20). However, since I’m not a full-time plumber (or part-time, really), it would have taken me a lot longer than someone who knew what he was doing. A quick call to the landlord solved the problem while I played with the baby.

    Sure, there’s some things that we don’t like in our current place. It’s probably because we’re still in denial that we have another human being to take care of and we can’t lead a DINK lifestyle anymore. But for now, the positives outweigh the negatives and we’re going to stay renters for the time being.

    The Price of Compromise

    by  • May 12, 2010 • Tagged: , ,  • Comments


    photo: somebox

    My husband David and I recently tackled the Big Scary Most-Expensive Thing You’ll Ever Buy investment: buying an apartment. In New York City. It was one of those “well, they say if it doesn’t kill us it’ll make us stronger …” experiences.

    The most financially fraught moments came at the end, at the closing table, where we forked over checks for pretty much every dollar we could lay our hands on legally. (We didn’t end up knocking over any liquor stores, but we briefly considered it when we saw the five-figure bill for property transfer taxes.)

    But emotionally, the big money-related hits came early on, when we had to decide how much we could afford to pay and what trade-offs we’d be willing to make.

    A thing we rarely agreed on. Even the best-matched couples aren’t going to have identical preferences and priorities.

    On the big-picture stuff, David and I were fairly in-sync. We had similar ideas about what kind of total monthly payment we’d be willing to shoulder, and we were both dead-set on only considering a 30-year fixed mortgage — no ARMs or interest-only exotic stuff for us, thanks.

    But within the rough framework of “we can afford X,” we had the usual stack of disagreements about what we should use that money to buy. The #1 rule of NYC real estate is “you will never get everything on your wish list unless you double your price range.” What stuff couldn’t we do without?

    I wanted a short commute. David wanted a second bathroom. I wanted two bedrooms.  David wanted a nice-looking block.

    I didn’t care about the block or the bathrooms; he thought a one-bedroom would be fine and wouldn’t mind an extra half hour on the subway. Everything on the list came with a price tag. So how could we pick? Whose wishes got to win out?

    I’d like to claim we talked it out like sensible adults, calmly bartering swaps from our own personal want lists. “OK, this place is a little further from the subway than I would like, but it has that second bathroom you want, so let’s go for it  …”

    There was some of that. We picked a building fairly quickly — which, I’ll admit, catered more to my preferences than his. Commute: great! Neighborhood aesthetics, not so great.

    But the building is fairly large, with more than 100 apartments and dozens of different floor plans available. Therein commenced the “discussion” about compromises.

    Which eventually escalated to yelling.

    We only had one really epic fight, but it was a full-decibel affair that led to several hours of us speaking to each other only via the cats: “Kea, go tell the human being on the other side of the room that if he wants dinner, I’m leaving it on the counter.”

    Finally, a day later, when we decided to again acknowledge each others’ existence, we hammered out a framework for decisions. The only way we (ok, I) could see to make either-or choices was to bow to the wishes of the partner who cared more about the issue.

    I would have preferred a walk-in closet to a second bathroom. But David felt really strongly about that one, so I said OK to his extra room and goodbye to my shoe-and-handbag haven. On the other hand, I desperately wanted the apartment with a small terrace — the proximate cause of our Waterloo, since David hates heights. After some extensive pleading on my part, he finally agreed to it.

    Buying a house (ok, in our case, “tiny living cube”) isn’t the only pricey investment that brings clashing wants to the fore. Cars, schools for the kids, even expensive appliances or furniture seem likely catalysts for showdowns. I’m curious how other couples have negotiated the peace treaties.

    Making Home Ownership Work

    by  • February 5, 2009 • Tagged: ,  • Comments

    Wow, a $15,000 tax credit for new homeowners? (thanks, Jim)

    Plummeting housing values?

    Ever decreasing interest rates?

    I’d be lying if I were to say that I haven’t been trolling the MLS listings for about an hour each day for the last few days, searching for our lair where we will hoard our spoils of war and amass an army of hatchlings.

    While this perfect storm of economic factors is a definite boon to us as potential home buyers, our lack of savings is looking like our largest obstacle to future home buying.

    Currently we have a little over $20,000 in cash saved up. I’m not sure how much of that is liquid; we expect to owe taxes this year and are deciding which route to take to reduce our tax burden. We’ll either contribute $10,000 into a solo 401(k) and pay the remainder of the tax out-of-pocket, or we’ll just eat the estimated $4,500 tax bill. Both options don’t leave us with much flexibility.

    We also have the two 0% student loan balance transfers. If these were 0% for life it would be an easy decision to only pay the minimums until we saved enough for a down payment. Unfortunately, the balances must be paid off by September and December, and it doesn’t look like we’ll be able to change our plan for paying these off.

    The only item in which we have any breathing room in our budget to free up some money is our Roth IRA contributions. We were planning on contributing the maximum amount to both of our Roth IRAs this year. On a monthly basis, we would be allocating $833.33 per month, an amount that, if saved, would significantly accelerate our plans to own a home. I’m not quite sure that this is anywhere near the right thing to do now.

    There’s nothing wrong with our current goals: pay off debt, save up until we have a 20% down payment, and contribute to our retirement plan. We are planning on waiting until spring of 2010 to seriously look for a home. Even writing this now I feel that waiting may be the best option because we’ll be the most financially ready then.

    But wow, a $15,000 tax credit is going to be difficult to pass up.

    Financial Goals for 2009

    by  • January 19, 2009 • Tagged: , , , , ,  • Comments

    While we are already pretty well into 2009, it isn’t too late for us to officially declare our 2009 financial goals. We’re now married, so our financial priorities have changed accordingly…and they happen to be house and baby, not necessarily in that order and probably not for at least a year from now. That said, 2009 is going to be a year of heavy financial preparation. Here’s what we’re setting out to accomplish:

    Pay off student loans that have been transferred to 0% balance transfer (BT) cards

    In late 2008 both Her and I opened 0% BT credit cards for the purpose of paying off the remainder of the private student loans. The total amount was a little over $13,000, and we started making payments in December 2008. The cards’ BT rate expiration dates are this year in September and December. Therefore, we’re going to pay off the cards in order of BT rate expiration. We’re allocating $1,000 per month towards paying off those cards. That way, we should be making our last payment in December 2009.

    While we’re paying these off we’re paying the minimums, about $400 total, towards the other student loans that aren’t at 0%.

    That brings us to a total of ~$1,400 per month for student loan payments. Ouch.

    Stretch goal: pay off half of the student loan on the 1.9% BT, about $4,000

    Save $15,000 for a down payment for a house

    We’ve written a lot of posts on our ideas on housing. Summary: we want to buy, but haven’t had any money so we’ve rented and get a great deal, now we’re saving, but have no idea where or when we’re buying, but no suburbs, please.

    Of the above summary, the most tangible thing we can do to move forward with our housing decision is to save, save, and save. We’re socking away $300 per paycheck into savings with automatic deposits.

    Stretch goal: Save $20,000. This is entirely possible, but with the way the economy is going we’re not going to get our hopes up.

    Contribute the maximum to our Roth IRAs, $10,000 total

    …this of course assumes that we will be able to contribute to Roth IRAs. We’re actually going to start this in April when our taxes have been all sorted out, and contribute until April of 2010. Our monthly contributions to our Roth IRAs will amount to $833.33.

    Stretch goal: Be comfortable with our cash flow so that we can increase our 401(k)/SIMPLE IRA contributions at work by at least 1%. Alternatively, we can also put money into a Self-Employed 401(k), starting out with 5% of our business income.

    I’ll check in with these goals every quarter to see how we’re doing. How are your goals shaping up for this year?

    From The MoneyMix Archives – Housing

    by  • January 16, 2009 • Tagged: , ,  • Comments

    This is post highlights articles from our writings at the MoneyMix blog.

    When Is The Right Time To Invest In The Housing Market? The housing market is going down, but that means good things for potential buyers like us. Read our list of criteria that we’re going to try and follow when we decide to jump into the market.

    Where Should We Put All Of This Stuff? Ah, the eternal enemy of clutter. After the wedding and showers, we received a bunch of gifts. Read our plans on how we’re going to deal with all of it.

    A Look Back At 2008

    by  • January 9, 2009 • Tagged: , , , , ,  • Comments

    Whew, 2008 was quite a year. For us, it will forever be remembered as the year that we got married! But what else happened this year for us financially?

    To cut expenses, we cut Netflix out of our life. We also cut back on weekend trips. I was officially diagnosed with depression and learned some of socioeconomic aspects of dealing with it. After we were married, our first fight was about…money. It wasn’t as bad as the financial infidelity that Her’s brother went through.

    After much trial and error, we finally made a budget that we stick to.

    Our crazy but generous landlord increased our rent a whopping $8 per month.

    We started a Big Dreams Savings Fund with the spoils of our wedding and related showers. We’ve decided that 2009 will be a balls-to-the-wall savings year.

    The biggest news was the huge gift we received that wiped a good portion of the student loan debt. We even succeeded in not taking any more debt for the wedding and the honeymoon. As newlyweds, we’ve decided that tackling the student loans will be our first financial priority.

    This year taxes got crazy. I had a hard time dealing with them early in the year but somehow figured it out. But, at the end of this year I went back to a dumbfounded state about taxes. We didn’t know if we would have to pay taxes on the student loan gift payment, but it turns out that we didn’t have to.

    In 2008 we were light on the posts, especially the meaty financial ones. Our main focus was on the wedding and not much else. Since we now have a future together to plan for we have a lot of financial stuff to talk about in the upcoming months. Stay tuned!

    My DIY Plumbing Success!

    by  • January 2, 2009 • Tagged:   • Comments

    Our bathroom drain has been clogged for about a year. We have been pouring gallons of Drain-o (and money) down the drain. I tried to remove the drain stopper (the little thingy that goes up and down) but couldn’t. Recently, the clog got so bad that it would take hours for the sink to drain. Gross! We figured it was time to call the plumber. But before we spent any more money I decided to go all-out and try to fix it myself. I spent this afternoon reading plumbing websites. Considering my massive New Year’s hang-over, it didn’t really ruin my day.

    I tried several approaches and after a few hours – SUCCESS!!! The drain is clog-free! And it didn’t cost us a cent to fix it. Now I just have to clean up the giant mess I made pulling everything out from under the sink. I’m super proud of myself because this wasn’t something I initially thought I could do.

    Have you ever saved money by DIY’ing a home repair?

    On Renting, Part 2: Our Future

    by  • January 29, 2008 • Tagged: ,  • Comments

    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?

    On Renting, Part 1: Our History

    by  • January 28, 2008 • Tagged: ,  • Comments

    I should have seen this coming: after Friday’s post about how we got an amazing deal to rent our place for a few more years, we inevitably received the obligatory “renterz drool, homeowners rule!” comment. I apologize, personal finance blogosphere, for not letting you know the nuances of our housing decision!

    Buying property isn’t something that we’ve been ignoring. Heck, I’ve posted numerous times about owning property. As you can imagine, it isn’t as simple as going to the fictional neighborhood condo supermarket, picking one out, and viola! – move into a new place.

    When Her and I first moved to Chicago three years ago, there was no way we were in any financial shape to own property. Every month we had about 30 different bills we were paying a month with over $20,000 of credit card debt alone, coupled with a lot of student loan debt. During that first year, the only way we would be able to afford a place would be if we took out a 100% loan, probably with some “creative” financing. I’m willing to bet that we would be in deep financial trouble had we bought a place then.

    Two years ago, Her and I were starting to gain momentum in terms of getting our finances together. We still had over $18,000 in credit card debt and a lot of student loans. Again, looking at our overall financial situation, we were not ready to buy property without accepting a lot of risk.

    One year ago, we were well on our way to becoming somewhat financially healthy. Looking at our finances, we were in a better position to buy property. We were aware, though, that we would be buying at a time when home prices were at, or at least near, their maximum. Prices for a 2 bedroom, 1 or 2 bathroom condo near public transportation in Chicago were still out of a comfortable price range.

    Today, we’re in the best position to purchase property. Home prices and interest rates are dropping. Even if we weren’t earmarking much of our cash for our wedding, we still wouldn’t buy. The reason: In 2 years we’re probably going to move away from Chicago.

    Tomorrow, I have a post lined up that explains what moving in 2 years does to our purchasing property outlook.

    Unbelievable Rent Increase

    by  • January 25, 2008 • Tagged: ,  • Comments

    When Her and I first most to Chicago, it took us a little while to find an apartment that would accommodate us and not have any weird holes in strange locations. We didn’t enlist the services of any of the apartment finding services here, but instead we took a multi-pronged approach of checking out Craigslist and the Chicago Reader.

    After seeing many apartments that were too small for the rent asked, had too many holes in weird places (seriously, this was a weird theme in our hunt), or were not in a location near to public transportation, we finally saw one we liked. Thus, a little over three years ago, we signed a 3-year lease for a 3 bedroom apartment in a great Chicago neighborhood a few miles north of downtown. Not only that, but we somehow found a place for only $900/month, with a 5% increase each year thereafter. Sure there was no dishwasher; we’re fully capable of doing dishes ourselves. It didn’t have a washer/dryer in the unit, or even in the building, but that wasn’t a problem since there is a laundromat a steps away from our apartment.

    In the time in which we’ve been in our apartment, we’ve seen many buildings get torn down, and others rise up to take their place. To our delight a brunch place and a coffee shop opened up two years ago, just steps away from our apartment. A CVS opened up shortly after we moved just a block and a half away. All of this has resulted in more foot traffic on our block, meaning safer commutes and more of a community feel.

    Alas, this March our lease to rent our current apartment was set to expire. Because of the 5% rent increases over the last few years, our rent has increases but has managed to stay a hair under $1,000.

    As Her and I have a wedding this year and much uncertainly of where we even want to be in a few years, we mulled over the decision to ask our landlord to extend our lease. We didn’t have much time to mull it over when we came up to speak with us about that very topic.

    He offered us this proposal: An even $1,000 per month, for the next two years. No increase…and if we wanted to stay longer, he wouldn’t increase the rent.

    Our landlord was proposing to raise our rent by less than $8 per month for the next two years. With an option to renew at that rate.

    Unbelievable. The fact that he was going to offer it to us for so cheap was unbelievable.

    Needless to say, we have a place to live for the next two years.

    “On Paper” Divorce for Financial Reasons

    by  • November 12, 2007 • Tagged: ,  • Comments

    photo: How I Met Your Mother website

    Last week on How I Met Your Mother, Lily and Marshall considered getting a divorce “on paper” for financial reasons. Lily had bad credit, so she proposed that Marshall divorce her so he could apply for a mortgage without her. The odd thing about this scenario is that I know a couple who actually did this – and it ended in a real, bitter (and permanent) divorce.

    This couple, who were close friends of my parents, started several hotel businesses. Over time one business after another collapsed, leaving them personally in financial ruin. They were facing bankruptcy, a difficult time for any married couple with two small children. They were going to lose their home and have to uproot their children. Wanting to protect his wife and children, the husband proposed that they get a divorce before he filed for bankruptcy, allowing his wife and children to retain their home. It was supposed to be “on paper” and he would still live with them. After the dust settled, he planned to remarry his wife. But his wife was so hurt by the idea that they started fighting over it – in addition to their fights about finances. Within a year, they were divorced for real. They ended up losing it all: the businesses, the house, and the marriage.

    Aside from the obvious legal and ethical issues (what the husband wanted to do was obviously fraud), this was a terrible idea for their relationship. It may be tempting to try using divorce to cure your financial issues, but chances are you will only add pain to the disaster. It’s better to take advantage of credit counseling and other debt services than to try to defraud your creditors and spouse.

    Good Weather For Renting

    by  • August 27, 2007 • Tagged:   • Comments

    Lately lots of our friends have been buying houses, and we’ve been feeling left out. But this week Chicago has been deluged with severe weather, and suddenly the only thing we’re missing out on is damaged property. The friends with the brand new garden level condo are furious that it has flooded – again – and the contractor won’t return their phone calls. The co-worker with the new house in the suburbs now has two enormous trees decorating their living room. The friends with a new condo on the north side were out in the storm shoveling leaves out of the storm sewer. As for our own leaky windows, the landlord was here last night to take measurements for replacement windows while we lounged around.

    A major reason we haven’t purchased real estate is that we don’t have an emergency fund large enough to cover major home repairs. For once the soggy grass seems greener on the renting side.

    “How Much Home Can You Afford?” Calculators Scare the Bejeezus Outta Me

    by  • June 22, 2007 • Tagged: ,  • Comments

    Between friends and coworkers, I’d say that 80% of the people I know are now homeowners, with many of them buying their first home in the last year or so. Admittedly, I’ve felt out of the loop.

    In the past, we’ve wondered if it were feasible to put down 20% on a home. The more I look at our future, it looks like that could be possible. As we’ve just paid off all of our revolving credit card debt, I’ve wondered (just for fun) how it would affect how much home we’d be able to afford. So in order to get a better idea of a number, I decided to run the numbers using four different online calculators, and maybe even see if I could get some of the best home loan rates.

    Before I get into the details of each calculator, there were some ground rules in the numbers to make everything even. I assumed:

    - $50,000 for a down payment, the approximate amount I’d like to save up before buying a home

    - Fixed 30-year mortgage at 6.25%, a reasonable guesstimate of what our interest rate would be considering our FICO scores

    - Annual property taxes of $2,300, an eyeballed average of property tax listings of condos in my part of town

    - Annual homeowner’s insurance of $659, the 2004 Illinois state average.

    - Monthly debt of $1,000, the minimum payment for the student loans

    The first calculator is the one (warning, this calculator is a java applet that will slow down your computer for a few seconds) from dinkytown.com. I’m pretty sure that it is the same calculator found on (also java) interest.com (disclosure: they may have ads on this site, on every page, or something). I like their calculator because it shows how much mortgage you can afford over a range of interest rates. But since we’re only looking at interest rates at 6.25%, I’ve gratuitously outlined the value in the chart: $318,883. Add to that a $50,000 down payment, and we have a value of $368,883. Not bad.

    The second calculator was the venerable bankrate.com‘s housing affordability calculator, which said we could afford a $368,902.36 home:


    I next went to smartmoney.com to use their calculator. The mortgage amount was pretty much the same as was dinkytown.com stated, $318,835, making the final value $368,835.


    The last calculator I tried was CNN Money’s offering. This calculator gave me a range from $368,882.87-$397,846.38.


    This was a fun exercise considering that a year and a half ago a calculator (erroneously) told us that we could only afford a $10,000 home!

    Why do these calculators scare the bejeezus out of me? Because I know for a fact that I’m not in the state of mind for home ownership. I’m still in young and carefree mode, and with a house comes a lot of responsibility that I don’t think I’m ready for. I think Mapgirl would agree with me on this one.

    The real scare is knowing how much more debt would be added to our tally. That is only slightly tempered by the fact that we’d have to be paying for housing whether we’re renting or buying…so why not build equity? I also have to keep in mind that these numbers represent the MAXIMUM amount of mortgage that we’d be able to handle. Her and I have had some pillowtalk discussions about how stretched thin we’d be if we bought the maximum amount of house we could “afford,” and how we’d rather not have to stress about the money.

    In the end, I know that none of this is serious. We’re not looking to buy until at least a few more years, both for maturity and saving’s sake. It does feel good though, to know that we’re making some financial progress.