Question House vs Apt

iVillage Member
Registered: 10-30-2004
Question House vs Apt
12
Tue, 09-13-2005 - 10:20am

Ok, right now we live in a house. We have been here for 5 yrs, and our house has appreciated less than 10,000. Our real estate market in MI has not rebounded from 9/11. There are ton's of houses for sale in our community, but they are not selling. I have been trying to convince DH to sell the house and move into an apt for one or two years. Closer to DD school, and in a much better neighborhood. I figured we will be able to pay down some of our 50,000 debt with the money we saved on insurance, utilites, apt rent. Right now with taxes, insurance and our house payment the paymens is 1200 a month. I have found a three bedroom, 1200 sq foot apt for about 700.00. Our house is only 1082 ft, so this is even bigger.

Here's my question...Is this a good idea? I know your home is your most valuable asset. We have NO equity in our home, and I feel like we are just sinking.

TIA!!!

Martha

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iVillage Member
Registered: 08-19-2003
Tue, 09-13-2005 - 10:29am
HOw much do you still owe on your home, and how many more years is the loan? Sometimes renting is better and sometimes owning is better, but we need more info.

Shannon


Pregnancy%20ticker
iVillage Member
Registered: 10-30-2004
Tue, 09-13-2005 - 11:05am
We will have 28 yrs left on our 30 yr mortgage in Dec. We still owe 111,000.
iVillage Member
Registered: 08-19-2003
Tue, 09-13-2005 - 12:25pm

OK so it will roughly cost you:

To own your home:

$1200 x 28 years = $403,200 (plus maintenance)

To rent:
$700 x 28 years = $235,200 (plus rent increases)

How long will it take you to pay off your debt with the additional $500 a month your saving? Personally if your not attached to your home, I would attempt to buy a cheaper home in the $700 a month range if thats what your comfortable with, but aslong as you could pay off your debts with the savings and not incorporate it into the monthly spending I would say sell the house with the plan to pay off debt & purchase another one ASAP.

I consider a mortgage a forced savigns plan. With rent you are only making the landlord wealthy.

Shannon


Pregnancy%20ticker
iVillage Member
Registered: 10-30-2004
Tue, 09-13-2005 - 2:10pm

That's how I feel also (about the landlord), but the city we live in is as low as I wan't to go. The next option is to move into Detroit, and that's NOT going to happen. That's why I thought an apt. But I really want another house so it would only be temporary. Maybe 2 or three years max.

Plus, around here, if you don't own a home for three years, you can start to use the first time buyers incentives again.

iVillage Member
Registered: 03-27-2003
Tue, 09-13-2005 - 2:17pm

Only you can make this decision, but let me throw in my experience and thoughts. I have two children, although only one of them had been born when we hit rock bottom financially three and a half years ago. We were living in a rented duplex.

We left the duplex, which was $600 a month plus utilities, for an apartment ($580 a month, with water included--approximately a $100 a month savings, plus some savings from the fact that the apartment was more fuel efficient and all repairs were handled by the management company).

It was the right decision for us at the time, but living in an apartment with a toddler and then a young child and then a newborn was challenging. In order to get my son the exercise and outdoor experiences I felt he needed and that he definitely wanted, I spent a lot of time driving around town to different parks. I was bored most of the time, because sitting at a park watching a toddler play is, well, imo boring (as opposed to a child playing in a back yard while I work on yard work or, better yet, working on yard work while the child helps). I also went to friends's houses a lot. I probably spent a fair portion of the $100 a month savings on gasoline.

Meanwhile, through a combination of me having a night job while dh watched the kids, learning more and better frugal skills, selling a lot of stuff, a couple of raises for dh, and refinancing our car, we managed to get back on our feet enough that in 2004 we purchased our own home.

For us, the quality of life difference WAY offsets the more than $500 a month increase in expenses for living in a home. I no longer drive to parks all over town all week--we get all the stimulation we need at home (and at the pond that belongs to our neighborhood association). The neighbors are awesome, my kids play with the other kids in the neighborhood (at the apartment, there were other kids, but nowhere for them to really get together and play, so everyone stayed pretty isolated), we have plenty of space (we went from 900 sq ft to over 1800).

So, there are big differences between our situation and yours. But some similarities, too, especially the fact that twice we had to choose between a house and an apartment, though only the second time was it a decision between owning and renting. The first time we chose the apartment, the second time we chose the house. Each time it was the right decision for us.

As Shannon pointed out, on a strictly financial basis, renting may be better for you. Although, don't forget to factor in the savings you will gain from not paying all your utilities (if that applies) and not having to pay for home repairs and maintenance. But also don't forget to factor in any extra expenses you may incur from driving to parks and other areas to meet your children's needs, as well as any extra driving you'll do to see friends, etc.

Also don't forget the costs of selling and then buying again when you're ready. They can be substantial.

But ultimately, I don't think it should be a purely financial decision, unless your situation is desperate. If you're having trouble paying your mortgage and creditors are calling you, then it may be time to take a drastic step. But if you're managing your bills or if you can find a way to pay all your bills without selling the house, then you will need to weigh the potential financial savings against quality of life issues.

Will your kids miss having a back yard? Will they be sorry if they don't have friends they can play with next door? Will you feel cooped up without a garden to play in (depends on whether you're a gardener!)? Will you hate having to compete with others for a parking space when you get home from work? What about the loss of storage space in the form of a garage or shed or attic? Will you feel safe in an apartment with so many people around and no stable neighbors? What about the kids and the parking lot forever right outside your door? Will it make running errands more or less convenient?

And so on. Think carefully about everything you might lose by leaving your house. And also think carefully about everything you might gain.

Our choice is clear. We love our house. We wouldn't care if prices tanked and we were suddenly severely upside down in our mortgage (okay, we would *care*, but we wouldn't leave). We love it here. We would not leave even if someone offered us an apartment with free rent and a children's playground and a garage. You couldn't pay me enough to go back to living in an apartment.

But that's me. What about you?

I guess my big point is, as is often repeated on this board: You are not your debt. Yes, it's important to get out from under it, to declare independence from the debt cycle. But it shouldn't be the only thing you do. Live your life too.

Let us know what you decide. Blessings,

Heather

iVillage Member
Registered: 04-27-2005
Tue, 09-13-2005 - 8:52pm
Just my 2 cents, but I don't think you should ever sell your house to live in an apartment unless you are in dire straights. I feel this is moving "back" in life. Renting is giving someone your money and not getting anything (yes a place to live but not much else) back in return like a house. A house will appreciate in value. I don't see how it has only appreciated so little as I live in NY and the prices of houses have skyrocketed and 9/11 was so close to us. I paid a little over $100,000 for my house and it is now worth about $400,000.
iVillage Member
Registered: 10-07-2003
Tue, 09-13-2005 - 9:04pm

Hi.

Pumpkin

&nbs

iVillage Member
Registered: 10-30-2004
Wed, 09-14-2005 - 12:32pm
The reason our market hasn't rebounded is because oil prices have risen so drasictly, so gas prices have. We like in Metro Detroit, and all of our income, state wise, comes from the auto industry. If they don't sell cars, they lose jobs and people don't want to live here, hence, no rise in the property value. Your right, EVERY where else the market has rebounded. But not here. I can't remeber where I heard it, but they said MI was the only state that the market hasn't recoverd.
iVillage Member
Registered: 10-30-2004
Wed, 09-14-2005 - 12:36pm
I totally agree, and if someone else posted this question I would probably tell them the same thing. I just feel like we are going backwards. We don't have creditors calling us, but that's becasue the bulk of our debt is owed to my parents on their credit. We haven't been late on their payments, but we have been on our house, car and what little payments we have on top of that. I don't know, I know it seems silly....
iVillage Member
Registered: 04-27-2005
Wed, 09-14-2005 - 4:41pm
That really stinks! Our gas prices have FINALLY come down and the lowest I have heard today was $2.99/gallon.

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