Finance Help - Want to Move/Sell for Cheaper Place, but would it save anything?

My wife has really been feeling the pull to be at home with our 6 month old. I originally thought the idea of a nanny coming to the house might satisfy her, but it's the stress of work and her lack of sleep that is wearing on her. She'll tough it out for now, but want to start looking at options.

We bought our house January 2017 for $300k. It has already increased in value by $10k, maybe more. It has not cost us a dime (we didn't even paint), but I'd like to expand the driveway ($2000-$3000). 

We don't like our neighborhood. Guy across the street is junk collector and has noisey dogs and random people living with him. Another guy across the street collects mundane cars (he has two of the same Kia Soul, weird.) We live at the bottom of a hill with a blind small parking area. Our backyard get some serious sun, which makes it uncomfortable to spend time there during the summer (needs shade of some sort). 

Basically, we'd like to move. 

What I'm wondering is: 

Would reducing our mortgage by $60k, and getting a mortgage through a credit union (like Alliant) reduce our mortgage payment considerably? Or would we end up paying only a few hundred dollars difference but have a significantly junkier/smaller home?

Plug it into an online mortgage calculator and find out.

pheller said:

Guy across the street is junk collector 

What's his name on GRM?

Using a basic calculator and the default numbers ($60k down, 5%, 30 years, identical tax / insurance costs):

$300,000 house - $1,571.71 per month

$240,000 house - $1,249.61 per month

Duke said:

Using a basic calculator and the default numbers ($60k down, 5%, 30 years, identical tax / insurance costs):

$300,000 house - $1,571.71 per month

$240,000 house - $1,249.61 per month

Factor cost of moving, cost of sale 4-6% and its much tighter match. Interest rates are up as well. 300$ a month is not a lot of money to cover those things. 

Yeah, this one is tough without more specifics, I'd use a mortgage calculator like the one on bankrate.com. The rate you're currently paying will play a big role in what the net outcome of that is going to be for you.  For example - if your current mortgage is at 2% and you are looking at 4.5% new loans, that could be enough to wipe out any savings from a smaller principal balance and proportionately smaller taxes.  Insurance would also be a wildcard here although the difference is probably negligible compared to a difference in interest rates.  Also, in order to come out even you will need to have a gain of at least 6%.

Assuming identical rates (Google's calculator is defaulting a rate of 3.92% today), going from a $300k mortgage to a $240k mortgage is worth about $300 a month.

I think some more detailed info is needed to do any helpful math. What's your current interest rate? How much equity would you walk away with by selling your current place (remember that the seller usually pays around 7% of the selling price to the realtor, and that would be taken from your equity)? How much of that equity would you put down on the new place? What about a difference in property taxes or insurance between the 2 places? Commute changes? Are you just trying to have a lower monthly payment, or are you trying to save a certain amount of money over the life of the mortgage?

If your wife stays home with your kid, she might consider babysitting/day caring for 2 or 3 other kids in your house.  To me, this does not seem less stressful or less tiring than a regular job. 

Life with kids is hard. Which way do you want it to be hard? 

Is moving back east off the table? Because if you're still thinking about moving in a few years adding another move would be an unneeded stress and expense.

Remember you'll pay 6% commissions to sell your house.

We were thinking about working a deal with our last realtor to have her reduce her commissions since we bought with her. 

If we get into an area that we like, taxes will be higher. If we get into an area that is cheaper by a large margin, taxes will be the same or less due to decrease property value. 

Insurance will likely be less due to decreased value. 

Our appreciation has been decent, but only break-even after sale/buy costs. 

Interest rates pissed me off. We got suckered into 4.5% with a broker when everyone else was paying under 4. I'm hoping going with Alliant or another credit union will allow us to actually improve that, but who knows. 

Moving back east is always on the table, but I need a job offer first. My job here is too good to leave with nothing lined up. 

4.5% seems to be the normal-ish rate at the moment for a 30 year fixed. I don't think you'll save money that way.

I'd budget around 10% for the overall transaction (commission, fixing the house in case the home inspector finds something, random fees) and call it a good day if you pay less. So that'll eat up the gain in value and then some.

However this isn't a math problem other than the part about minimising the monetary impact.

That said, I would try to buy in an area you do like if you can afford it, or find one you can afford and like. You already know what it's like living somewhere you don't like.

pheller said:

We were thinking about working a deal with our last realtor to have her reduce her commissions since we bought with her. 

 

If we get into an area that we like, taxes will be higher. If we get into an area that is cheaper by a large margin, taxes will be the same or less due to decrease property value. 

 

Insurance will likely be less due to decreased value. 

 

Our appreciation has been decent, but only break-even after sale/buy costs. 

 

Interest rates pissed me off. We got suckered into 4.5% with a broker when everyone else was paying under 4. I'm hoping going with Alliant or another credit union will allow us to actually improve that, but who knows. 

 

Moving back east is always on the table, but I need a job offer first. My job here is too good to leave with nothing lined up. 

So, with interest rates being basically the same between your current loan and what a new loan would likely be that eliminates one variable. Having the equity gain in your current place be canceled out by realtor's commission and closing/moving costs eliminates another variable. As szeisforcookie mentioned, going to a loan that's 60k cheaper might free up about $300/mo but that's not accounting for any difference in taxes/insurance or repairs to the new place, or expense changes due to longer/shorter commutes, etc. It's always a good idea to consider resale as well. If the current place is more likely to appreciate more, or sell faster than a cheaper place in a cheaper neighborhood that should be considered as well.

How much equity do you have in the home? That will likely make or break the calculation. 

I know for us, without much equity in our house, we really have to downgrade to make it worth it--including our MIP, we just can't beat our current rate which we got right after Brexit. 

We've got our down payment 20% plus a few hundred bucks. We don't overpay our mortage and have only owned for a year and a half.

wearymicrobe said:

Duke said:

Using a basic calculator and the default numbers ($60k down, 5%, 30 years, identical tax / insurance costs):

$300,000 house - $1,571.71 per month

$240,000 house - $1,249.61 per month

Factor cost of moving, cost of sale 4-6% and its much tighter match. Interest rates are up as well. 300$ a month is not a lot of money to cover those things. 

4-6%? Really? Around here the commission is 7% plus whatever closing costs are applied to the seller and then moving costs. $2000- $3000 isn’t unusual.  

Even if inflation hits both houses the same  You’ll have more dollars owning the more expensive place.  

Reduced value will reduce taxes.

pheller said:

We've got our down payment 20% plus a few hundred bucks. We don't overpay our mortage and have only owned for a year and a half.

It sounds like you could have more than that. Equity would include whatever the house would sell for over your purchase price. So if you paid $300k, and it sells for $310k that's $10k appreciation + original down payment+few hundred in equity payments minus realtor commission, closing costs, and moving/acquisition costs on the new place.

Unless you go a mile north and cross into the city where taxes are higher. I'd pay double the taxes if I lived in FLagtstaff proper...all of $3600. 

pheller said:

Unless you go a mile north and cross into the city where taxes are higher. I'd pay double the taxes if I lived in FLagtstaff proper...all of $3600. 

Man, taxes of $3600... That would be really, really nice. 

Miner are like...$1900 or so. 

Super cheap. 

Then again, I live across from two properties that look like junkyards and dogs barking incessantly and there is nothing I can do about it because we don't have a property maintenance ordinance (although I could call Animal Control about the dogs but that'd result in pissed off neighbors).

pheller said:

 

Interest rates pissed me off. We got suckered into 4.5% with a broker when everyone else was paying under 4. I'm hoping going with Alliant or another credit union will allow us to actually improve that, but who knows. 

 

Nobody was really getting under 4% unless you had 50-60% down and were in a really good area and had good reserves and personal connetions to your bank. IE private clients. 

Rates are 4.75% with standard downs depending on zip and credit of course. 

So it sounds like playing the mortgage game again won't save us much, if any money, aside from reduced principal. 

No, it doesn't sound like it, but as BoxheadTim said above, most of this isn't a math problem.

*Tough love time*

With the multiple, multiple threads you've had over the years about jobs/career, moving, etc, you seem to have "Grass is greener-itis."

Sit tight and keep paying/saving. Maybe take a 12 pack to the neighbor with the dogs and talk politely about the constant barking is keeping mom and baby awake, can't rest, etc. 

pheller said:

Miner are like...$1900 or so. 

Super cheap. 

Then again, I live across from two properties that look like junkyards and dogs barking incessantly and there is nothing I can do about it because we don't have a property maintenance ordinance (although I could call Animal Control about the dogs but that'd result in pissed off neighbors).

The one thing you cannot control is your neighbors.  Move to a nice neighborhood and next week you discover the house three doors down had the police there last night arresting the child molester.  A week later they’re back arresting the drug dealer across the street. 

The really sweet old lady who baked you a cake when you moved in dies  of a heart attack. The new people will enjoy loud raunchy parties all night long.  

You cannot pick your neighbors so either figure out how to get along or figure out how to ignore them.