Trapped in your current house

At this week’s NSCAR finance committee presentation, our volunteer committee chair Jason Russell reminded us that there are creative ways to make moving up from your starter home to your forever home affordable at today’s rates.

As I have stated many times over the last year, thousands of homeowners that purchased their starter homes from 2008 to 2015 had outgrown their homes by 2019 and were seriously thinking of moving up and then, BANG, the pandemic broke out and many were suddenly homeschool teachers and home-improvement specialists. The government spent a few trillion tax dollars to help everyone survive the lockdowns and forced rates down to near zero and mortgage rates to an all-time low.

Market values climbed by 35% from middle 2019 to early 2022 and almost all the people living in starter homes refinanced below 3.5% and some even got 2.5%. Just imagine how much equity some of the homeowners have today that purchased at the bottom from 2008 to 2012 and may feel trapped in their home.

One great idea to make the forever dream home affordable is for the move-up buyers to sell their old homes and only use 50% of the proceeds for the down payment and use the other 50% to pay off all their credit cards and auto loans, making the higher house payment potentially the same as the outgo they were paying before.

Another idea I have suggested occasionally for people with little or no debt and increasing income each year, with retirement 15 to 20 years away, might be to put $150,000 down on the new home and invest the other $200,000 with a local certified financial planner.

The other day, CBKG agent and my friend Sheilah Tucker, in a very upbeat and motivational tone, described this market as a “rent a rate” market which is like the “marry the house and date the rate” slogan we are all using to convince buyers that another refinance market will come in a few years, like it has 11 of the last 32 years.

I get it, a $2500 PITI house payment makes it possible to have $400 date-night dinners and vacations to Disneyland and Hawaii, and ever since the lockdowns, people have wanted experiences and travel, but nothing compares to living in your forever dream home.

Jim Porter, NMLS No. 276412, is the branch manager and senior loan adviser of Solano Mortgage, NMLS No. 1515497, a division of American Pacific Mortgage Corporation, NMLS No. 1850, licensed in California by the Department of Financial Protection and Innovation under the CRMLA / Equal Housing Opportunity. Jim can be reached at 707-449-4777.

Related