Home Owning and Struggling to move Forward

[Robin Mikolyski]

Hi, I'm a listener of the Bigger Pockets Money show and will begin listening to the main podcast you have!

My husband and I bought a small home (685 sq ft) in Hawaii in Sep 2017, on a big property (8200 sq ft) with hopes to build a new house in the backyard. But our mortgage payment is so big that we don't know how we can afford to build anytime soon. We have 4 kids and no family on the island. Our strategy from the get-go was to pay down our balance as much as possible in order to qualify for a HELOC. We are putting as much as we can into this mortgage, but are still $30k away from a HELOC. Will we be living in a 2 bed/1 bath till our kids grow up? Should we ditch our dream and move somewhere cheaper? I know no one can really answer this, but maybe there are some money ideas we haven't thought of. I'm working with a bank to see if refi is a possibility to help bring down the monthly payment and increase our cash flow. My husband has a great job, and I'm able to be home with our little ones, just earning a little side money here and there. But I'm interested in other money-making projects I can do from home.

Thanks!

[Chivas Miho]

Aloha @Robin Mikolyski! I feel your pain here on Oahu, it's tough making a living here. My first question before making any major decision is: how long will it take you to save that $30k before qualifying for the HELOC?

Further questions might be: do you plan to convert your existing mortgage completely into a HELOC (some call this Sweeps Strategies)? Or are you planning to just obtain a HELOC in addition to your primary mortgage? If it's the latter, you may find yourself in a MORE difficult situation than you are in now once you draw cash for investment property. This because you will still be paying your monthly mortgage PLUS your interest due on the added withdraw for investments. This could potentially derail you from saving any future funds.

If you can convert your mortgage completely into a HELOC that could help your situation but it comes with major risks as well which you should learn before making any kind of move like this.

One consideration, which may not be favorable, is to just consider renting if it's cheaper than your monthly mortgage now. Theres nothing wrong with NOT owning a home, you're just making decisions that make sense for you. The pros of renting: lesser rent payments, no property tax bill every 6 mos which I suspect will increase in the coming years with the rail situation, no repairing one replacing broken appliances, no maintenance for lawn care (if you pay for these). If saving these expenses means you can reach your financial goals quicker, you owe it to yourself to analyze the numbers and reassess your living situation.

IMHO, I would not invest the money to build additional property on your land, unless you plan to sell at a much higher value. If you calculate how long it will take for you to get that initial investment back, it might paint a clearer picture. You can make your money go farther by investing out of state.

Wishing you the best, take care.