All Forum Posts by: Joseph Henry

We have been house hunting for a while. Because the market has been competitive (very few houses for our liking), we did a pre-approval just to be ready. Now it has been 90 days and the pre-approval expired. I have to do the process again. The issue is that I am impacted with recent layoffs at my company. Even though I will be getting a pay check for the next 2 months, the pay stub indicates "WARN NOTICE". I am looking for opportunities outside. How do I get around this? Is it still possible to get approved for loan when we find the right home, assuming it will happen in the next 2 months?  Or am I pretty much out of luck and have to find another job before getting approved?  My wife is working and we make similar pay. However, we likely need both incomes to be able to afford the homes in our price range. We have a paid off primary, worth around $850k. Not sure if that helps in any way. The new homes we are looking for is in $1.6M range.

Just to clarify, let's say the monthly payment is $5000 out of which $3000 goes to interest and $2000 goes towards principal. If I make a lump sum payment of $10,000 towards the principal, the future monthly payments of $5000 should go a lot more towards the principal since there is less total balance to calculate the interest. 

Is this correct even for an ARM?

I currently have a 30 yr fixed at 2.5%. Looking into buying a new primary home. With current rates, I am only thinking of a 5yr or 7yr arm. Never taken an ARM before. On a fixed mortgage, i could pay extra payments (or a one time lump sum payment) and apply it towards principal. This way, even if the monthly payment remains the same, the amount you pay towards principal each month goes up.

Does it work the same for an ARM. Any gotchas with ARMs?

Primary home is valued at $850k (purchased at $450k), with less than $20k remaining in the mortgage. It will be paid off in the next 10 months. I could rent it for $3800 and net $2800 after expenses (after the mortgage is paid off). Home is 25 years old and requires a new furnace, A/C, and roof in the next 5 years. 

Interested in a new primary home valued at $1.6M. I plan to make 25% down on this home. The mortgage will be 1.2M if I decide to rent or I could sell the older home and bring the mortgage down on the new home.

Consider the situation, interest rates and the market, what makes more sense? Rent or sell or the home? If I sell the home, I could net $400k and pay no tax. I am not sure how the depreciation and tax write off work for the rental, and if that makes a difference. 

I am new to landlording so looking for some help. We have a situation where my in-laws will be living with us temporarily. This could be an year or even longer. I want to get an estimate with numbers to see if this makes any sense. In-laws will be living in a bedroom (it is a 5 BR home) and will be sharing kitchen and family room with us. For deductions, should I only use 20% (1 out of 5 BR) or is it possible to use the actual sqft (bedroom + shared area)?  In terms of property depreciation, would it make sense to distribute across 30 years or is it possible to claim a one time depreciation? For a 800k home, how much would the depreciation be? 

If this makes any difference, there is a possibility that we will move to a bigger home, in which case, the in-laws will move along with us, and we will either rent the existing home or sell it. Is there anything I need to consider any terms of lease or rental agreement with in-laws? In-laws will likely pay the same rent in the bigger home. We intend to charge them below market anyway.

Quote from @Matt Devincenzo:

Quote from @Joseph Henry:

...What am I missing here?

It's your personal residence not an investment, so you can't "math" your way to an answer. The question is, does this purchase give us the space, location and amenities we want in our home? If so, can we afford it? 
 

Agree but I am also trying to make sense with the investment. If it has to go up 50% just to break in, then that is not the right investment. We don't spend 100s of thousands on food or clothing so by far this is much bigger investment. Also, another interesting thing here is that, if the value of the home goes up 50% and the sale price is 2.25M, that will also trigger a sale tax since the sale price is more than 500k of the original purchase price; even though it is just break even.

It does look like sell existing home, and move funds towards the purchase of the new home makes more sense, since that will be lower mortgage and hence lower interest, but still won't be slam dunk considering the current prices.

Quote from @Justin Brickman:

Hey Joseph there are ways to get creative on this that may make you feel better about it, I wouldn't limit yourself to only those 2 options. Such as a HELOC or making it a furnished rental. (I believe you should be able to make much more than $1K on your rent on your main house if you do it correctly)

Also, if you can negotiate seller credits (which many buyers are able to do right now) on your new house, you can use that to buy your interest rate down. Even though rates are 7-7.5 lately, my clients have been getting in around the low 6s.

 Makes sense. But in my calculation, even with a 5.5% rate, I would be paying $450k in interest over 7 years. Prop taxes, home owners, and other upkeep will easily be $300k. That would require the property to go up by 50% over 7 years(1.5M to 2.25M) just to break even. I should be able to sell in 7 years as needed. What am I missing here?

Current home valued at ~850k with 50k left on mortgage. Wife and I are interested in buying a newer home (current home is 25 years old). Wife also thinks the current home is smaller with less closet/storage space and it has been on the back of our minds for a while. New homes we are interested in the suburbs are around 1.5M. Idea is to rent the existing home. Rent should cover expenses and have an additional $1k for the new mortgage. 

However, the numbers do not make sense. With a 20% down and a 1.2M loan balance and 7% rate, the first 7 years will amount to an interest payment of $560k. Even if the rates drop to 5.5%, that will still be $450k in interest payment alone over 7 years. Add $150k for property taxes. That is $600k to $700k just for interest and prop taxes. In 7 years, if the house price goes up to 2.2M, that will just break even. 

Am I doing the math right? Selling the existing home and bringing the loan balance down would be an option. What would you do in this situation? 

I have an existing home valued at around 800k with 45k left in the mortgage. We have been looking to buy a newer and bigger home for the last year but due to the tight inventory, could not find a home that has everything checked. Even if an odd home hit the market, the listing price is exorbitant and the mortgage rate at 7% does not help at all. With all said and done, we could not find a home in the 1.5 - 1.6M range. The monthly payment would be north of $10k, with taxes and insurance included. 

Our idea is to rent out the existing home. The rent would partly cover the new home but I am not convinced on the ROI with the majority of the payment going out to the interest.

I want to hear from fellow BiggerPocketers if they recently upgraded their home. If so, how did you do it and are you happy with your decision? If you considered and backed out, I want to hear as well. When would it make sense to upgrade the home, assuming you can afford a 10k payment.

Quote from @Carlos Ptriawan:

ZILLOW NOVEMBER DATA IS OUT

San Jose/San Diego/California is stabilizing. The average price is regressed to Q1 2022 only. The east bay area is ticking up.

The worst is now Austin,TX which regressed to Q4 2021 level. The price is still moving down, same with Vegas. Greg is correct at some points.

Phoenix also dropped, but not that much.

Wow it seems a duplicate of 2008, CA crashed the first but recover very early too.

Craziest is Maui county and Hawaiian county, price is sloping upward with 20% YoY expected appreciation, but Honolulu is sloping down , so even between island the appreciation is vastly different LOL

Crazy how Zillow has helped me in the last 10 years.

How trustworthy is Zillow? SF lost 20% yoy. San Jose lost 15% since last year.