Home buying/selling question

Savings are liquid.   Home equity is not.  If your plans change in a year, would you rather have $30k in the bank, or $30k in home equity? 

agreed, also, if you are pretty sure you can sell your home for more than what you owe + selling costs, there is no reason to build up equity in it!!

If you paid in $30k in a year, why not just do the same for 3 more years and be done with it?

If you are only going to stick with a house for a year, why buy? Renting is much better for such short terms.

I'm thinking we aren't using the same math or there is a dramatic typo in the original post...

Having $30k in equity in one year does not necessarily mean the owner paid in $30k in that time period. 

What they said.

Build up your savings.  Paying extra on the existing mortgage is going to have a negligible impact on interest in the short term.  If you use the extra money to build up your savings instead you could buy the next house with or without selling your current home.  I have never done the "equity transfer" but I believe there are a few ways to do it.  Best to ask a mortgage broker...go in to inquire about rates and just plain ask the question.  I know that when you go shopping for your next house you could make the contract/closing contingent upon selling your current house first.  This could scare off a lot of sellers because in today's market it could take a LONG time to sell a house.  It leaves closing up in the air.  Your offer on a new house comes across a lot stronger if it IS NOT contingent upon selling your current house.  Of course, that means you have to qualify with a high enough income to support two mortgages simulatneously.

Another option...so let's say you build up your savings rather than pay down the mortgage.  Now you have a down payment for the next house (if you can qualify to get two loans at the same time.).  Why not rent the current house out for a year or two?  There are rules as to how many years you need to have lived in a house within the last five years not to pay capital gains on the sale...it's something like 2 or 3 out of the last 5.  Whatever it is, make those numbers work for you.  Rent for a year or two then sell.  You'll build up one or two more years of equity with someone paying 90% of your mortgage, you'll get a nice tax break, you give the market a little more time to recover, and you still won't have to pay capital gains when you sell.

Once you sell you can then dump the equity into your new house in a big lump sum and make a good dent in the future interest.

I'm guessing they re-financed to a 15-year loan a year ago... but had a 30-year loan for X years before that.

Me, I would keep my cash. You just never know.

also...speaking of math...$90k in principle does not equal $90k worth of payments over three years...

brynn - 2012-07-08 7:53 PM

faded_memories - 2012-07-08 12:29 PM

brynn -

My husband and I have a 15 year mortgage with 14 years left on it. .....$30k in equity in our current home....we owe around $90k.

If you paid in $30k in a year, why not just do the same for 3 more years and be done with it?

If you are only going to stick with a house for a year, why buy? Renting is much better for such short terms.

I'm thinking we aren't using the same math or there is a dramatic typo in the original post...

Lisa is right, we had a thirty year mortgage and refinanced into a fifteen. We are living in a small three bedroom ranch with four kids, three of them sharing a 10 ft by 11 ft room...kind of a long story, but we hope to adopt all of them before the end of the year and we just need more room! So that is why we are looking at moving. Our situation in the last year has changed, and when we bought our house five years ago we never dreamed we'd have four kids at this time. Thanks for the info. I figured saving up the cash would be the best but just wanted to make sure we weren't missing anything.

this is the coolest thing.  good luck!