My wife and I are recently married...about 3 weeks. We just got back from our honeymoon, and things are starting to get back to normal.
We want to buy a house in the near future (3-5 years or when this economy turns around) but we dont really have a game plan for saving up. Any advice?
We already own a condo that my wife came into the marriage with. We have been living there for about 2 years now and she has a mortgage on it. She will get done paying it off in about 28 years (she is on the 30 year plan).
Put all of your spare money into the condo to try and build equity / offset interest. Spare money can be defined as an agreed amount you both contribute or a % of your incomes that will regularly be devoted to investment.
Then when you've got some equity built up in it, get another mortgage for a house and move into it.
Then, rent the condo and hopefully it'll pay for itself, while you just pay for the new place.
__________________ Suppose we've chosen the wrong god, everytime we got to church we're making him madder and madder. - H J Simpson.
What Enema said.
A 30 year repayment plan is probably the worst way to pay back a mortgage as you will end up paying off way more in interest than you would if it was say a 20 year plan.
If you can afford higher repayments, paying off more off your mortgage is much better than saving it- the interest you will save will be higher than any savings interest rate.
And as Enema said, you will build up more equity in the condo and be in a better position to borrow more money for a second property.
My H and I have been using a budget spreadsheet since we moved in together and in that time we have saved enough for a deposit and bought a house. We are repaying the house at the maximum repayment rate the bank will allow without penalties, and we track all our income and expenditure to see where we can save further money to put away for a rainy day.
IE- we worked out how much we need to spend on food, petrol, insurance, bills etc and subtracted it from what we earn. Whatever is left over we save half, and then use the other half for fun stuff for ourselves. When that amount is gone each month, its gone and we dont' dip into the savings to "treat" ourselves any more.
System works for us, we are used to it now and both stick to it.
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Wonderbaby born 22.10.09, 10lb.
So its not a good idea to wait and sell the condo (for at least the price that she paid for it) and than go and find and buy a house?
Quote:
Originally Posted by Enema
Put all of your spare money into the condo to try and build equity / offset interest. Spare money can be defined as an agreed amount you both contribute or a % of your incomes that will regularly be devoted to investment.
Then when you've got some equity built up in it, get another mortgage for a house and move into it.
Then, rent the condo and hopefully it'll pay for itself, while you just pay for the new place.
That is one way of doing it, but if you are only paying back the minimum repayments you are still paying more interest.
Even if you are planning to sell it, you will get more cash back if you put more into it now.
Why bother selling it if you are only going to get back what she paid for it? What a waste of all the money she has paid into it over the last year..... you would be better off paying off as much as you can because when/if the market recovers, you will stand to get most of that back and then some. (less interest, which is less the more you pay off)
The other scenario is this- you could sell the condo and take any losses on the chin, because if its like anything where I live, some of the more expensive properties are selling for big bargains at the moment, and any loss on a cheaper property could be offset by the savings you make on the more expensive one AND the lower interest rates. This works if you are planning to buy a home and live in it for a number of years rather than use it to make money.
Eg-paid $150K for condo, sell it for $140K, BUT you buy a house that was valued at $250K for $230K- you make up the $10K "loss" by the $20K drop in price. And interest rates on new mortgages are low at the moment if you have a decent deposit.
to be honest I have no idea what the financial situation is with the condo and my wife. She bought it before we got married and I have no idea how much she owes on it still, what she is or not paying, etc.
I have never owned a house myself so I figured the wise thing to do is to try to sell the condo for at least what she paid for it (so we wont have to owe the mortgage company anything) and then go and buy a house and use the profit from the condo to cover the cost of the downpayment and closing, etc.
Quote:
Originally Posted by sb129
That is one way of doing it, but if you are only paying back the minimum repayments you are still paying more interest.
Even if you are planning to sell it, you will get more cash back if you put more into it now.
Why bother selling it if you are only going to get back what she paid for it? What a waste of all the money she has paid into it over the last year..... you would be better off paying off as much as you can because when/if the market recovers, you will stand to get most of that back and then some. (less interest, which is less the more you pay off)
They're substantially upside down on the condo....
I suggest a regular savings plan into a conservative investment. I've found, over the last 20 years, oil company stocks have consistently been a good vehicle. However, that may not be your style so you could get a minimal return in the form of money markets and/or CD's.
Don't put any more money into the condo than necessary to maintain your credit standing. That's my advice.
OK, its not for me to judge, but finances are really important in a marriage (they can end up being a huge bone of contention), and its important to know that if you are both intending to contribute financially you need a good picture of eachothers finances.
I would start with the budget idea before you make any decisions.
You are a team now, and if you plan on buying joint property you need to act like one. Your wife may have other ideas on what to do with any money made from the condo- she may feel that as it was hers to start with she has more right to any profits, esp if she is the only one making any repayments. (Speculation on my part, but stranger things happen.)
In the current property climate, it isn't as simple as selling to make a profit to then upscale your house.
There are too many other factors to consider. Condos are not usually the kinds of property that still sell well when there is a property slump- often they are the kind of property people have as a rental/ second property, so when the market sh*ts itself, they are the first things people sell, and therefore the market can become saturated with them.
There is a very big chance that you won't make any profit at all on a condo that you have owned for less than two years and you are paying the minimum repayments on.
Chances are if you do see any profit at all (and profits are low at the moment) that will be eaten up by any sellers fees, bank fees, and there may be termination fees to get out of the mortgage early etc etc etc.
If you want to own a house- unless you pay cash for outright, you will ALWAYS owe the mortgage company something.
The trick is to be smart about it and try and owe them as little as you can (by having a big deposit or a large amount of equity in another property to offset that) and pay them back as much as you can afford as quickly as you can.
They make money by charging interest over a long term. The faster you pay them back, the less money they make off you (which is why they will discourage you from doing so)
If you have a small mortgage on one property that you don't need to sell in a hurry and a medium sized one on another that you plan on living in for at least 4-5 years, you are probably in a better position than if you have a large mortgage on a small property that is not gaining value.
Anyway thats all moot really if you have no idea how much is owed on the property, the interest rates and terms of the mortgage, how much the property is worth, or how much the two of you can afford to make on repayments. You need to have some key information before you can start making big decisions like that.
So you dont think adding a laminate floor would be a good idea?
The condo situation is a bit weird. It started out as an apt. complex and new owners took it over in hopes of selling the condos and letting people pick out their own appliances, colors, etc. Well my wife was one of the first and only people to buy. I would say that 80% of the condo complex is yet to be 100% finished and there are very few places that have actually been bought. For the most part the construction has been stopped and a guy comes from time to time and does a few things. Basically she got it because at the time she got a great price for the area she bought it in.
Quote:
Originally Posted by carhill
They're substantially upside down on the condo....
I suggest a regular savings plan into a conservative investment. I've found, over the last 20 years, oil company stocks have consistently been a good vehicle. However, that may not be your style so you could get a minimal return in the form of money markets and/or CD's.
Don't put any more money into the condo than necessary to maintain your credit standing. That's my advice.
Personally, I wouldn't have bought the condo in the first place- she bought at a pretty bad time on what I imagine to be less than optimal terms- I probably would have rented somewhere cheap and saved as much as I could using either a term deposit or an investment plan and sat tight looking for a bargain house that we could live in long term and taken advantage of the more competitive interest rates that are out there now.
Do not put in laminate floors. This is a new condo with relatively new carpets. You're just wasting money, you should be putting towards other things, especially credit card debt or other debt with higher interest rates.
Look OP, you're looking for simple solutions for a much more complex problem. It's not going to happen. As per your other thread, take some basic finance courses. Making decisions with no hard details (for the condo, etc), as well as little knowledge, is worse than flushing money down the toilet.
I think you might need more than a laminate floor to make that an attractive purchase option if all the condos still haven't sold and the project isn't even finished yet!
Sounds like the developers ran out of money (as with so many of these types of projects) and will probably end up having to sell the rest of the condos at less than what your W paid for them just to break even.
Not looking good I'm afraid, and if that IS the case, I take back my suggestion to put equity in that property- its likely its going to be a long time before a place like that makes any returns. I would probably cut my losses and get out and start afresh.
If they're upside down, selling is easier said than done. If this is the US, there is very little recourse which will leave them in a good position to buy again and immediately. Tax ramifications of a short sale and damage to their credit rating from walking away (foreclosure) are contra-indicated if their cash position is tenuous, as it appears that it is (from readings elsewhere).
I know a number of people who milked their properties with easy money, then bought replacements with the cash, then walked away and left them to the bank. Killed their credit but they paid cash for the replacement, or used a low LtV mortgage with the cash prior to walking. It's a strategy, though one not available to the OP.
IMO, consider the condo rented and take the tax breaks (as applicable) and put your extra money into other vehicles to save for a replacement. For now, the condo is home. In a few years, it may recover enough to make some sense for you
Agreed Carhill- I think sitting tight is their only option. (and DON'T make any improvements to the condo)
I would like to add to that- get some sound financial advice from a non-biased professional. Even something as simple as a budgeting website is a good start.
Then you will be in a position to predict exactly how much you might be able to save for the next few years.
And communicate with your wife about all things financial.
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