I am terrified of getting a mortgage

[Ian S]

I would echo the other comments about not being in fear of a mortgage but only you can work through that psychological impediment. I also would advise selling and getting out ASAP. As a long time Board member of an HOA, I see the deteriorating maintenance and non-existent reserves as a disaster in the making. Even if there's a whiff of a specific special assessment, you may be forced to disclose that meaning another hit on the unit's value.That said, others have also suggested that you might try to change the rules regarding short term rentals. How quickly that could be done might depend on whether the rental rule is in the CC&Rs or is simply a rule that is changeable by the Board without the more involved procedure to change the CC&Rs. If just a Board decision, that could be done quite quickly. Also, not sure if it's available, but you could try a fixed fee sellers agent. That could save enough on commission to allow you to drop the price more and come out financially the same. We were able to do that with our patio home recently and saved over $25K on the sale. Good luck.

 

[gooddog]

I have seen people chase the market down when selling their place. They are so tied up in what they haven't got that they keep trying to get the most for their place, and it never sells - until they finally give up and get next to nothing. If you want out of this mess, get ahead of the downward trend and price your place under the market and dump it. It will hurt for a few months, but in a year you will be much happier and forget about the 20k or so you "didn't get". Or, stay frustrated and keep trying to get the max. Those are your two choices.

 

[tmm99]

Living in a condo with zero in reserves that is not being maintained is a lot scarier than a mortgage.

+1
With a mortage or not (You could possibly rent although it's probably not so wise the housing prices in your area are going up a lot), the most important thing seems to be to sell your condo ASAP before the price plunges even further.

 

[papaof2]

Expand your house search to properties farther out than you're looking. We moved up from a paid off house to a new 5/1 ARM because we needed more space (kids living 600 miles away do want to stay a while when they visit and we loved having the grandkids here).

Moving up to that much house where we were living would have been $300K. Moving out of the city (four miles out) and into an unincorporated area of the county (but with streetlights and full underground utilities) meant we got the equivalent house for $200K. Our original house sold some months later so we paid down the principal and refinanced the balance. A year or so later a stock we'd held for a long time was doing well so we sold enough to pay off the new-to-us house.

The area was once a city (before WWI) so it's "civilized" and we have two grocery stores, plus Aldi, Lidl and a gas station less than a mile away. Several decent restaurants plus Lowe's, Home Depot, Target, Walmart, LA Fitness, a hospital and several doc-in-a-box locations within a 10 minute drive. A major mall is about 30 minutes away. AT&T cell service is excellent here but Verizon and Tracfone are not as good (that might or might not be important to you). We have the option of Xfinity or AT&T for internet and cable TV. Both offer high speed internet (for a price).

Make a list of what you NEED in a new place to live. Make a separate list of what you WANT in that place. Put priorities on each item (1, 2, 3, etc) and a dollar value of what it's worth to you now and what it will be worth to you if you're still in that house in 10, 15 or 20 years. We looked for a "forever" house, with a garage, minimal steps (one 5 inch step from garage to main level and the design is master on main). If we couldn't do stairs to the basement, there's a paved drive around to the boat door (garage door but to an unsealed space not suitable for parking a car) so a wheelchair or powered scooter could get me from the garage to the basement if things came to that.

At 75+, I'm mostly retired with my writing (7 novels published) [mod edit] as my current "job".

 

[Buckeye]

Property will sell when its proced appropriately and marketed well. Something has to give.

I negotiated on a house that had been on the market for over a year. Negligent maintenance. High HOA fees. Seller would not budge on repairs and i walked. She held out another 6 mos and finally dropped her price below what I offered and sold. Total time on the market almost 2 years. 14k a year in taxes. Several hundred a month in HOA. She ate it big time. Don't let this be you. Price it right.

Have a professional appraisal done. Will probably cost $300-$400. Find out the true value of your property from an unbiased expert. We did this several years ago when we were selling a home into a tough market in a rural area. I did not like the number that came back but it told me the 'truth.' We sold within 60 days and got the hell out of there. If we had tried to sell at the price we thought the house was worth (i.e. more than we paid for it), we would probably STILL be there.

Whatever you do, don't turn it into a rental. Misery on steroids.

 

[Davidoff]

Get a nice loan calculator to make informed decisions

The monthly payment on a 30-year fixed mortgage at 3.2% equals what you're paying for your current HOA (~$650). So buy the house with the proceeds of your condo and put the rest on a mortgage that is no different than what you're already accustomed to pay (i.e., the HOA). Actually, you should feel even more comfortable with the mortgage since you got it fixed (it can't change) UNLIKE your HOA which will increase either directly or through "special assessments". And save your savings for a rainy day.

 

[Karloff]

The monthly payment on a 30-year fixed mortgage at 3.2% equals what you're paying for your current HOA (~$650). So buy the house with the proceeds of your condo and put the rest on a mortgage that is no different than what you're already accustomed to pay (i.e., the HOA). Actually, you should feel even more comfortable with the mortgage since you got it fixed (it can't change) UNLIKE your HOA which will increase either directly or through "special assessments". And save your savings for a rainy day.

This is a very likely possibility, yes. However, I do not believe you can get anything lower than 3.7 these days, even with an 800+ credit score. Unless I am mistaken? Please do share where I would be able to get 3.2!

Of course, in addition to the mortgage payment we would also have the HOA's of the new place, although these would not be anywhere close to $650. We are looking into gated communities, mainly for security and peace and mind. The average HOA for the houses we liked so far vary from $75 to $250 / month, depending on the services on offer. The gated community we like the most is about $250 but this includes the gym (a must for my wife, and $70/month by itself anywhere else), cable (do not need), 200 mb/s internet ($I pay $70/month now for a similar plan), security, pool, common areas, and lawn services, so, all in all, not a bad deal.

 

[Davidoff]

Hello Karloff,
I apologize. I did the loan calculation at first assuming a 15 year term trying to see if it would be close to your HOA. I googled "15-year fixed mortgage rate" and saw that 3.2% was a good value. When the calculation came back well above the $650 value, I changed the term to 30 year and didn't look up what I should have realized would be a higher interest rate. You're correct, a 30-year fixed is running about 3.75% (your payment on a 150K loan would be $695, not $650). The VA rate on the same 30-year fixed though is pretty good at 3.25% though (I don't have experience with these types of loans). But, the point I was making is that a paid-off condo with a high HOA isn't that much different than a fixed mortgage and can even be more risky in that it will grow with time. Personally, I shun HOAs since they seem like "rent" to me.

 

[Karloff]

Hello Karloff,
I apologize. I did the loan calculation at first assuming a 15 year term trying to see if it would be close to your HOA. I googled "15-year fixed mortgage rate" and saw that 3.2% was a good value. When the calculation came back well above the $650 value, I changed the term to 30 year and didn't look up what I should have realized would be a higher interest rate. You're correct, a 30-year fixed is running about 3.75% (your payment on a 150K loan would be $695, not $650). The VA rate on the same 30-year fixed though is pretty good at 3.25% though (I don't have experience with these types of loans). But, the point I was making is that a paid-off condo with a high HOA isn't that much different than a fixed mortgage and can even be more risky in that it will grow with time. Personally, I shun HOAs since they seem like "rent" to me.

Thank you! We do not want an HOA, either, but we do want 24/hrs. security. and a gated community, if possible. If we add high speed internet, a gym, and lawn services, the +/- $250/month rate seems reasonable. However, we are not married to this idea and, if we fall in love with a house in a non-gated community, we would consider that as well. If it was up to me, I would want $0 fixed expenses, but South FL is not that safe.

 

[winyaz]

Seems like the recommendations are leaning towards getting a mortgage. Frankly I don't get it. You don't want a mortgage, you don't need a mortgage, why get one?
I could see perhaps a bridge loan so you can move to a new place and then sell your Condo, rather than trying to close on both at the same time, but that could be paid back in days to weeks. In your position I would view investment funds used to purchase a home as an investment returning the current mortgage rate, by saving you that expense. That is a guaranteed rate of return. You don't know what you will get from the stock market but based on current valuations it may not be a bad time to have something with a guaranteed return right now. Rather than paying back a bank, you can pay back your investment funds.

 

[GNXGuy]

Once a prospective buyer finds out there is $0 in the reserve fund, they will probably bail, that only means huge special assessments are around the corner.

 

[Karloff]

Seems like the recommendations are leaning towards getting a mortgage. Frankly I don't get it. You don't want a mortgage, you don't need a mortgage, why get one?

We just reduced our price another $10K, to $375K. Assuming we end up selling for even less, let's say around $350K to $360K (not even close to what we had envisioned, but at this point we made peace with this reality...), we would net about $330K. If we can then find a home we love for $380K to $400K or so, we may simply use $60 to $70K from savings to close on the new home, plus $10K or so for miscellaneous expenses (the move, furniture, repairs, etc.), and do without the mortgage. My heart tells me this is the only way to go, knowing myself. However, many of the comments in this thread make excellent points in favor of the mortgage. We are thoroughly debating both options, but until we get a serious offer in writing, they are both viable only in theory, unfortunately.

 

[Davidoff]

You're right of course regarding HOAs, they make sense at certain times and conditions.

 

[winyaz]

If we can then find a home we love for $380K to $400K or so...

FWIW, With the kids mostly grown and mostly out, we went ahead and bought our retirement home a couple years ago. We were initially planning to buy a similar sized house but with a view. We ended up with a house about 1/3 smaller (1500 sqft) but with a great view, a very useable layout, and in an area we love. We are thrilled with it. My wife loves that there is less to clean and we also enjoyed saving well over $100k on the purchase.

 

[JJpop]

To be honest paying $650 a month for HOA fees is a payment you have made for many years and now you do not want to take on a small mortgage less than your HOA? Does that make any sense whatsoever? At least the mortgage payments helps pay down your mortgage.

 

[Karloff]

To be honest paying $650 a month for HOA fees is a payment you have made for many years and now you do not want to take on a small mortgage less than your HOA? Does that make any sense whatsoever? At least the mortgage payments helps pay down your mortgage.

It really is not the same, since one is not debt, but mainly covers services, although your point is well taken. In our specific case, the monthly HOA covers security, the pool, beach access, common areas, 100% of water usage (this would be easily $100/month by itself), cable, gym, etc, etc. We paid $570/month for almost 8 years and it went up to $650 in the last two. Many attribute this surprisingly stagnant rate throughout the last decade to the fact that we now have zero reserves. And as crazy as it may sound, our building has the lowest (by far) HOA's in the area (beach front). All other buildings next to ours pay almost $1K/month. Next door is about $900/month. The one in the corner, built last year, is about $2K/month. Insane, I know. I am not by any means justifying these rates, but simply sharing the information. In fact, one of our building's few selling points today are the "low" HOA's... (!)

 

[JJpop]

The reality is HOA fees are usually well above what they actually cover. How much value did you get out of them,really.
Anyway,I would advise you to get over the mental trauma over paying a small mortgage because it is big emotional mistake,especially at current rates.

 

[SonofCohoes]

I know this will fall on deaf ears, but as many have stated, debt, in certain instances may be your friend. Think of all the things that bother you and place a discomfort factor on them, then figure if a small mortgage will offset that factor.

We’re sort of going through the same thing. We’re buying a house and while we’re both retired still obtaining a mortgage for the purchase. Although we’re getting a mortgage on the house, which is new, we’ll still be paying substantially less than the cost of renting.

If you weigh the pros and cons unemotionally and just from a dollars and “sense” standpoint I’m sure the single family with the mortgage will be justifiable.

 

[SonofCohoes]

It really is not the same, since one is not debt, but mainly covers services, although your point is well taken. In our specific case, the monthly HOA covers security, the pool, beach access, common areas, 100% of water usage (this would be easily $100/month by itself), cable, gym, etc, etc. We paid $570/month for almost 8 years and it went up to $650 in the last two. Many attribute this surprisingly stagnant rate throughout the last decade to the fact that we now have zero reserves. And as crazy as it may sound, our building has the lowest (by far) HOA's in the area (beach front). All other buildings next to ours pay almost $1K/month. Next door is about $900/month. The one in the corner, built last year, is about $2K/month. Insane, I know. I am not by any means justifying these rates, but simply sharing the information. In fact, one of our building's few selling points today are the "low" HOA's... (!)

How can you think this is not debt? Don’t pay it and see what happens. Money owed no matter where it’s going is debt.

 

[jazz4cash]

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