I am terrified of getting a mortgage

[Karloff]

Would love your feedback and input!

We have been trying to sell our condo in SE FL for almost one year. It has been a draining, stressful, disappointing process. The property was originally appraised at around $460K. But, unlike with single-family homes, the condo market has been on a steady downhill trend, and the unit is currently listed at $375K.

This place has been our home for almost 10 years, but we are really tired of the beach condo "lifestyle" (ie: everybody is always on vacation, except for you) and would love something more spacious, less noisy and without the hassle of an association, etc. I am also self-employed, work from home, and value privacy and peace and quiet above all else. There are months were new, short-term tenants move in close to our unit and make our life an absolute nightmare.

We are sick of the glorified apartment life where tenants seem to have more privileges than owners.

There is also ALWAYS somebody renovating something next door, to the point where the noise becomes unbearable and I can not even hear my clients on the phone. I have been forced to leave my own home many, many times due to the noise. Plus, the area is just ridiculously overcrowded and has become a magnet for anchor babies and all sorts of activities of dubious merit (I wish I was exaggerating, but I assure I am not).


The condo is paid in full. No mortgage. Total cost to live here is about $18K / year. This includes property taxes (a crazy $7500+!), HOA's ($650/month), insurance and electric. In 10 years, we have only had one single special assessment of $1K. But our building reserves went from almost 2 million to $0 this past year due to structural renovations, etc., so I anticipate additional special assessments down the road.Today, nothing really words. 3 elevators are broken, trash is not being collected on time, etc, etc. The building is deteriorating rapidly.

So we have been looking for a single-family home thinking we could sell our condo for around $425K or so, and then buy a home around $450K. Sadly, that was 2019, and in 2020 we would be lucky to sell in the first place and, if we do, we are looking at around $340K in our pocket after closing costs and commissions. The picture has changed dramatically for us due to the fact that our condo keeps depreciating while every other house we like keeps appreciating. In short: we can now afford a lot LESS.

Our numbers:
We are both in our early 40's, have zero debt and about $650K between cash savings and investments, etc. The condo is by far our largest expense. We live well below our means, usually on one pay-check, and we try to save/invest the other one. No kids. Let's just say that if it wasn't for the condo, our fixed expenses would be really low, and we could potentially retire at 55.

We also have about $15K in passive income from dividends and interest.



So, here is where I would love your input:

- Assuming we are lucky to finally sell our condo for about $375K, we would net about $340K.

- The average asking price for the type of single-family home we love is $450 to $500K.


- So, all in all, even after selling the condo we still would need to put down anywhere between $100K to $150K or so.


- I really do not want a mortgage, period. I have never have debt in my life. The mere idea of signing such a document shakes me to the core. I can picture myself awake at night simply by realizing that "crap, I now have a mortgage!"

- But I also HATE the idea of using about $100K to $150K from our hard-earned and hard-saved cash. Having said this, even if we used $100K from savings, we would still have about $500K left.

Perhaps a change in mindset would make sense. We could have the house we love, and hopefully this would translate into a less stressful life.

Also, let's assume we sell the condo, put $400K down to buy a $500K house, and mortgage $100K. The monthly payment for a $100K mortgage is about $500. In other words, $150 LESS than what we pay now in HOA's ***without*** a mortgage!

But who am I kidding? I come from a different country and culture. We buy things we can afford. If you can not pay cash for something, you do not buy it, period. I am also, like most of you, the epitome of frugality, and a savings-addict. The idea of using such a large amount from our savings literally petrifies me.

What would you do?

Your thoughts and experience are truly appreciated.

EDIT: Just as an edit to my original post, and for multiple reasons, renting would not be an option for us.

[PointBreeze]

Life is too short, my friend. Sell the condo and buy what you want. You are frugal and can pay off the mortgage relatively quickly and interest rates are low right now.

[DFDubb]

Lots of things to be terrified about in this world. Taking out a 150k mortgage at less than 4% for a 500k house is not one of them.

[levindb]

Different approach...have you thought about a home equity loan on the condo, and then renting out the condo...either short term or long term. The rent payments could help reduce the mortgage on the new place and the payments on the home equity loan. You then have a depreciating condo for tax purposes and all everything becomes a business process. Not sure if this will help you sleep at night, just a different approach to get you to where you want to be sooner rather than later.

[SumDay]

We split the difference, and used some of our cash, and took a 3.75% 30 year mortgage for the remaining 33%.

I wanted a 30 year loan so the payments are as low as possible, as I can always pay extra when we're flush with cash. When we're not, the payments are NOT a problem. I've been paying extra, and after 4 years here, our mortgage is now 25% of the home's value.

It initially bothered me to have that debt and now if a sack of money fell from the sky, I'm not sure I'd pay it off.

Also, we got a HELOC on it right away, before we retired, as a back-up to our back-up plan if the market were to tank. We haven't had to use it, luckily.

[justlikebike]

Options as I see them:
1) Stay where you are
2) Buy a house for $350/400 cash and fix it up in time
3) Get a mortgage

What "we" would do and what "you" are comfortable with is probably 2 different things. You give 2 very different conflicting statements with "If we can't pay cash, we don't get it" and then state "should I get a mortgage? ". Well, no, don't get a mortgage. Not if you aren't going to be happy. I would suggest pay cash for something that you could fix up to make your dream home over the next 5-10 years. That way you aren't paying a mortgage, you aren't dipping into your savings and you end up with the home you want.

p.s. If you are petrified of dipping into your savings now, wait till you go to retire and realize that is the only spot you can get money from.
My $0.02 opinion.

[W2R]

If it was me, I'd sell it ASAP, at whatever price you can get, and live in a rental while I save up more money and look for a better place to buy.

If you need a mortgage, get one that you can pay off early and start dumping all your excess cash into it every month until it is paid off.

[Cassius King]

I'd sell the condo, invest all the proceeds and get a mortgage on the new house. You'd be borrowing $500k at cheaper rates that you could beat in the market.
Your expenses will increase slightly, but that will put you at a $1m in savings/investments and cheaply borrowed money you can pay off early if you wish.

[ownyourfuture]

I had a similar problem approximately 20 years ago.
My late father gave it to me straight.
"get the hell out of there"

[Go-NoGo]

Quote:

Originally Posted by Cassius King I'd sell the condo, invest all the proceeds and get a mortgage on the new house. You'd be borrowing $500k at cheaper rates that you could beat in the market. Your expenses will increase slightly, but that will put you at a $1m in savings/investments and cheaply borrowed money you can pay off early if you wish.

If I were you I would sell the condo now at the best price you can get. In the larger scheme of things $75K (loss of condo value) is not worth the stress you are putting on yourself and the DW.

I gather the 2 of you have well paying jobs and you are saving a significant % of your incomes, by the time you are ready to retire your assets will have grown you will have paid off the $150k mortgage well before then.

[Teacher Terry]

I would sell, buy a house and take a small mortgage.

[omni550]

Quote:

Originally Posted by ownyourfuture "get the hell out of there"

+100

omni

[Starsky]

Quote:

I come from a different country and culture. We buy things we can afford. If you can not pay cash for something, you do not buy it, period.

This really sounds like a cultural thing. Get used to debt. It is how America became so wealthy in the first place, and it is one of the perks of living here. Our system is much more amenable to personal debt than any other country in the world because we believe in freedom, and owning a home is an expression of that freedom. I'm not suggesting you go crazy and max out your credit cards; on the contrary. In the US, cash is still King; so using debt wisely - i.e. using other people's money to make money - is one of the keys to financial freedom.

As a native, this is a great time to get a mortgage while you can lock in historically low interest rates for 30 years! A $150K mortgage costs about $700/mo., but you are paying $650/mo. in HOA and getting nothing. For you, a move could be close to a wash, cost-wise; and your quality of life could improve a lot. You will also get to write off your mortgage interest expense, so it will lower your income for tax purposes. And, frankly, it is kind of nice to have them impound taxes and insurance monthly rather than doing it yourself.

I've spent a lot of time overseas, and have been lectured to - a lot - about the way we Americans use credit. We are uniquely unafraid of debt and of bankruptcy because our economy has been so dynamic, and our country is full of home-brewed entrepreneurs and second-chance success stories. In most other countries, individual/small-business success is usually much more class-driven, second chances are rare, and most of the banking systems are highly regulated and very strict towards personal and business lending - unless you're a member of the elite.

Take out a mortgage and sleep well at night. It will probably be the least of your worries...

Edit: Another way to think about it is to ask yourself if you would loan $150K of your money to someone for 3.75% fixed for 30 years. If the answer is "no, that's a terrible deal for me" - and I assume it would be - then getting a mortgage would be a great deal for you, right?
I almost hate to suggest that you could also keep some of your cash proceeds when you sell the condo - for investing or whatever - and take out a slightly larger mortgage...it's nice to have the cash.

[ziggy29]

Personally, I would be willing to be aggressive in my selling price on the condo in your situation, if you really want to be rid of it and don't want to be landlords. Then you would have a very small and manageable mortgage on the house you want.

And if cash flow comfortably allows it, you can take out a shorter mortgage -- a 15-year or 20-year (or even a 10-year -- we have a 10-year mortgage on our house, with an initial $104K loan balance, already down to $93K after 16 months). That would get you out of debt faster and perhaps let you pay it off early down the road.

[MBAustin]

Quote:

Originally Posted by ziggy29 Personally, I would be willing to be aggressive in my selling price on the condo in your situation, if you really want to be rid of it and don't want to be landlords. Then you would have a very small and manageable mortgage on the house you want. And if cash flow comfortably allows it, you can take out a shorter mortgage -- a 15-year or 20-year (or even a 10-year -- we have a 10-year mortgage on our house, with an initial $104K loan balance, already down to $93K after 16 months). That would get you out of debt faster and perhaps let you pay it off early down the road.

+1 Just do it.

[RobbieB]

Me too!

Sell it and buy what you want. Get a mortgage, the rates are tiny! Do it now and get on with life the way you want to live -

[Aerides]

Get the mortgage.

Life is too short to spend years living in a place you don't love, when you have the means to live somewhere you do.

[pb4uski]

Quote:

Originally Posted by Karloff ....- I really do not want a mortgage, period. I have never have debt in my life. The mere idea of signing such a document shakes me to the core. I can picture myself awake at night simply by realizing that "crap, I now have a mortgage!"...

You wanted feedback. You're being ridiculous. Man up.

Sell the condo for what you can.

Take the proceeds and either get over your fear and buy the SFH you want and your all in costs will be lower at a place that you prefer.... you can get a low interest rate 15-year mortgage.

Or keep your mortgage fears and rent a SFH.

[aja8888]

$650/month for HOA fees? And the reserves are $0 now! That's nuts. Get out quickly and you won't be throwing $650/month into a black hole.

[badatmath]

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