My husband and I can’t decide between selling our house or renting it out. We live in Northern California in an area that we don’t like. The house is cute, we have a 2.5% interest rate and $262,000 left on our mortgage. The Redfin estimate for our home right now is $550,000.
We welcomed a child last year and this is not an area where we want him to grow up given that schools are not good and it’s not the safest neighborhood. A good friend in another state has said we can move in with her rent-free for a year until we figure things out.
My husband and I are ready to move, but we’re not sure if we should rent out our home until we find another area where we would like to settle, or sell and buy a new house this year since prices are going up nationwide.
I was laid off last year and I am thinking about going back to school which complicates things. Our current monthly mortgage payment is $1,700 and we could rent the house for up to $3,000 a month. We’re overthinking this and can’t seem to make a decision.
Indecisive
‘The Big Move’ is a MarketWatch column looking at the ins and outs of real estate, from navigating the search for a new home to applying for a mortgage.
Do you have a question about buying or selling a home? Do you want to know where your next move should be? Email Aarthi Swaminathan at TheBigMove@marketwatch.com.
Dear Indecisive,
Focus on your long-term financial goals, and whether your home will help you achieve them. I have some questions for you: Do you want to cash in on the home now and graduate debt-free? Or do you want to keep the home as an asset that you can tap as a lifeline?
You have a 2.5% mortgage rate, which only requires a monthly mortgage payment of $1,700, and you can net a profit of $1,300. Today’s mortgage rates are more than double that. On that basis, don’t sell. Renting your home seems to be the more optimal route.
Continuing your education, especially after being laid off from work, requires money. You also don’t like the school district or your current neighborhood, and safety is a concern. For those reasons, I can see why you think it makes sense to cash in on the home.
At the same time, you are also going to live rent-free — just make sure that agreement is rock solid so you don’t have any drama with your friend later on. You are essentially saving tens of thousands of dollars in rent, and you will also benefit from a steady stream of rental income.
Uncertainty versus instability
You have a year to figure things out. I know that uncertainty can feel like instability, and you may feel anxiety over things being up in the year, but you are living rent-free for a year, which gives you a significant amount of time to decide if you really need to sell.
Furthermore, lots of things change in a year. What if you decide that you don’t like living in another state and prefer the stability of your own home in Northern California? If you hold on to the home, you’ll always have a safety net.
And don’t worry too much about home prices rising or falling. The market doesn’t look like it’s heading towards a crash, based on economic indicators. Supply is low, and demand is high. Mortgage rates are high, but the market is starved of inventory.
You will likely fetch a good price for your NoCal home when you sell. The longer you hang onto it, the more likely your house will be to increase in value. Please don’t sell because you feel like you need to. Only sell if you think the math makes sense.
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