5 Reasons to Stay in Your Current House

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Do you remember the time when it was considered wise to keep buying bigger and better houses? With your first home purchase, you most likely started small since that’s all you could afford at the time. After two or three years you started to build a little equity in your house (probably because the value was increasing). By selling this house, you were able to put a much larger down-payment on the second house, which was much more extravagant of course. After that, you moved on to a third and fourth house, each time buying bigger and better. Sure, you had $40,000 of equity in your home now, but instead of owing the bank $80,000, you now owed them $280,000!

Then, as we all know, the housing market went to crap and many people owed more to the bank than their house was worth. This method of “house hopping” was only thought to be wise because at the time, we had only known the value of houses to go up, not down.

So with the market growing again, is it still wise to house hop? My vote is no, and here are my five reasons why:

1) Pay Less Interest

When you first buy a house and start paying down the mortgage, the majority of your payment goes to the interest payments, and only a small portion pays down your principle. In other words, after a year or two, the amount you owe on your house is still very close to what you initially borrowed. If you keep hopping from house to house, your loan starts all over and 99% of your money has no impact on paying down your mortgage.

But, if you say in your house, the ratio begins to shift. After a few years you’ll begin to notice that your loan is decreasing faster and faster since more of your money is going toward the principle. By staying in your original home, your money will have a greater impact on your overall net worth.

2) Avoid the Unknowns

landscaping on a budgetYou know when you decide that you need another car? Many of us begin to explore the used car market and might find something that we absolutely love and at a price we can afford! However, we know absolutely nothing about this car. Sure, the owner claims that it was his grandma’s car and she only drove it to church on Sundays, but maybe it was his car and he raced it against his buddies every weekend. There are many unknowns in these purchases and no matter how much we inspect this car, it may still turn out to be a lemon.

Well the same is true with houses, only to a greater extend. With a car, you can at least get a quick idea of its condition. You can walk around it and look at the body, check the oil, rev it up and listen for knocks or clanking. With a house, many of these things are hidden. We can’t physically see that cracked foundation or the mold that’s lurking behind the wall. If you stay in your same house, at least you have a solid understanding of the issues and challenges that may exist.

3) Realize Your Improvements

It seems like there are always house projects doesn’t it? There are always things you can do to keep your house looking nice, and then there are projects that might improve it. For those of you that are into sustainability, you might be interested in solar power or wind generated power. If you truly want to realize the improvements that you make, it would be wise if you stick around for a while. At this moment, solar panels have about an eight year payback period, and wind (depending on where you live) might not pay you back until 10 years down the road. Stay in your house and experience those benefits down the road!

4) Relationships

Being a money guy, I’m don’t often consider the value of relationships, but now that I live in a neighborhood, I realize how important neighbors can be. Certainly if you have kids that have friends nearby, it’s an excellent reason to stay in your house for a longer stint.

5) Increased Cash Flow

Some of you can’t possibly fathom this, but you will pay off your house someday (hopefully soon rather than later). By staying where you are, the chances are greater that you’ll be able to pay it off sooner. And, think about the cash flow that you’ll have once it’s paid off. If you have an extra $200 a month right now while paying your mortgage and you dump that $1,000 payment, all of the sudden you’ll have $1,200 to do whatever you want with! That is much more satisfying to me than getting a mansion on the ocean.

Are you working to pay off your home or are you a house hopper?

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Money

Derek

AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

13 Comments

  1. We were going to sell our current house and buy a new one, but we decided not to. The main reason is because we are not moving until we find the perfect one, and after a year of searching we haven’t found it. So now we are just going to wait a couple of years and hopefully our dream house does not come for sale during this time!
    Michelle recently posted..Don’t Let Addicting Side Hustles Ruin You

    • I was in the same boat as you Michelle. If I would choose to sell my house, it would be to purchase a multiplex. I would live in one of the units and then rent out all the others.

    • I agree Mark. Sure, they can get a bigger down-payment for the next house, but they really aren’t gaining anything from their move. In fact, many times they’re only increasing the amount that they owe the bank!

  2. We don’t expect to move until after our currently 12 year old son is out of college, so it will be at least 10 years. We have paid off the house, and as you mentioned, the cash flow into savings is great.
    Bryce @ Save and Conquer recently posted..Carnival of Financial Planning – Autumnal Equinox

    • That’s awesome Bryce! I love to read your comments because it sounds like you have become quite wise with your money.

  3. We’re both gonna inherit our parents’ apartments. Our families lived here since ’63 (my folks) and ’70. We live in some great neighbourhoods and are very pleased with our homes. They’re not some super-duper apartments, but are still great for us. We’ll probably never move from here, unless we moved to another country.
    dojo recently posted..Top Things to Do in Istanbul

    • Hi dojo. You mean that your parents own a condo? Or are you just going to take over an apartment that they rent?

  4. Buying your own multiplex and living in a unit is an interesting idea. Seems great on the surface – keeping a close eye on things, plus saving the additional overhead on a property management firm or having a separate dwelling.

    I’m not sure I’d want to be that accessible to my tenants though.
    Jack @ Enwealthen recently posted..3 Steps to End the Health Insurance Nightmare

    • That is the challenging part…do I really want to live in a small apartment after living in a large 3 bedroom, 2 bath house? It would be delaying gratification now for some big cash in the future. Most people wouldn’t do it, but that’s what makes me think it’s such a great idea! 😉

  5. My next move will definitely be into a smaller home. I am 46, approaching the time when I will be living alone, and think a small condo will be perfect.

    I am considering the multiplex idea, either alone or purchased jointly with my daughter and son-in-law. If I go that route, I will absolutely have a property management company handle it. I will let the other tenants assume I am a renter, just as they are. I think that will make for a peaceful life. 🙂
    Petunia 100 recently posted..Xmas Party

    • I would suggest owning it completely on your own – sometimes joint ventures in the family don’t work out so well. With this investment, you should be able to have the property management company take care of things and still churn out a small profit. It might take a little while to find, but those multiplex deals are always out there! Best of luck to you!


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