losing in the sale, gaining in the purchase
Still debating about backing out of a home sale contingency (we are secondary) offer we made just a few days ago, we have one more day to do that.
Here's the scenario:
Our house is assessed at more than what we paid - that's a good thing. But, we put more into it than what we will sell for, not good for us, but we'll live with it. So, we want to break even - sell for at least what we owe on our mortgage. By the time we pay the prorated property taxes (if we sell by the end of the year), realtor fees, and what we can realistically get for it in this market (comps didn't come back the way we wanted), we will have to pay into it in order to get out of it - we'll have to delve into savings or more likely borrow against our 401k. We don't HAVE to sell, it's a personal choice to find a property with more land.
On the upside, the home we put an offer in has nice acreage, and a close enough commute to the city - this acreage is hard to come by, and we probably couldn't afford it if it were an up market. The home itself is nothing special, needs a lot of upgrades, but the land is prime real estate given the location, and lots of nice homes in the area. The home is priced $78k below assessed value.
Would you delve into your savings to get out of a current home, to make it up on the back end later down the road? Our mortgage in the new home will be lower, at a lower rate, but at the same time we'll be borrowing against our 401k (not cashing it in, which is a tax penalty), to get out of our current home to pay the remaining mortgage, realtor fees, etc. In other words, we'll have a mortgage with a better rate and lower monthly payments, but we'll also have a loan against our 401k to pay off at a 5% interest rate, so not sure what the better choice is. Lower utilities in the new home as well, lower taxes, lower insurance due to zip code, more lawn to mow, oil heat, well water - no water bill. But many upgrades needed - new kitchen and baths, carpeting...all down the road of course. The acreage is the biggest factor. We're worried we'll never find that again, or should I say be able to afford it in an up market close to the city.
I don't know what is the better choice.
Everyone is telling us take the loss on the house now, and make it up on the other side with more acreage, but I don't know if that means we are smart to borrow against our 401k to get out of it.