Well, as I'm sure you know, nothing is ever a sure thing. But, you seem fairly confident that your windfall will come to fruition. So, my personal suggestion would be to get the thing on the market as soon as possible. Have a contingency for your sale about you being able to find suitable replacement housing (closing not right away, basically). I'm unsure how the market will be a month from now. With the tax credit running out, the bottom could fall out. Or, it may not. I honestly have no idea. But if people were on the fence, the 8k seems like a healthy incentive to me. You must act now to take advantage of it, though. If someone is under contract by the. end of April, they get the credit provided that closing is by the end of June. Is that a reasonable expectation for you guys to be able to move? Sorry to get off topic, just giving some food for thought.

Thanks for your response. No, unfortunately I don't think we could manage by the end of April. Primarily, the reason my husband is getting the windfall is because of his workaholic nature. So that's a problem plus there's my schedule with school and a 2 year old. I just don't want to put the house on the market until it's totally ready. I need to paint our bedroom and fix up some baseboards etc...

The other thing I was looking into is replacing the bathroom vanity tops, light fixtures, faucets, towel bars for under 1k. Would that be worthwhile? It's a 2br, 1 1/2 bath 2 story townhome with unfinished basement. We just installed tile flooring (previously builder grade vinal), and put in a new light fixture and knobs. The cabinets are 10 year old cherry cabinets with builder grade laminate counter tops. That seems to be the norm for the area so I don't think it's really necessary to replace those. I think it would over-improve it. As it is, I think our unit is nicer because the original owner upgraded to cherry while the rest are this shiny, white lacquered stuff. The bathroom updating would help add a little sparkle and get rid of some slightly worn laminate tops in both bathrooms. They also have the shiny brass fixtures which I HATE (that's what I got rid of in the kitchen a few months ago). I just have to convince my husband it's a good idea. He doesn't seem to think it will matter, while me, Miss HGTV, thinks it's a reasonable amount to spend to make this place stand out a little bit.

We need to move because it's only a 2 bedroom unit and we have an adjustable mortgage. "

With interest rates near all time lows, your adjustable mortgage may actually go down. Also, 2 bedrooms is actually twice what you "need" for a married couple with a cat. If you want to sink all of your cash and your windfall into a "dream" home, that is your decision, but it certainly isn't a need.

Personally, if I were in your shoes (grad school, no dependents, underwater in a house, and coming into some money) I would sit tight and squirrel away some cash. Continue to live frugally until you get out of school and have a dream job to go with the dream home.

I know it is a conservative route but it would do wonders for your long term financial lives and would give you a big safety net while you transition to your career after school.

billl - did you miss the 2 year old

I also can't see the reasons why you have to sell, unless you are planning more kids. I think billl has a very good approach to saving money.

There are other options too as in you could always re-finance into a fixed mortgage and then not have to worry about the ARM and stay put.

Without the windfall, it sounds as tho' your finances would be stretched by a new home, so I'd definitely wait until the windfall was in-hand.

And then possibly wait some more, as bill1 and lyfia suggest. It's still a buyer's market. If you live in a populous area, probably more than one 'perfect' home is out there for you.

Hello Bill,

We have a 2 year old son and plan to have more soon. We also don't have any privacy in the backyard and the condo restrictions are awful. I want my son to be able to play. Plus, the schools in my town are TERRIBLE right now and they're only going to get worse. There are no playgrounds or parks close by so I have to drive 25 minutes to let my son get out his energy. Most importantly, my husband's job requires to work from home several days a week and he is currently working out of our unfinished basement (too costly to finish if we plan on moving--not worth it) with no heat in Mass. It's awful for him. So we want to move.

My husband has a dream job. The only reason finances are tight is because of the $60,000 loss we took on the condo plus the realtor fee. Our adjustable did go down last year but it will be going up this year with all these rate increases. My husband has an amazing salary that is due to increase substantially again this year, and we can afford a higher monthly payment. We prefer to get into our forever home while the interest rates are low. Any money we lose now should be made up in equity on the next home. In fact, since the next home will be considerably more than our current home, the net increase should actually be greater (20% of 300,000 is less than 20% of the 500,000). So when the market turns up in 20 years, we'll make back the money we lost now. And if this windfall does come through then it is going to be very large and will well exceed the total purchase price of the home. We will only take out a mortgage just to reap the tax benefits and put the rest away for savings.

In either scenario, I think we can afford a new home. Staying isn't a reasonable alternative. The town is going downhill and I want to get out while the gettings good. Know what I mean?

Thanks for your input though,
Nicole

Oops - I read that as a 2 yr old cat.....

It sounds like you have your mind made up, so I'm not sure what your question is. If you want to move, move. As far as the finances go though, you are just rationalizing. It is great that your husband currently is making a ton of money, but you are essentially a 1 income family with some very big liabilities. If for some reason he was unable to work for a period of time, you could find yourself in serious trouble. You absolutely should not spend money you hope to get before you actually get it. You absolutely should not spend all of your cash reserves to move up in house size, especially while you are in school.

Of course, if you come into a million bucks, then that obviously changes the equation. Until then, you shouldn't sink all of your money into a new home. No matter what you say, if you don't have a down payment, you can't afford a half million dollar home. Anyone considering moving up in house should have at least a 20% down payment plus at least 6 months of expenses in the bank.

BTW - Your adjustable rate mortgage is inconsequential here, so just get it out of your mind. Even if you have a small rate increase, the increased interest for a year or two is trivial compared to the numbers you are talking about.

Also, trying to view your home as an investment is just more rationalizing. Houses are really bad investments compared to other options. Spending more money on a house does not make you money, it costs you money. You will be paying more for a higher quality of life. There is nothing wrong with that, but you need to have the money to afford it.

Well, I wasn't planning on buying that 500,000 dollar house if the money doesn't come through. It'd probably be 350,000- 400,000 which is very modest for any town with decent schools (13-1700 sq ft). I'm not really trying to rationalize. The home does not accommodate our needs. I'm not looking at is as a true investment but more of a home.

I'm only in school because I plan on staying home for the next 5 years. I gave up my job to stay home. I wanted to keep somewhat current with my career so I decided to go back to school part-time in the meantime. I'm a teacher so it's not like the money is great in the beginning. So my income is negligible once day care costs have been accounted for. He has short & long term disability coverage and life insurance. We've planned for the liabilities best we can, but of course there are no sure things in life.

But you're right, I think we've made up our mind that we're willing to do anything to get out of this condo. If the money doesn't come through then I will be attempting to unload it by scraping by and purchasing a much more modest home. The interest rates, I fear, are going to go back into at least the 9s in the next year or two. By then, the savings I could potentially reap by sticking it out until then will be erased by increased monthly payments.

I guess my question has been answered. I'm going to wait to hear about this money definitively in the next month or two. Hopefully, that won't make too much difference. If it doesn't happen then we'll figure out another way.

Also, trying to view your home as an investment is just more rationalizing. Houses are really bad investments compared to other options. Spending more money on a house does not make you money, it costs you money. You will be paying more for a higher quality of life. There is nothing wrong with that, but you need to have the money to afford it.

This is sooo important, and I believe, one of the reasons that the housing market crashed. Too many people were looking at their houses as investments and piggy banks rather than as a place to live - a home.
Unfortunately it is still happening. I just found out that the people who bought our house in 2005 have put it on the market for $80K less than they paid for it. They have also put money into it - all new windows, garage door, etc. It's not a short sale. They have found a home that was previously listed for around $800K and is now in the $500K range. Although they will take a $100K hit by purchasing this home, they think that the market will come back in a couple of years and their $500K house will be worth $800K. (probably a fantasy) And in the meantime, they lose $100K, have a higher mortgage payment and higher property taxes.
If they want to invest in RE, the smart thing to do would be to purchase a rental property that will not only provide income, but probably has a much better chance of appreciating in the next several years.

nikci,

Why do you think interest rates will go back to the 9s soon? We have had a 5/1 ARM for about eight years now. Turns out it was one of our better financial decisions so far. Look at the caps on your ARM. It may not matter if rates skyrocket. I agree with whoever said your ARM is just a red herring in this story. But your original post said you *needed* to move because of it.

It sounds like you really want to get out of your current place for good reasons that you didn't mention in the OP. So go ahead and do that. It will probably take awhile to sell. In the meantime you can look for your forever home. (Two houses ago was my forever home - life happens - don't bet too much on forever.) Wait until you get your windfall to commit to it. If you end up selling quickly, you can rent for awhile in a location you consider more desirable. Moving twice is nothing compared to making a hasty decision about forever.

I think you need to wait until your townhouse is under contract or make purchasing a new place contingent on selling your old place. My partner and I carried a rental and our old townhouse for awhile and it was financially very difficult when we both worked and had no kids.

I would talk seriously to a realtor before putting any more work into the house. If you're moving soon anyway, who cares about the brass fixtures?

Also, many realtors have their own handy people they work with. Given your husband's income and (I'm going to guess) the demands on both your time, it's probably a better equation to hire someone else to do any (realtor-recommended) improvements.

About the "junk" in the house. Work on getting rid of as much as possible. The townhouse will show better, your quality of life will improve, it will make the move easier/cheaper.