Sell Now, Pay Off Debt, Get a New Home That Fits Your Needs

Recently we helped a family who went through a major medical emergency with one of their children. This not only changed how their child would navigate the world, but it changed their work schedules as well. The wife had to change positions at her company from a salaried manager to a part time hourly employee to care for their child.

This change in income affected their ability to continue their current lifestyle, meaning their ability to pay their mortgage, car payments, and credit card debts.

They had bought their home 3 years ago for $400,000 and luckily their home had increased in value to a little over $500,000. They had about $100,000 in equity in their home.

We ran the numbers to do a cash out refinance but being limited to 80% LTV ratio there wasn’t enough room to do a cash out refinance and really impact their situation. They mentioned they would prefer a new house which was a Rambler but did not think they could afford it.

Luckily, they knew someone in their church who wanted to buy a house in the neighborhood. They spoke to her and it was the perfect house for them. They were able to find a buyer who would pay market price without paying any realtor fees.

They sold their house to the neighbor and was able to pocket about $100,000 in equity. They were able to continue living in their house with a rent back for 30 days so they could have a little extra time for them to find their next house.

Immediately after they sold their house, they paid off all of their debt which was about $60,000 between 2 auto loans and multiple credit cards. The total payments of their debts equaled $1,900 per month and they were able to eliminate it all.

We found their next house which was a rambler. We put $20,000 for the down payment and with today’s low interest rates the new house payment was $200 cheaper per month than their current house payment. They were able to buy a new house, save $200 on their house payment and $1,900 per month on debt payments for a total monthly savings of $2,100 per month.

They were able to keep $20,000 in their pocket as an emergency savings account. Not knowing what the future holds this will be a huge blessing if anything happens unexpected in the future.

It’s true they originally called me about doing a cash out refinance, but really, they just needed reprieve. We couldn’t help them accomplish reprieve with the cash out refinance, and they were forced to move… which is never fun. But in the end, they lowered their monthly expenditures by $2,100 which allows them to live on their new smaller income. Also having the rambler instead of the 2 story allows them to better care for their new medical situation. In the end it was a win-win situation for this family.

Even if you don’t have a medical situation forcing your hand but prefer to live in a nicer, newer house but think you can’t afford it; if you have some equity in your house and a little more debt than you would like maybe you actually can afford it. Maybe it is time to consider selling your current house, paying off your debt, upgrading to a newer house, and lowering your overall expenditures.