We are planning to downsize to a $250K house (from a $450K house), as we are feeling "house poor" and unable to fund things like our IRA's or family travel. We have three sources to use for funding the down payment on our new mortgage (if we have one):
- 100K: The sale of our current house should yield about $75K to $125K after realtor fees and paying off our mortgage.
- Up to 144K: We owe $128K at 6.5% on our $340K (FMV) investment condo. I assume we could refinance it at up to $272K, yielding us up to $144K we could use toward the house. (Is this allowed?)
- Up to 50K: We have about $50K sitting in stocks.
Other facts: We're in our 40's and have 2 college-bound kids under 10 years old. We live (and own a rental condo) in a town where property values have actually gone up about 10% over the past 10 years, and we don't think they'll go up much further. We're moving to a town where housing prices are at a low. We want to live simply and are pretty scared about the future economy, but we want to make sound financial decisions as well.
Our question: How much should we put into our new mortgage, and from where should we source the money? I know there are implications tax-wise, economy-wise, financial-aid-wise, etc. We're even considering having NO mortgage on our new home… As we've come to prefer making voluntary IRA contributions over making monthly forced mortgage payments.
P.S. Another option would be to sell the rental condo and get back $150K (after capital gains and realtor fees), but we don't think we want to do this, as it's an easy rental, and someday may become rental income, or even our retirement home.
Read more: Use equity from rental property to have smaller/no home mortgage?
