Hellobee Boards

I would definitely not pay off the house unless it's an insanely high interest rate. Are you guys comfortable in your house or outgrowing it? Is the school district you are in now acceptable or questionable? Can you easily handle the increased payment or would it stretch you thin? There are a lot of things to consider here. I would just look at the move as its own item and decide if it's personally and financially the right choice for you. If not, stay where you are and invest the cash you're sitting on.

we would pay the house off.
my DH and I are all about living completely debt free.

We used to rent our condo out before we sold it, and eh. It's not something I'd recommend doing.

@Raindrop: yea I would be concerned about a bigger electric bill plus renovations plus larger mainenace Costs.

@Raindrop: it's a huge pain in the butt. don't do it! we had a property manager and he handled almost everything, but it was still a major PITA. we were SO relieved and happy when we sold the condo.

@Raindrop: we rent out a TH and we must have great tenants because it's easy money for us. We net a $500 profit each month. In addition to the fact they are paying the mortgage and building equity for us. But real estate investment isn't for everyone.

Our current house is as big of a house as we would need and I would love to pay even some of it off! It's not a fancy house but we're not fancy people.

I would work towards buying a new house, maybe not right away, I like the ideas @gingerbebe: had.

I say that because I lived in a townhouse, only ours was 4 stories. The space was ok but not great the parking was a hassle and so were all the stairs. A year ago we bought a single family and it is amazing. We only have 2 floors (plus walkout basement), plenty of parking including 3 garage spots, room for guests and a play room and an office. Life is so much better.

@Raindrop: Not at all! We sold our townhouse because it was never going to work long term so I know how you feel. We finally bought our forever home but of course that came with a big, scary mortgage so I'd rather pay that off than upgrade from a house that's good enough to raise our family in!

Pay it off, sit on it until you find the perfect house, and BANK what you would have spent on a mortgage in the next few years. then use THAT and the selling price of the small house towards a new house when you're ready.

I would consult an accountant to talk about tax implications- without the interest as a write off you will be paying more income tax. It may be more benifical to invest the extra cash. Do you have a financial adviser? Get with some good money people to talk about your options.

I am in the camp of buy the new house and rent out the old one.. because that's what I did! Being a landlord can definitely be a PITA sometimes but the house would have sold for less than we paid at the time so renting was the better option.

@lamariniere: A few reasons. Interest rates are really low right now and have been for a while, so I'm assuming the OP is paying somewhere around 4%. For me personally, I feel confident that I can earn greater than 4% by investing the cash instead. Also, you never know when an emergency will come up. Keeping the mortgage payments and having your cash more liquid (even if invested in the market it's a max of three business days to cash out) means you are better prepared if you have an unexpected cash need. Once you've paid off your house, you can't get the money back out unless you sell it, or open a home equity line of credit (at likely a higher rate than their current mortgage since rates are going up sooner rather than later). Lastly, as @youboots: pointed out, you lose the income tax deduction.

@Truth Bombs: thanks for the explanation!

Reading all this makes my head spin, lol.

I def agree that you have to carefully consider whether being a landlord is something you want to do! My in-laws are landlords and they've been fine. But I also have close friends that are landlords and they wish they aren't!

It really depends on your family's financial goals too... I think what others said about tax deductions, earning more with your cash flow, having more cash on hand, etc is excellent. But if you are just simple folks, I also see the plain appeal of just living debt free.

Hope you find the right solution for your family!!

What is your debt/income ratio with the new projected payment? If it's reasonable I would invest in the better house and school district. If it's too high I would only pay off the mortgage if you already have additional cash in the bank to cover 6 months worth of expenses. If you pay it off, start saving for another down payment and instead of selling your current house rent it out!