Hey all, my wife (36) and I (35) are considering going back to renting. We bought our current home intending it to be our forever home, for $590k with 10% down. Initially, our monthly payments were about 27% of our income, which was manageable. However, due to various factors including a hostile political climate in our town and an unexpected $6,000 shortfall in our escrow, our monthly mortgage has risen to nearly 40% of our income. This change was unexpected, especially since we won a tax appeal last year which reduced our taxes. I’m struggling to understand how this happened, assuming a bank error. Now, with a second child on the way, is it unreasonable to consider going back to renting? Despite the potential financial step back, the high mortgage rate we currently enjoy might not be available again soon. I’d appreciate any advice or insights, thanks!
That’s rough. Escrow amounts are based on current expenses, not future predictions. When a house sells, the county often increases the assessed value, leading to higher taxes. We experienced a 33% increase in taxes right after purchasing our house. Homeowners insurance has also doubled in the last five years. These aren’t necessarily your lender’s miscalculations, but rather the result of rising costs across the board. Despite the challenges, I’d find it hard to return to renting since rental prices are also increasing. You’re locked into your house price, which isn’t the case with renting. Consider the moving and selling fees, which are substantial. If you like your home, I’d try to adjust your budget to keep it. Congratulations on your new baby!
@Rudy
Ownership costs are rising, but so are rental costs. By owning, you’re building equity for the future, which wouldn’t be the case with renting.
@Rudy
As someone who works in escrow analysis, this is a common issue everywhere. It’s typical for property taxes and insurance to increase significantly after purchasing a home.
You’re essentially paying a mortgage either way, so it might be better to pay your own than someone else’s. If moving back to renting is necessary, consider renting out your current home to cover the mortgage. This way, someone else helps pay down your mortgage and contributes to your retirement fund.
@Paxton
Paying into equity that you can’t use until you sell can be frustrating, especially if you need liquidity.
Wylie said:
@Paxton
Paying into equity that you can’t use until you sell can be frustrating, especially if you need liquidity.
You could leverage the equity in your home by taking out a loan on it, which isn’t possible with a rental.
Wylie said:
@Paxton
Paying into equity that you can’t use until you sell can be frustrating, especially if you need liquidity.
Once your mortgage is paid off, you save significantly compared to continuous rent payments, and your children could benefit from the property in the future.
Both renting and owning are stressful, but owning tends to be more financially advantageous in the long run. Rent increases often outpace mortgage adjustments, and property values typically rise over time. Managing stress day-by-day is key. Despite the challenges, owning can provide more stability and control over your living situation.
Selling your home and moving to a rental might seem daunting, but it can lead to greater happiness if the current political climate or other factors are causing stress. After selling my home due to similar issues, the equity helped me invest and enjoy life more in a new community. Sometimes, a fresh start in a rental is the best choice for mental and emotional well-being.
If you decide to rent, aim for an inexpensive place and save aggressively for a significant down payment on your next home. Manage your escrow contributions by paying property taxes and insurance yourself, which can provide some financial relief and allow for better budget control.
Consider renting out your current home to cover the mortgage and find a less expensive rental for your family. Refinancing could also reduce your monthly payments. Explore all options with multiple lenders to ensure you get the best terms before making a decision.
Investigate if the bank failed to account for your tax appeal win this year. Make sure all factors are considered before making a decision, as errors in escrow calculations can sometimes be corrected.
Renting offers less responsibility for maintenance and fixed costs, which can be appealing. However, consider the long-term financial implications and stability concerns, especially with a growing family.
@Aza
Renting may seem easier now, but it can hinder long-term financial growth and stability, unlike owning a home.
If this was a newly built home or your first year in it, the tax assessments might explain the sudden increase in escrow. Selling might be a drastic step if this is a temporary issue.
Charlie said:
If this was a newly built home or your first year in it, the tax assessments might explain the sudden increase in escrow. Selling might be a drastic step if this is a temporary issue.
The house was built in 1949, and we’ve owned it for over two years, purchasing it in 2022.
@Laine
Consider temporary solutions like a second job to bridge financial gaps. Homeownership often stabilizes financially after the initial years.
Moving back to renting can be a strategic decision that offers immediate financial relief and better living conditions in a preferred area.