At what point are you too invested in your house to sell? (ie: Rent it out instead)

[JEDI]

I have a 15yr mortgage at 5.5%. (i should have refinanced at 4.85% in beginning of year 3?)

I'm at the end of year 6.

Mortgage = 60% Principal, 40% Interest now.

ie:
$3k mortgage, 1800 goes to principle, 1200 goes to interest

Is there an optimal point where you should sell vs rent if the sole criteria is based on the mortgage?

edit:
Next year, it should be 65% principle, 35% interest

 

[FoBoT]

i don't understand the question, how can renting ever be better?

 

[KLin]

I believe the optimal point is year 8.848729837.

 

[DrPizza]

There's one more thing that's just as important: how much can you rent it for?

I just tried for a few minutes to even begin to suggest which is the best course for action - every situation is far too unique. There are tax questions, questions about the real estate market (how quickly do you think the house will appreciate in value?), etc.

Fobot, I think he's referring to renting the place out vs. selling the place.

 

[KK]

Originally posted by: KLin
I believe the optimal point is year 8.848729837.

I thought it was alittle closer to 9.

 

[thepd7]

Originally posted by: DrPizza
There's one more thing that's just as important: how much can you rent it for?

I just tried for a few minutes to even begin to suggest which is the best course for action - every situation is far too unique. There are tax questions, questions about the real estate market (how quickly do you think the house will appreciate in value?), etc.

Fobot, I think he's referring to renting the place out vs. selling the place.

Dr Pizza is right, anytime when you can rent it for more than the interest you are paying you should rent it. That is if you can afford having to pay some of the principal. You will (should) get all of the principal back whenever you sell it, so having someone pay the interest and even just a few hundred dollars of the principal will help you in the long run. Only thing you need to think about is the cost in time and money of dealing with renters. There are companies that will do it for you so you could check into that too.

ie: mortgage is $3k, $1200 interest. If you rent it for $2k, you essentially having someone pay off the loan you took out. You will make that $800 (probably less after renting costs) back when you sell the house.

Also, if you really want to make money rent until the house is paid off in 9 years then keep renting it. Then it's almost all gravy. Then you have a $300k or whatever asset around plus you are making $20k a year extra income.

 

[thepd7]

Originally posted by: FoBoT
i don't understand the question, how can renting ever be better?

It's always better if you own the house no mortgage and when the renter pays the entire mortgage.

So when you own the house it's better to have a $100k asset and make $10k a year than just sell it and make $100k.

OR when you buy a house with a $2k/month mortgage and rent it for $2k someone is paying off your mortgage and you will reap the benefits when you sell it.