11:04 AM
Swee Ng
After we purchased our new home in 2005, we spent the first year stunned by the $68,000 increase in the house's value. Little did we know that in just six short years the value would turn the other direction. Our house value has since slid an almost identical, but negative, $70,000.
Even though we owe more money on our mortgage than our house is now worth, we have discovered a positive side to plummeting house values, including a huge reduction in our property tax bill.
Contrary to reports that the only people who are underwater homeowners are those who put little or no money down, we saved and put down a full 20 percent on our home.
According to Zillow.com, half of homeowners who purchased their home in 2006 owe more than their home is currently worth. For people like us who purchased in 2005, the percentage of people who are underwater in their homes is 42 percent.
If you like your house, and don't have to relocate for work-related reasons, staying put can be a wise financial move. Here are some of the surprising advantages of staying in our underwater home in Florida:
Affordability of payment
Since we did not overextend ourselves when purchasing the home, we are still able to afford to make the monthly payment. In fact, it's affordable enough to pay off the mortgage in half the time.
Decrease in property taxes
By visiting Zillow.com I was able to plug in my address and get a quick summary of how much we paid in property taxes each year. I was pleased to see our property taxes have gone down. We paid $3,764 in 2006, but only $1,930 in 2010.
Low-interest fixed rate loan
We started with a low interest rate of 5.99 percent, but because of the housing crisis our mortgage company offered a free refinance a few years ago. We were able to lock in at an even lower rate for a 15-year fixed rate mortgage.
Security of one home for life
I love the fact that we can enjoy our house for what it was meant to be: our lifelong home. It was not intended to be an investment we could flip in a matter of a few years. According to Thomas J. Stanley, the author of "The Millionaire Next Door," most millionaires own the same home for more than 30 years. Being "forced" to stay put means you can focus on paying off your mortgage instead of worrying about fluctuating values and the high costs of moving.
Anticipation of a housing recovery
If there is one thing I bank on in life, it's the fact that history always repeats itself. Yes, we purchased our new home for about $101 a square foot, and now it's only worth an estimated $62 a square foot. However, I know we will be financially ahead by staying in our starter home for the long haul. Housing values do change. A friend's home was worth only $119,000 a year ago, but shot up to $150,000 recently because of expensive new homes being built in the area.
Fixing it up just for ourselves
Pumping money into a home that is underwater may sound like financial suicide, but I'm not afraid to fix it up. We opted for the sub-$10,000 kitchen remodel that fit our budget. It also happens to be that our budget-friendly improvements won't outprice other homes in our subdivision when we do decide to sell. We also spent $2,000 on landscaping, which increased our home value by $20,000, according to a local Realtor.
Perhaps the biggest reason I'm pumped about our house is its rental value. If we had to move for a job transfer, we could rent out the house at an amount that is more than our monthly mortgage. Renting here has now become more costly than owning, even when what you own is an underwater house.
via yahoo finance
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