Time to Make the Move?

Amy and her husband live in a terrible school district. They'll have to put their daughter in private school. They could move, but housing is more expensive. Dave gives Amy his take on their situation.

QUESTION: Amy in Macon is on Baby Step 6. She and her husband owe $50,000 on a house that would sell for $130,000. They live in a terrible school district, and if they stay in their home, they’ll have to put their daughter in private school when she starts school. They could move, but housing is more expensive. Dave gives Amy his take on their situation.

ANSWER: There is a spectrum when we talk about buying a home. The spectrum is from what Dave would do to what Dave would say. What I do is I don’t borrow money. When I was in your exact situation, we had put the first two children into the private schools and it was costing us about $11,000 or $12,000 a year. Plus, we were driving 35 minutes each way twice a day to take them and pick them up, which was unbelievably strenuous.

In that situation, we sold our house, moved to a good school district, and rented for two years while we saved up and paid cash for a house. That’s what we did and that’s what Dave does.

What I say is, if you buy a home where the payment on a 15-year fixed rate mortgage is no more than a fourth of your take-home pay, that’s okay. The answer to your question is that you could go ahead and move, take out a slightly bigger mortgage while these rates are down and while you can get a good deal, and the house is going to go up in value, and it will be a good investment for you as opposed to putting the kid in private school only because the school district is bad.

Our kids went the rest of the way—and our youngest went all the way—through some high-quality public schools. Some of the people associated with the school district are idiots, but by and large, the schools did a good job with the kids. We loved the teachers and we loved the principals all the way through. We still do.

But anytime your kids are in anything, you have to watch what they are getting into. You have to do that in private school. I would start talking about what you’re talking about, and that’s making a move. There’s nothing on fire here; we’ve got a few years. The good news is that interest rates are down and prices are down. The bad news is, for your sales purposes, prices are down.

You need to find what the house will really bring today. If you are not willing to sell it for that today, then you need to wait to execute this. But there’s no sense in wasting everyone’s time and jacking your price up to an unrealistic price and just hoping an idiot comes along.

Put the house on the market at a price where it will sell with a good, high-octane real estate agent who gives you good advice, then get it sold and take your time and make your move. It’s okay to go rent for a year until you sneak up on a bargain. In the meantime, save money like crazy.

That’s okay to move into that better neighborhood or not. The good news is, different than our situation, you don’t have to have the school district today. The tuition to the schools almost paid our rent when we moved. If you sell yours for $130,000 and you move into a $200,000 house, you spent more but that is going up in value. The $150,000 you’re going to spend over the years on tuition is not. That money is just burned, it’s gone.

I prefer your plan, I just don’t know exactly how you’ll end up executing it. But as long as you keep it between those two borders, anywhere from paying cash for the move or lateral move like your husband is saying, all the way up to a 15-year fixed rate mortgage where the payments are no more than a fourth of your take-home pay, I think you are inbounds and you won’t get yourself into trouble that way.