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Nontrads with no kids - sell house?

Discussion in 'Nontraditional Students' started by Twitch, Mar 8, 2007.

  1. Twitch

    7+ Year Member

    Jun 17, 2004
    Likes Received:
    Medical Student
    For those starting school this fall - are you planning to sell your house and go back to renting?

    Financially, it seems prudent. Let's say avg yearly appreciation = 7% and you're interest rate ~ 5-6%. Plus you have taxes, HOA, maint cost (including time), closing cost, realtor fees. Minus writing off interest paid on 1040.

    Now the equity on the house would be cashed out if you sell (versus e.g. rent it out). This equity depending on its size may have an impact on your financial aid.
  2. Sol Rosenberg

    Sol Rosenberg Long Live the New Flesh!
    Physician 10+ Year Member

    Feb 12, 2006
    Likes Received:
    Attending Physician
    It depends a great deal on how much you would pay for rent -- you are leaving that out of your analysis.

    If Monthly Mortgage Interest + Property Taxes + HOA (But you don't have to join an HOA) + Maintenence Cost < Rent, it's obviously a no brainer to rent. If you factor in appreciation of the the property, it's not inconcievable to break even or even come out ahead.

    Remember, you lose money with 100% certainty when you rent, and rent (despite rumors to the contrary in pre-allo) is not tax-deductible. Also, although you don't pay for repairs when you rent, they still cost you time/comfort. If the AC/heat goes out the weekend before a test, that will cause you inconvenience whether you are renting or buying. You will probably get things straightened out before your landlord will (take it from me, I'm a landlord.)
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  3. DrMidlife

    DrMidlife has an opinion
    10+ Year Member

    Oct 30, 2006
    Likes Received:
    Resident [Any Field]
    I sold because I was overextended and tired of taking care of everything all by my single self. If you can financially manage to keep your house, that's probably smarter than selling. Your home and your 401k aren't considered against financial aid.

    There are a lot of if's though:
    - IF your house can be reasonably expected to grow in value
    - IF you can reasonably handle the mortgage payment
    - IF it's easily rentable or you're expecting to stay during med school
    - IF it's easy to maintain
    - IF it's easy to sell (if you leave for residency)

    While you still have job income, get approved for a home equity line of credit, as much as they'll approve you for. This sits there, unspent and not accruing interest, until you need cash. You know, if the roof blows off or the HOA assesses $3000. You have to have income to get this, so do it now.

    There's still a personal exemption from taxes on the sale of a house, up to $250k per person, if you've lived in it for 2 years prior to sale. There used to be a condition that you had to use the sale profits to buy another house, but not lately.

    Best of luck to you.
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