If you can find a place you would like to rent for less than your mortgage + taxes + insurance now, selling would allow you to build a lot of principal for your retirement. You can probably offset the tax advantages by dumping that in retirement funds of one description or another.
If you don’t like numbers, this might be a question you should take to a financial planner. I don’t want to ask you personal questions on this board. A lot depends on how well your retirement is funded and the degree of security you have for the next ten years, but the future value of a few hundred thousand could make an immense difference for your retirement.
You see, if you are going to spend no more on rent than you spend for your house now, the capital you get out of your house PLUS the ongoing proceeds can be invested now and will grow very rapidly. This is likely to bring much higher returns at least for 5-6 years than staying in the house will. For many people, staying in the house in a situation such as yours can be a very expensive decision.
Factors which would weigh against selling are:
1) You intend to live in the same area after you retire.
2) You cannot find a place to rent for less than your P&I mortgage, taxes and insurance.
3) You already have a secure retirement and you feel secure in your job.
4) You are healthy.
5) You can save substantial money each month for your retirement now.
Factors which would indicate a sale are:
1) You don’t necessarily want to stay in the same area after you retire.
2) You can find a place to rent for less than your P&I mortgage, taxes and insurance.
3) You are not comfortable with your retirement funding currently, or you are not sure that you will be able to stay at your company for 8 or 10 more years (or whatever it will take to build up your retirement stash to where you want it to be).
4) You have or may have health problems.
5) You are not currently saving enough money each month to meet your retirement goals, and you have no current plan to achieve them.
6) You are relying on a non-vested contractual company pension plan and social security to fund your retirement.
Many company pension plans are not secure, and it is likely that you will receive very little from SS for your retirement. So pulling out capital now while it has time to grow would really provide you a tremendous return down the road. I will come back with some sample numbers, if you like.
Btw, I’m not a financial planner, so I’m not shilling. The less financially risky decision here is probably to sell, but personal factors may change that decision for you. At least you have good options.
As an economist, I’d say stay put. I was in a similar situation as yours last year, but decided to sell b/c I knew I was going to move within the next couple of years. In fact, I got a job offer and had to move last year anyways (the new employer even paid for by closing costs, RE commission, etc., but I digress).
If you are happy with your house and you expect to live in the same town for at least 5 yrs, then don’t sell. Instead, focus on paying off your mortgage faster, by paying double the principal, or more. (Of course, if you invest your money at a higher rate of return, considering the interest tax deduction, then this may not be the best course of action).
If you cash out, the money you put into a CD will barely cover the rent of a comparable house. And anything that pays higher than a CD will definitely be riskier too.
.
