Expert: Dick Dennis - 3/2/2010

Question
I own a house (actually the bank does) in western Canada but I am sure this question would apply to anywhere.
Our house has gone up in value considerably since we bought it ten ywars ago, tripling in value.
However, all property values have increased in my area.
We have not benn able to, unfortuneately, make much of a dent in the principal.We have even had to refinance a couple times.
My wife and I are in our fifties, and our children, who are late teens, still live at home.
Eventually they will move out.
Would we be better off financially, heading into retirement, and considering the fact we still carry a lot of debt both with the mortgage and line of credit, credit cards, etc., to sell this home and move into a more modest home and use whatever profit? from the sale to pay down debt?
Or, as a friend in the financial industry has suggested, would the best option be to continue living here even after the kids are gone, and continue to pay down the mortgage and debt into retirement, with the idea being that eventually we will get ahead and be low or no debt and own the house or at least most of it.
To put the question more simply, do we stay in a big house with lots of debt into retirement with the hopes of eventually paying it off, or do we move into a smaller more appropriate place and use the profit to pay down debt, therby freeing up room to travel,etc.

Answer
If you've been reading about what has been going on south of your border, you should be getting a hint as to what you should be doing, Bud. We, too, went through a period in which our values jumped up so much like we believed there was no ceiling. Like so many here now know, our houses were being used like ATMs. If we needed some cash, just go and refi the house. Then the financial world caved in. You have not experienced true misery until your credit is ruined and you have to hold back on your spending, and/or your job lays you off.

The reason why you have not been able to make a dent in the principal of your mortgage is because you refinanced at least two times. Yes, you went to the ATM and took some money out. I guess the same disease we have down here is spreading up in Canada, too. Everybody is blaming everybody else in the US for the recession and for their personal financial problems. The borrowers are blaming the lenders. The lenders are blaming the government. The government is blaming the lenders. The lenders are blaming the spoiled borrowers who seem to want houses they can't afford and all the toys that go along with it. The builders, who want to make more money, build and try to sell houses that would lure buyers, even if they can't afford it.

If you believe that Canada is going to have the same miseries we are having here, then I suggest you sell your house, put your money away and rent for a few years . . . because if you buy another house, you will be buying a more expensive house just as yours was. When values drop . . . and please believe me, they definitely will . . . then go out and buy your retirement house and stay there and don't play games with your funds. Indeed, save it for your retirement. I am 78 and I have been in this business more than 40 years. So, I have been there, done that. I wish you well.

Dick Dennis
dixiedee13@aol.com