Letter Re: Should I Get a Bigger Property and a Bigger Mortgage?

I currently live in a crowded subdivision in a moderately nice house that is worth $240,000. We owe approximately $120,000 on it, and have $120,000 in equity. Based on much of what I read here, we were looking for a house with some land, and recently found one for $370,000 (it’s only 2.5 acres, but that’s much more than we have now). If we buy it we will owe $370,000 -120,000 = $250,000). I currently make around $120,000 per year, in a job in the medical field that should not be too hard hit by financial crises.

So what do I do? Buy the country house and assume a larger mortgage (but have some space, and a water well, plenty of room for a garden, and less crowding)? Or do I forego that plan and just stay where I am, even though it’s crowded, because it’s cheaper, and I can get it paid off in 2-to-4 years?

The economy has me worried, so this decision has been a difficult one for me. Your site and its links makes a lot of sense to me, but when I read other things online (i.e. the main headlines) it all seems to say that “Everything will be okay, just give it time, you’re in good hands…” When can we expect the major crisis/crises to hit?
Praying for your wife, thanks for all you do, – Perplexed in the Midwest

JWR Replies: If your job is truly stable, then it might be safe making that move. Just by itself, having well water is a huge plus. (I’ve described numerous hand pump and solar well pump alternatives in the blog.) But with the economy presently looking the way it is, having that level of debt should be reason to give you pause.

One alternative to consider is instead of the “halfway measure” of moving to a house on a bigger lot–but still in a relatively high density area–is the concept of buying a dedicated retreat with a house on much more acreage (10+ acres) that is way out in the country, preferably in one of my recommended retreat regions. You could simply tell your family and friends that it is a “vacation cabin.”

My general advice to my consulting clients is to buy their retreat properties with cash, and leave their primary residences mortgaged. That way, if the economy totally tanks and you lose your job you can move to your retreat and essentially abandon your house to the bankers. (The phenomenon they now call “jingle mail”.) At your retreat you will then only have to worry about paying your property taxes.

In answer to your other question: I don’t give “timing” predictions. All that I can say with certainty is the the current economic instability is the worst that I’ve see in my lifetime. So just be ready.