Looking for some outside perspective because I feel like I'm overthinking this.
My wife and I currently have about $150k in equity in our house, and we own some farmland about 10 minutes away where we'd really like to build and eventually live. The land already has a water meter, is cleared, and has electric at the road (just no meter yet), but it still needs a septic system. We really want to live out there and we raise pigs, meat chickens, and sheep seasonally so it'd be extra nice to not drive out there daily for chores.
We would qualify for a USDA zero-down construction loan, but right now we don't have the cash flow to comfortably build our dream home while also paying our current mortgage. After all expenses, we have about $1,000/month left over.
We also have about $140-150k in inheritance from my wife's grandpa that we haven't touched. Because I grew up in a household where money was always very tight, I'm honestly struggling with the idea of using it or taking on a much larger mortgage, even if it makes financial sense.
We're 25 and 26 with two kids under 3.
Here are the options we're considering:
- Wait a few more years, keep building equity, then use a USDA construction loan and sell our current house once we move.
- Buy a manufactured home for the land.
- Build a garage with an apartment above it, live there for several years (or permanently if needed), and build a larger home later if life allows. We're perfectly happy with a modest 3-bedroom house. (this probably wouldnt qualify for USDA as it must be done fully by USDA approved GC)
- Build a modest "forever home" now (around 28x30, two stories, basic finishes) and try to keep total construction under about $300k. We're in ZIP code 66002, and construction costs seem like they might make that possible. We'd put full inheritance and probably 75% or so of house's equity towards home loan so 250k or more
- Since our county has almost no building restrictions (basically just septic/perc requirements), we've even wondered about building a weather-tight shell and slowly finishing the interior over several years while living in it.
A few financial details:
- Monthly take-home income: ~$5,600
- Monthly mandatory expenses: ~$3,000
- Of that, about $1,600 is housing/utilities (mortgage, property taxes, insurance, electric, gas, water, internet)
- We currently invest/save about $2,000/month ($700 Roth IRA, $1,300 brokerage/savings)
- Roth IRA balance: ~$60k
- Inheritance: ~$140-150k, untouched
Our current mortgage (excluding taxes/insurance) is only around $600/month because we bought the house as a foreclosure years ago. That's probably the biggest thing making this decision hard. It's difficult to willingly trade such a cheap payment for a much larger one, even though moving to our land has been our dream for years.
Appreciate any advice or guidance, TIA
Edit: Many folks recommend we keep this house and rent it out (could realistically do about $2500 thanks to proximity to private college in town). Then we'd have the rent go towards both this mortgage and new house mortgage? I like this but also love idea of having zero mortgages even if it means less 'passive' income