WWBT do finance edition?

Without getting into personal finance details, I just wanted to make a point that you may or may not have considered, regarding taxes.
Note: I know nothing about ID tax law, but these would be my considerations if/when I sell my condo here in IL.

Don't forget the tax implications of selling your house, and transitioning to a rental:
1. The taxes you'll need to pay on any gain you make in selling the property. This could diminish the proceeds, potentially preventing you from fully extinguishing the other debts.

2. When you're talking about %'s of your take home income, are you accounting for the tax implications of the deducibility of mortgage interest, and property taxes?
Since part of your tax refund each year is a result of those deductions. Say you get a $3,600 tax credit as a result of deducting your interest and taxes, that's a credit you WON'T receive when you rent ($300/mo).
If you go from paying $2,000/mo on a place you own, to paying $2,000/mo on a rental, you'll find yourself significantly out of pocket.

3. Is your wife currently on your health insurance? Or would you be going from single to family coverage?
Obviously this would impact your take home pay.

I just wanted to say I like the idea.  If you can rent a suitable home for half of what you're paying now (which I think is what you wrote), and make all of those other savings in interest on the other loans, it works for me in theory.   The other advantage of renting for a while is that you can possibly again find a good real estate investment, without worrying about selling an existing home. 

Good luck!

Make sure you completely understand the income/capital gains tax consequences of selling the home and not rolling the proceeds into another home.

The "rollover" of the gain is old law. If and your wife have owned and lived in the house for 2 of the last 5 years you could be eligible for an exclusion of the gain up to $500,000. Check with your accountant, blah, blah, blah.

ETA: nevermind, I see you have people to consult with...

I believe you bought around the same time I did, did you take advantage of the $8k cash for first time home buyers? I believe there is a repayment penalty on that if you sell in the first 5 years. Not for sure but something to check into if you were involved in that.

Home values in Boise are going up right now, new building is increasing, home prices will likely continue to rise, who knows how much or how quickly. I bought in 2010, got a lot more house than I would have ever been able to afford previously because it was a foreclosure and it was early 2010 so prices were crazy low. I could easily sell for $100k more than I bought for now, but I if I didn't roll the proceeds into another house right away I would likely not replace my current house with one of like size and quality any time soon. 

Could be hard for you to get back into a similar house in 3 years if the market keeps going up. I felt really bad for my friends that were a few years older than me and trying to buy in 2006-2007. A 3 bed 2 bath 1600 foot house was going for 285,000 in Meridian. Would hate for you to be stuck in that same situation.

But I can also see trying to work out a way for your wife to not work. My wife and I don't have kids and one of the reasons is she needs to work right now. Eventually we will decide to have kids but it will take a lot more income from me and a lifestyle shift for us to be able to afford for her not to work.

If this is the peak, I need to move to Boise.

Not really relevant, but interesting nonetheless, I think. When I lived in NYC, my friend bought a 1bd 1ba 650sqft condo, in Battery Park, for $635,000 (plus $1.200/mo HOA).

Haha yeah doesn't sound like much compared to other areas, but it was a heck of a lot around here at the time. They threw up a ton of crappy little house boxes in those years and they went for crazy money. Most of them are all sorts of broken down and falling apart now. 

For comparison sake I just wrote some insurance for a 3,800 square foot, brand new house in one of the top 5 subdivisions in a city a few miles from Boise, it sold for $375,000. 

Yeah the profit is very tempting right now. We went a bit above what we really wanted to spend and got the house we wanted to retire in. I don't see myself getting into a similar house again until I make a lot more money. 

If you are not in the house you want long term selling and paying off debt sounds like a pretty decent plan. Now you just have to decide when to sell. Do you wait 6 months and see if prices keep climbing or do you get out now, tough call for sure. 

If you really like your house, then I would keep it.

What about a re-fi (or second mortgage on a shorter term) with a cash-out to pay off your student loans and car?  

Rent money is gone forever.   Mortgage principal is effectively going into a "savings account" (the value of your house) until you can withdraw it (either via another re-fi or by selling your house)   As someone else mentioned, increased mortgage interest can also be offset (if the interest you pay is larger than your standard deduction) by the interest deduction.

It's likely that your house will appreciate faster than any "safe" savings vehicle over the short-to-mid-term.

There's flexibility in your "extra lot" as well.   If your neighborhood is very desirable you might be able to contact a developer about building on it.  Review plans and work with him to make sure that he builds a house that is bigger and nicer than yours.  Try to add a clause in the contract where he pays you some "penalty" if his finished product doesn't appraise for a set value.    That will give you some cash from the sale of the land (and the developer will buy it without the need for a realtor's commission!) And will also provide a "bump" for you in your home value when he finally sells his house. 

Can you put your current house on the rental market, and then rent a house for your family?  You could do everything you're doing currently, use the extra income (assuming you can rent your house out for more than your current mortgage payment) to pay down your other debts.   Once you've got a steady rental income, you're also in a great position to buy your "dream house" somewhere else and continue to have income from your rental.   Or you can sell your first house if you want. 

Don't focus on just using YOUR money to make money.   Whenever you can use OTHER people's money to make money... you should! :^)

ETA:   don't think about this as a "lotto ticket"   You're selling yourself short!   You made good decisions to get to where you are.  Continue to capitalize on that way of thinking.  This is not a "lotto ticket." This is the result of your hard work and good decisions.   It can and will happen again, if you make it.

On face value, I say do it. Getting out of debt and being able to live comfortably if your wife truly wants to stay home with the kids are both major life enhancements IMO. I've owned 4 houses in my lifetime, and I liked things about each one of them (which is why I bought them). You will find another house. Don't let liking the house stand in your way.