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Message
Paying off student loans vs. saving up for home down payment...
Posted on 10/1/16 at 5:35 am
Posted on 10/1/16 at 5:35 am
so I really don't know much about buying a home (thus the thread).
Summing my situation up as briefly as possible:
1) making ~$55k per year now.
2) should be getting pretty solid raises each year (I started in January, so getting a raise in a few months), let's say 12% per year for 3 years. So figure ~$85-90k 4 years from now, then leveling out with smaller raises after 4 years. I know that sounds hopeful, but I've deducted this salary raise expectation from coworkers. Also based on average starting professional engineer salaries.
3) $25k in student loan debt @ 7% interest
4) $25k in debt for my vehicle @ around 3%. ~$500 per month payments for another ~6 years. I'm driving it until it dies on me. I don't put many miles on it (8000 per year) and it's a Honda, so I figure it will last me another 15 years or so.
5) I'm not saving anything right now outside of my existing $2000 emergency fund. Two years from now, my employer 20% SEP kicks in, which will make up my retirement fund . Basically, my employer matches 20% of my salary and allows me to invest it. So if I make $100k/yr, my employer gives me an extra $20k/yr to invest for retirement. Bringing this up to emphasize that savings aren't an issue for now.
6) I pay $0 in rent right now, and will continue to do so until next summer. My precious Gamgam had to move into an old folks home because her shoulders are shite (though she's mentally kicking arse for an 85 year old). She's letting me stay in her home rent free so that I can pay off the student loans ASAP.
I only HAVE to pay $330 per month for the student loans, but have been paying about $1000 on average. Obviously been paying the minimum $500 for the car note on account of the lower interest rate.
So, Gamgam said I can live rent free until next Summer, at which point she will sell the house that I'm currently staying in rent free. Home value is probably in the $150k range. I am considering making her an offer when the time comes. If I decide to buy, she'd probably hook me up a bit (let's say $135k), but for the sake of this thread, let's say that she'd sell it to me for full value.
Should I continue to pay as much as I can towards the student loans, or should I start saving up for a down payment? Making the minimum payments on the student/car loans, I figure I can save between $14000-20000 over the next ~10 months.
I know that there are some government hookups for no/low down payments on rural homes, but this would be in Jefferson (between Harahan and NOLA).
How fricked would I be if I shifted from paying as much as possible towards the student loans towards saving for a down payment on the home, but then end up not buying it? I suspect it would only cost me a few hundred bucks, but just want to make sure.
More importantly, would I be buggered if I keep putting as much as I can towards the loans, but have no money for a down payment if I end up buying the place?
Summing my situation up as briefly as possible:
1) making ~$55k per year now.
2) should be getting pretty solid raises each year (I started in January, so getting a raise in a few months), let's say 12% per year for 3 years. So figure ~$85-90k 4 years from now, then leveling out with smaller raises after 4 years. I know that sounds hopeful, but I've deducted this salary raise expectation from coworkers. Also based on average starting professional engineer salaries.
3) $25k in student loan debt @ 7% interest
4) $25k in debt for my vehicle @ around 3%. ~$500 per month payments for another ~6 years. I'm driving it until it dies on me. I don't put many miles on it (8000 per year) and it's a Honda, so I figure it will last me another 15 years or so.
5) I'm not saving anything right now outside of my existing $2000 emergency fund. Two years from now, my employer 20% SEP kicks in, which will make up my retirement fund . Basically, my employer matches 20% of my salary and allows me to invest it. So if I make $100k/yr, my employer gives me an extra $20k/yr to invest for retirement. Bringing this up to emphasize that savings aren't an issue for now.
6) I pay $0 in rent right now, and will continue to do so until next summer. My precious Gamgam had to move into an old folks home because her shoulders are shite (though she's mentally kicking arse for an 85 year old). She's letting me stay in her home rent free so that I can pay off the student loans ASAP.
I only HAVE to pay $330 per month for the student loans, but have been paying about $1000 on average. Obviously been paying the minimum $500 for the car note on account of the lower interest rate.
So, Gamgam said I can live rent free until next Summer, at which point she will sell the house that I'm currently staying in rent free. Home value is probably in the $150k range. I am considering making her an offer when the time comes. If I decide to buy, she'd probably hook me up a bit (let's say $135k), but for the sake of this thread, let's say that she'd sell it to me for full value.
Should I continue to pay as much as I can towards the student loans, or should I start saving up for a down payment? Making the minimum payments on the student/car loans, I figure I can save between $14000-20000 over the next ~10 months.
I know that there are some government hookups for no/low down payments on rural homes, but this would be in Jefferson (between Harahan and NOLA).
How fricked would I be if I shifted from paying as much as possible towards the student loans towards saving for a down payment on the home, but then end up not buying it? I suspect it would only cost me a few hundred bucks, but just want to make sure.
More importantly, would I be buggered if I keep putting as much as I can towards the loans, but have no money for a down payment if I end up buying the place?
8
Posted on 10/1/16 at 6:51 am to THRILLHO
A guaranteed 7% return from paying off student loans is mighty nice, and there's no particular reason to think house prices will go up that much.
Posted on 10/1/16 at 7:19 am to THRILLHO
I say pay off the student loans unless you have a pressing need to own a home in the near future. I'm assuming you are young. Early to mid twenties?
As of right now, you'll only save at most $20k for a down payment, which puts you $7000 short of the 20% needed to avoid PMI if you can talk her into selling it for $135k. $150k means you're $10k short.
It's also common for people in their twenties to get hit with a job relocation, career change, lifestyle change, etc. Speaking from experience, the last thing you'll want is to have a house that you cannot sell.
Also, your salary is on schedule to increase substantially over the next few years. You could budget hard to pay off that student loan now and then spend a few years saving up for your down payment with what will essentially be a doubled salary.
As of right now, you'll only save at most $20k for a down payment, which puts you $7000 short of the 20% needed to avoid PMI if you can talk her into selling it for $135k. $150k means you're $10k short.
It's also common for people in their twenties to get hit with a job relocation, career change, lifestyle change, etc. Speaking from experience, the last thing you'll want is to have a house that you cannot sell.
Also, your salary is on schedule to increase substantially over the next few years. You could budget hard to pay off that student loan now and then spend a few years saving up for your down payment with what will essentially be a doubled salary.
Posted on 10/1/16 at 7:39 am to THRILLHO
Pay off the student loan and live in an apartment when you have to move. If you are in your early 20s, don't buy a house right now.
Posted on 10/1/16 at 8:12 am to THRILLHO
Pay off the student loan baw
Posted on 10/1/16 at 9:29 am to THRILLHO
Cliff notes, baby Jesus
Loans 7%, pay off first after saving for retirement. Forget about a house down payment.
Loans 7%, pay off first after saving for retirement. Forget about a house down payment.
Posted on 10/1/16 at 11:58 am to THRILLHO
I wouldn't bank on a 12% raise every year that is pretty substantial in today's market place - you will be disappointed.
Posted on 10/1/16 at 1:52 pm to THRILLHO
Would/could she sell you the home and owner finance it?
Posted on 10/1/16 at 3:10 pm to THRILLHO
Posted on 10/1/16 at 4:03 pm to LSUSUPERSTAR
quote:
If you are in your early 20s, don't buy a house right now.
Why not?
If anything just rent out the spare bedrooms to pay down the student loan debt.
Posted on 10/1/16 at 4:36 pm to Powerman
quote:
If anything just rent out the spare bedrooms to pay down the student loan debt.
That's assuming he wants to deal with roommates.
Posted on 10/8/16 at 12:16 am to foshizzle
Sorry for not answering quickly, was a bit drunk when I started the thread and just remembered it, but it's still important to me.
That's what I figured.
33
Again, the raise is based on what fellow employees have recently (last January) received. If I get a typical 5% raise for the next 4 years, that would put me in the $65k range 4 years from now. That's about $20k lower than the average PE salary.
I don't really know what this means. You mean she loans me the money? That would most likely be up to the people in her will (my mother and her 4 brothers/sisters). My mother is the only one that's probably hurting for money, and I doubt she'd have an issue with it. Pretty sure the home makes up only ~5% of my gamgam's total assets. They'd all trust me to pay the mortgage.
No thank you. I don't mind living below my means, but I don't want any roommates.
quote:
A guaranteed 7% return from paying off student loans is mighty nice, and there's no particular reason to think house prices will go up that much.
That's what I figured.
quote:
I'm assuming you are young. Early to mid twenties?
33
quote:
I wouldn't bank on a 12% raise every year that is pretty substantial in today's market place - you will be disappointed.
Again, the raise is based on what fellow employees have recently (last January) received. If I get a typical 5% raise for the next 4 years, that would put me in the $65k range 4 years from now. That's about $20k lower than the average PE salary.
quote:
Would/could she sell you the home and owner finance it?
I don't really know what this means. You mean she loans me the money? That would most likely be up to the people in her will (my mother and her 4 brothers/sisters). My mother is the only one that's probably hurting for money, and I doubt she'd have an issue with it. Pretty sure the home makes up only ~5% of my gamgam's total assets. They'd all trust me to pay the mortgage.
quote:
That's assuming he wants to deal with roommates.
No thank you. I don't mind living below my means, but I don't want any roommates.
This post was edited on 10/8/16 at 12:19 am
Posted on 10/8/16 at 10:34 am to THRILLHO
You were drunk at 5:30 in the morning?
Posted on 10/8/16 at 10:47 am to jimbeam
quote:
You were drunk at 5:30 in the morning?
Posted on 10/10/16 at 3:31 pm to foshizzle
quote:
A guaranteed 7% return from paying off student loans is mighty nice, and there's no particular reason to think house prices will go up that much.
But what about the money that he is losing with rent as opposed to building equity in a house. %7 25k is ~ $150. I'm sure he is paying more than that in rent now.
Just playing devils advocate here.
ETA: well didn't see the no rent.. carry on
This post was edited on 10/10/16 at 3:33 pm
Posted on 10/10/16 at 3:48 pm to Pintail
Very little equity gained in the first few years.
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