I don't think a balloon note is a "safe" move at all.

However, you have a clear plan and do not appear to have the dreaded disease of "our income will never be enough to retire this debt." Having a clear plan and solid budget fundamentals is literally 90% of the battle - take everything else I say with that in mind - you're "probably" fine with your plan.

On the other hand, what you're going to struggle with is the rising internal expectations associated with your rising gross household income. I'm of the opinion that you should live like monks - now - get the debt at least to an easily manageable level, and get off the train of paying a lot of interest with little retirement of the principal.

That balloon note will be sitting out there waiting - like you will have paid all this money and still have to make that loan and pay it all over again. That seems (potentially) demoralizing and self-defeating.

You didn't talk specifics about current income or expectations and I respect that. However, I would go back to square 1 - cut spending to the absolute, painful bone, until you cut the overall debt load (possibly excluding the mortgage on the primary home) to half or less of what it is now. Otherwise, in your shoes, I would feel like a debt slave for the foreseeable future.

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Posted by TheWiz

Third World, LA

Member since Aug 2007

11695 posts

Posted on 8/18/16 at 2:41 pm to Ace Midnight

quote:
On the other hand, what you're going to struggle with is the rising internal expectations associated with your rising gross household income. I'm of the opinion that you should live like monks - now - get the debt at least to an easily manageable level, and get off the train of paying a lot of interest with little retirement of the principal.

I can't argue that. We run a tight budget now, but we still have some "fun" things budgeted. Monthly date nights, plated, yoga, etc... Could we free up some money by living in a hole? Sure. But I think we're doing a pretty good job by freeing up nearly $4,000/month of after tax money (Currently $1k to interest only). I max out my 401k. She has her 457 plan or whatever it is. I put about $25,000 into my house this year so that it would let me at least ride out the next 5-7 years with little to no maintenance. It was getting to a point where the repairs were beyond necessary anyway. We have a modest $235k home in Metairie. Our house has three extra bedrooms to grow a family. Staying in that home is part of the 5-7yr. plan. The only foreseeable changes are her car's lease ending and having a child. Yes, I said lease. Her thirteen year old car was dying on Claiborne and I was uncomfortable with that situation. We found that a lease fit us best at the time since we might need to upgrade for kids in the future.

Her income should jump from $55k to $150,000-$170,000. I work for a private company here in New Orleans. With bonus, which isn't guaranteed but historically happens, I get close to her future lower limit.

Based on our current track, it really steers us somewhere towards scenario 1 & 2 listed at the top. That leaves us with a balloon note at the end of nothing or next to nothing.

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