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re: Question about debt reduction and deciding when to purchase home
Posted on 5/11/11 at 4:54 pm to Costanza
Posted on 5/11/11 at 4:54 pm to Costanza
Still think it comes back to your original response, with interests rates so low, even buying a modest house still has to be a better rate of return than just paying off loans (which you can still do even at accelerated rate). But I see your point in waiting as well.
1
Posted on 5/11/11 at 4:59 pm to BlackenedOut
If the OP is in ATL, that might not necessarily be true.
Posted on 5/12/11 at 4:47 pm to Costanza
Do you guys have access to good 401k plans? If so are you both contributing? You have 31% tax drag over $69k including GA state tax of 6%. I would at least capture the match, but probably consider contributing ~ 20k total between the two of you. That's $6200 less taxes this year. I am assuming you can't currently write off the SL interest based on your income, but could be wrong on that as it has been a long time since I looked at the limits.
Can the student loans be refi'd lower? If not I would work on those instead of buying a house. Yeah, there are good deals out there, but what if you and/or your wife might want to move somewhere else in 3-5 years if you bought a house now. Even if you can knock $70k off the loans in two years it would save you > $4700/year thereafter compared to making minimal payments for years.
Personally, unless a lot of positive events occur with employment and stabilization of housing prices I don't think mtg rates are going up substantially in the next 12-18 months, but my crystal ball could be wrong.
Look on the bright side, at least you incurred debt that enabled you guys to earn a good living compared to many who incurred debt and are underemployed or jobless. Don't dwell on it, it will work out, just don't buy a $50k vehicle when the current vehicle needs replacement.
Can the student loans be refi'd lower? If not I would work on those instead of buying a house. Yeah, there are good deals out there, but what if you and/or your wife might want to move somewhere else in 3-5 years if you bought a house now. Even if you can knock $70k off the loans in two years it would save you > $4700/year thereafter compared to making minimal payments for years.
Personally, unless a lot of positive events occur with employment and stabilization of housing prices I don't think mtg rates are going up substantially in the next 12-18 months, but my crystal ball could be wrong.
Look on the bright side, at least you incurred debt that enabled you guys to earn a good living compared to many who incurred debt and are underemployed or jobless. Don't dwell on it, it will work out, just don't buy a $50k vehicle when the current vehicle needs replacement.
Posted on 5/12/11 at 5:18 pm to tirebiter
How will having kids affect the income and all of these plans? Something else to consider
This post was edited on 5/12/11 at 5:20 pm
Posted on 5/12/11 at 6:22 pm to tirebiter
Good advice, thanks.
I'm just about to hit the 1 year mark with my firm which will allow me to participate in the 401k program. I'll only participate enough to get the full match until the debt is gone. Wife will do the same.
We can write off up to $2500 the SL interest for taxes, which is nice. At least we were able to last year. The income limit is 120k this year for married filing jointly, so we'll probably earn 121k! We may adjust 401k contributions to make sure we qualify for this though. (if possible)
Yea, we knew going into grad school that we were creating a huge hole to dig out of (wife also came into the marriage with some student loans from undergrad). We went in with the intention of really focusing our attention on eliminating the debt once we got out. It'd be easy to put them on the back burner, but while we're used to living on nothing, we've decided to continue to do so.
Thanks again
I'm just about to hit the 1 year mark with my firm which will allow me to participate in the 401k program. I'll only participate enough to get the full match until the debt is gone. Wife will do the same.
We can write off up to $2500 the SL interest for taxes, which is nice. At least we were able to last year. The income limit is 120k this year for married filing jointly, so we'll probably earn 121k! We may adjust 401k contributions to make sure we qualify for this though. (if possible)
Yea, we knew going into grad school that we were creating a huge hole to dig out of (wife also came into the marriage with some student loans from undergrad). We went in with the intention of really focusing our attention on eliminating the debt once we got out. It'd be easy to put them on the back burner, but while we're used to living on nothing, we've decided to continue to do so.
Thanks again
Posted on 5/12/11 at 8:34 pm to Costanza
quote:
170k in student loan debt between my wife and I
Damn! What schools did you attend if you don't mind me asking?
Posted on 5/12/11 at 10:02 pm to Jason9782003
Private law school x 2, + some of my wife's student loans from undergrad.
Posted on 5/12/11 at 10:41 pm to Costanza
As another poster indicated, I would be very hesitant to purchase a house right now.
With the possibility of a kid in the near future, I think you have to take into account the possibility in decreased earning power as one of you may need to stay home to be with the child. Plus, the extra variable expenses related to a 3rd mouth to feed and the array of other items for a child.
The only way I would consider buying in this scenario is if you can find a house that better fits your needs that does not increase your rent/mortgage very much.
If I were in your situation, I would be very scared of my 130k combined salary dropping to 70k on one persons shoulders, the addition of a mortgage higher than my previous rent, the addition of another family member, and the $1,400 you are locked into for SLs.
I also agree with tirebiter that I don't think housing prices will increase for probably another year or more, so I would stick to what you are doing now.
The kid decision is much more personal. It is always easier to finance your life without a child--but there ar also some joys associated to having kids that have no value.
I will eventually face a similar issue in about 5 years when I get an MBA. I'll have $100,000 in debt, no mortgage, and a wife that wants to have kids. It will be a tough decision.
With the possibility of a kid in the near future, I think you have to take into account the possibility in decreased earning power as one of you may need to stay home to be with the child. Plus, the extra variable expenses related to a 3rd mouth to feed and the array of other items for a child.
The only way I would consider buying in this scenario is if you can find a house that better fits your needs that does not increase your rent/mortgage very much.
If I were in your situation, I would be very scared of my 130k combined salary dropping to 70k on one persons shoulders, the addition of a mortgage higher than my previous rent, the addition of another family member, and the $1,400 you are locked into for SLs.
I also agree with tirebiter that I don't think housing prices will increase for probably another year or more, so I would stick to what you are doing now.
The kid decision is much more personal. It is always easier to finance your life without a child--but there ar also some joys associated to having kids that have no value.
I will eventually face a similar issue in about 5 years when I get an MBA. I'll have $100,000 in debt, no mortgage, and a wife that wants to have kids. It will be a tough decision.
This post was edited on 5/12/11 at 10:46 pm
Posted on 5/13/11 at 6:35 am to Cold Cous Cous
If you decide to buy in a rural area do a USDA loan not an FHA as there are some fluctuating numbers in an FHA loan.
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