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cpdrummer
First Time Poster
Cash: $ 0.25
Posts: 1
Joined: 30 Jan 2012
Location: Dallas, TX
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| Student Loans or Home Investment |
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My wife and I have been going back and forth on the following issue. I honestly do not know if there is a "right" answer, but I would love to hear what some of you have to say.
We currently live in an apartment, paying $1050/month. It is very nice and has plenty of space for us. We have no current issues with the place, but have talked about owning a house for years. Combined we make about $120,000/yr and only have one car payment of around $250. We currently have about $25,000 in savings and no consumer debt.
The problem is that my wife has $125,000 in student loans. We currently pay around $700/month due to how they are arranged. The interest rates vary from 3%-6%, depending on the loan.
Would the best financial move be to just throw all excess cash towards the student loans for the next 5 year and continue living in the apartment, or to take advantage of the low housing prices and low rates. We both have above 750 credit scores, and at least 2 years at our jobs.
Any advice is much appreciated!
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Mon Jan 30, 2012 8:45 pm |
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oldguy
Senior Member
Cash: $ 751.85
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Joined: 21 May 2006
Location: arizona
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It depends mostly on your 'permanence' - apt dwellers pay for mobility, you can move about for new jobs easily. Houses are at least a 5-yr decision - the costs of buying/selling are 6% each way - so you need a few yrs of equity growth to cover that 12%.
Your %1050/m rent would cover about a $150,000 loan including prop tax & insurance. And with your income, you could stretch to $200,000 if need be. Over long periods (decades) houses have always appreciated even tho it is cyclical. So, if you can stsy in one place for 5 or 10 yrs you almost certainly will make money. (All of my rental houses have doubled, some 4X, one 6X, in the last 30 yrs).
You can probably find 2 to 7 yr old houses - they have modern plumbing/electrical services, new water heater, new AC, new appliances, new flooring - no mainteneance for nearly a decade. The first owner hung the drapes & planted the grass - you just need the keys. (That's what I like for a rental).
If I had to choose between a near-new $200k house and a $125k 'fixer upper' that needs about $50k, I choose the $200k. That way you have everything under a single 30 yr fixed rate 4% loan (as opposed to a $150k first mortgage, a $25k HELOC w/ VAR rate, yet another $25k HELOC later.) It's both cheaper & cleaner to buy the newer house. And when you start a refurb job, you always uncover more stuff that is needed - you may find the occasional "diamond in the rough" but I never have.
It probably makes sense to buy a 1400 ft to 1800 ft house - the McMansion trend seems to be over, people now prefer well-built, well appointed, energy efficient homes. (That means that the McMansions of the last decade may be become the white elephants on the market).
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Mon Jan 30, 2012 9:36 pm |
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angelasimon
New Poster
Cash: $ 0.40
Posts: 2
Joined: 08 Feb 2012
Location: india
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you just have to manage your finance with the help of smart steps. you can either liquidate your saving or can save more. just regular payments will do a lot good to you. as your debt is higher, your liabilities may take time to be paid off.
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Wed Feb 08, 2012 5:21 am |
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asapcc
Contributing Member
Cash: $ 6.25
Posts: 31
Joined: 23 Feb 2012
Location: Plymouth, MI
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I agree with OldGuy, if you think you'll stay put for a while (at least 5 years)... take advantage of low housing prices and great interest rates!
Since you'll never recover any of your rent money, it seems like a no-brainer to purchase a house and start building equity. Even if there's a small uptick in home prices (can we really go much lower???), you could actually make a nice profit -- besides all the rent money that will be returned as equity. The key is being patient 
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Thu Feb 23, 2012 5:56 am |
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Flipyourdebt.com
New Member
Cash: $ 1.80
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Joined: 20 Feb 2012
Location: Kansas City
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Consolidating student loans is a good option if you haven't already looked into it. There are great options available on federal sl's.
If you are happy in the apartment, then I say buckle down and knock out the sl. You can always jump up into a house whenever, but you won't be able to jump back DOWN into an apartment if something happens.
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Sat Feb 25, 2012 3:28 pm |
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