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Home Sale Funds Used How?

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LoneWildebeest
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Home Sale Funds Used How?  Reply with quote  

Good day!

My brain is at a standstill WRT some money I'll be gaining through the sale of my home. I'll be earning a good deal from it, and turning around to purchase another home using the VA, which does have a hefty fee, but can be rolled into the financing of the mortgage.

If I take the money and use it on a down payment, my VA fee is halved, and I'll start my new mortgage with a wee bit of equity on the new home, instead of financing 100%. It will also of course lower the monthly payment by about $150.

If I finance 100%, I can pay off some debt, freeing up around $450/month. One of those debts is my car payment, so I'd own it free and clear.

Some of my hesitation on paying off the debt is the bad taste in my mouth over financing 100% of my mortgage, but the opportunity to be debt free except for the mortgage is exceptionally appealing. Also, there is a good chance I'll be able to pay down the principle in the amount of the VA fee within three months anyway. That would mean I'd not be upside down on the mortgage, but I'll still have a higher payment every month.

Any suggestions/opinions would be welcome!
Post Tue Jul 01, 2014 1:05 pm
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oldguy
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quote:
Any suggestions/opinions would be welcome!


It depends largely on your personality and your money managing habits. You use the terms 'debt free', 'upside down', "higher payment every month".

For most people, debt-free is appealing 'just because" (emotion). For other people, debt is a tool to be used to earn more money - so "higher payments" and "underwater" are useful.

In my case, I refi my mortgages when rates are good, I always finance our cars 100%, and I avoid prepaying good loans. And I never prepay mortgage principal, I wait for the Market to GIVE me equity, no need to buy it. But that only works if you invest that borrowed money - if you spend it, then you lose twice - ie, the money is gone and your debt is even higher.[/b]
Post Tue Jul 01, 2014 1:29 pm
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LoneWildebeest
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quote:
You use the terms 'debt free', 'upside down', "higher payment every month".

For most people, debt-free is appealing 'just because" (emotion). For other people, debt is a tool to be used to earn more money - so "higher payments" and "underwater" are useful.

It's funny you point that out. I use those terms because that's how I've seen $$ in the past and it absolutely elicits emotion. I'm coming into a place where if I make the right decisions, I can free up my earnings to better work for me - instead of always feeling like I'm scraping by or behind the 8-ball. Maybe that's my answer if I can separate the emotion/stigma from the decision and see the other side. If I finance 100% and pay off other debt first, I can really pour much more into 401K, personal savings, and investments, as well as take bigger bites of principle on the house if I'm so inclined.

Thanks for your perspective.
Post Tue Jul 01, 2014 1:47 pm
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Wino
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You didn't give us enough information to really offer any suggestions. Debt free except the mortgage and an extra $450 per month is fine, but there's no way to evaluate which course would be better for you.

This is an anonymous forum. Can you answer the following questions?

    What is your monthly income?
    What is your new home value?
    What is the payment with (how much) down?
    What is the payment with zero down?
    What is your car debt?
    What is your car payment?
    Do you have any other debt? (Please list)
    How much money do you expect to get from the house sale?

From all of that, I can write a spreadsheet and we can then make assumptions based on different investment or payoff scenarios.

Oldguy and I differ in that I think one should become debt free, then invest the excess income to build wealth and retirement. Oldguy espouses using borrowed money backed by real estate value/equity to build one's investments more quickly. There are plenty of threads where we each state our case, and it is up to you to decide which way you think is best for you.

What he just said about spending borrowed money, though, is 100% correct. If you take one of the routes you've outlined and increase your lifestyle by $150 or $450 per month, then you're making a mistake. If you invest the money or use it to pay down the house or debt, then you're on the right track.

Which course (pay down or invest) is where you have the real decision to make, and that cannot be done without more information.
Post Tue Jul 01, 2014 3:46 pm
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