Announcement

Collapse
No announcement yet.

Selling House - do we payoff student loans vs. use profits as down payment?

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • rohitkhannaesq
    replied
    Thanks everyone! We will find out in a couple of weeks regarding their gender (kind of hoping for two more girls - we have plenty of clothes/toys). I'm really excited about getting a minivan - loved taking road trips when I was younger.

    Leave a comment:


  • RDB
    replied
    Sounds like the decision has been made and I believe it is a good one. I have twins who will be 4 in June. We had them in different rooms for a few weeks when it seemed like they were waking each other up at night. Otherwise, they have been in the same room, and it is not that large of a room. I cannot speak for you, but my guess is you will find that you like having them in the same room. Mine are both boys, maybe we would feel differently if we had a boy and a girl. Congrats! The first year is a whirlwind but seeing their bond is really fun!

    Leave a comment:


  • jfoxcpacfp
    replied




    Update:

    After much deliberation, we have decided to stay in our current 3 BR/2 BA house until we absolutely have to move out.  We are going to convert our “formal” dining room into a 4th bedroom/office.  Staying in our house, which we still love, ensures that we stay on track to pay off all student loan debt and provides us with liquidity in case of emergency.  We figured once the two new additions were about 5-7 years old (and our toddler 8-10 years old) is when we would think about shopping for a bigger house.

    Big thanks to everyone that responded…I appreciate your input!  Time to find us a sweet Pacifica Hybrid.
    Click to expand...


    Kudos to you. You gathered information, deliberated, and made (what I believe is) a wise decision. Very logical process.

    Leave a comment:


  • Anesthesia84
    replied
    As I was reading through the thread, I was getting a post ready to urge you to consider to stay in your house to help stay on track with your financial goals - which it sounds like you decided to do! I think you have a great plan. Our 3 kids (ages 7, 5, and 2) still all share a room by choice. We are moving to a larger house soon but our residency/ fellowship house has worked well for our family for the last 7 years even though it is only about 1600 square feet. The best part is that it allows us to put about $7k/month toward our student loans

    Good luck with the twins!

    Leave a comment:


  • Shamwow
    replied
    Congrats!  I think its a good decision - at least for right now!

    The pediatrician in me was going to try to sway you into staying in that house for now!  (reminding you the AAP recommends keeping babie(s) in same room as parents for at least 6 and ideally 12 months!)  - Although it does sound stressful moving with a toddler and twin 1 year olds... your plan sounds better!

    You are rocking it with a good set of priorities and thinking out a plan!

    The neonatologist in me says to start saving NOW for an emergency fund - once babies and mom are home safe, use whats left to fund the Pacifica!

     

     

    Leave a comment:


  • Zaphod
    replied




    Update:

    After much deliberation, we have decided to stay in our current 3 BR/2 BA house until we absolutely have to move out.  We are going to convert our “formal” dining room into a 4th bedroom/office.  Staying in our house, which we still love, ensures that we stay on track to pay off all student loan debt and provides us with liquidity in case of emergency.  We figured once the two new additions were about 5-7 years old (and our toddler 8-10 years old) is when we would think about shopping for a bigger house.

    Big thanks to everyone that responded…I appreciate your input!  Time to find us a sweet Pacifica Hybrid.
    Click to expand...


    I guess the coffee room/office is actually the formal dining in my house as well. I mean who uses that except once or twice a year maybe? We eat in the "nook" area. The dining room is the lounge.

    You're probably making a great decision, good luck sounds like you'll be busy.

    Leave a comment:


  • rohitkhannaesq
    replied
    Update:

    After much deliberation, we have decided to stay in our current 3 BR/2 BA house until we absolutely have to move out.  We are going to convert our "formal" dining room into a 4th bedroom/office.  Staying in our house, which we still love, ensures that we stay on track to pay off all student loan debt and provides us with liquidity in case of emergency.  We figured once the two new additions were about 5-7 years old (and our toddler 8-10 years old) is when we would think about shopping for a bigger house.

    Big thanks to everyone that responded...I appreciate your input!  Time to find us a sweet Pacifica Hybrid.

    Leave a comment:


  • adivjay
    replied
    Congratulations! Your hands are going to be doubly full with twins!

    Whether you want to pay off student loan or use the money for new home purchase should be viewed in the context of bigger picture. Instead of trying to figure out your path forward from where you are today, I would recommend beginning with the end in mind and tracking your way backwards to see which approach will enable you to achieve your financial goals. Some question to consider:

    1) How much do you think you would need during retirement - your asset base, years in retirement, and expenses in retirement?

    2) based on 1 and knowing your current contributions to retirement accounts, what sort of returns would you need?

    3) what are short, medium, and long term goals?

    Having kids is the easy part. As they grow and start going for classes, you are going to have additional expense few years down the line. So you would need to plan for some of these and ensure that there is additional cash flow. Cash flow is king, like oxygen. Too little of this will cause financial suffocation.

    I agree with paying off the higher interest student loan in theory, provided you really dont see any other opportunity to get higher returns than the interest you are paying on those smaller amounts. Bear in mind that interest you are paying on mortgages and student loans are not equal to simple interest. By the time you pay off the loan, the total interest paid is less than what you would pay had it been a simple interest situation. E.g. The interest on 100K loan at 5% amortized over 30 years is $93255. That is equivalent to paying 3.1% pa simple interest each year for 30 years. Compare that to average annual stock market or real estate investment returns and you will find there are plenty of opportunities to get higher returns.

    Also keep in mind that a primary home is never an asset/investment. From an accounting perspective, it may be argued otherwise. But in practicality there is negative cash flow on a day to day basis and there is risk associated with a home as there are factors that are not under your control. The only way you make a profit from a primary home is if you are able to sell it at a significantly higher price than what you paid initially and spent on annual maintenance, or you paid off loan aggressively so you have a lot off equity (again, is that the best use of your capital based on your financial goals?) You could do a quick evaluation to see how much appreciation is needed to breakeven based on however long you intend to be in that home and see if it is realistic based on what is going on in the local market.

    Buying a home because you get tax deduction is not a reason to buy a home. Yes, you can compare cash flow scenarios for renting vs owning a home to see which is a better situation by considering tax implications. Since interest rates are still low it may make sense to buy a home, but the purchase price and the timelines for holding a home are going to be more critical. Note that running numbers is easy part, the hard part is dealing with emotions. Too often our emotions get in the way of eecision making.

    Bottomline, identify solution based on financial goals rather than looking at the situation independently.

    Leave a comment:


  • rohitkhannaesq
    replied
    Bingo!

    Leave a comment:


  • StarTrekDoc
    replied
    Minivan =  Plugin Hybrid Pacifica --  nicely priced, good hauler, and federal incentives.

    Leave a comment:


  • rohitkhannaesq
    replied
    Thanks StarTrekDoc

    Toting around a toddler and newborn twins will be fun...we are definitely buying a minivan!

    It's funny that if we were having only one kid, then we would stay in our 3 bedroom house and continue on our path to be debt free around 50. But, as soon as you add another one to the mix, your outlook changes quite drastically.

    I am leaning towards paying off all student loans minus the PSLF loans and utilizing Doctors Mortgage (5 or 10% down payment) and keeping the extra cash on the side for emergency until the wife goes back to work.

    Thank you for all of your assistance!!! I'll keep you posted!

    Leave a comment:


  • StarTrekDoc
    replied
    Congrats on the Twins.  VA is excellent option for her as it offers great flexibility if she needs it in the future with 2kiddos in tow.

    Definitely 30yr IMHO.  You want flexibility at this juncture not equity.

    I would lock in low interest rates for 30 years, pay off all debt not named PSLF, and max tax deferred accounts as possible.  Then talk about paying down mortgage debt once all the above situated.  12 free payments is still 12 free payments and the rate is low enough to be a wash with mortgage anyways.

     

    Leave a comment:


  • Dr. Mom
    replied
    That savings account at 1% sounds fine.  It will be a short term park of cash so I wouldn't devote much time to searching for anything else when you have that account already.  Two other bits of advice from our experience starting out many years ago...

    1.  Nesting behavior during pregnancy is very strong especially if this is your first time becoming parents.  I would challenge you to really consider if a larger house right now is in your best long term interest.  We had 5 kids in a 3 BR/2 1/2BA house for several years while we both worked and got out of student loan debt.  We have very fond memories of those years and our "get out of debt" house.

    2. Whatever you decide, once student loans are paid off, start investing in 529's for the kids with some of what used to be your loan payment.

    Best wishes for a safe and uneventful pregnancy and healthy babies!

    Leave a comment:


  • rohitkhannaesq
    replied
    Dr. Mom:

    Hmmm...that's definitely an option, especially having some extra cash for emergency purposes for the newborns. If everything goes smoothly, then we can aggressively pay off loans as needed. I like liquidity! Where would you suggest to park that large amount? We have a Goldman Sachs Savings account that earns a meager 1.05%. We have brokerage accounts as well.

    You guys have been extremely helpful. Thank you very much!!!

    Leave a comment:


  • Dr. Mom
    replied
    Congrats on the twins!  With more info I would change my rec to the following:

    1.  Pay off private loans.

    2.  Put half toward house down payment.  Go for 30 year.  You can always prepay it and create a 15 year on your own.  The slight increase in rate on the 30 is your cost of flexibility.

    3.  Hold the remainder until the twins are born, healthy, and mom is back at work.  At that point, pay down loans.

     

    Leave a comment:

Working...
X