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Another down payment vs student loan question

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  • Another down payment vs student loan question

    Hey guys quick question for you. I'm having a hard time deciding on what exactly to do. We are planning on building a house in the next 2 years. I've been at my job for 2 years and will make partner in January. That will done with a very nice increase in pay. We have stayed in our house from medical school so far, however it's getting tight with 3 kids. But it's really cheap! I have about 200k student loans refinanced 5 years at 3.5%. I also have already bought a lot- got a heck of a deal from someone who needed to sell it in a hurry. FYI the lot next to mine which is much smaller and odd shaped sold for 45k more than I paid. I owe 110k at 3.5% on it. Starting in January I should have an extra 10k a month to pay either the student loan or on the lot. My local bank has offered to finance the entire build with no PMI and very competitive mortgage rate. Should I try to knock out the student loan or pay off the lot to get the conventional mortgage which will probably be a better rate and less fees? I'm already maxing out 401k , hsa. And when I become partner I will be eligible to put even more in my 401k. Thank you in advance for your opinions. I have learned a lot from you guys and try to send as many people as I can to this website.

  • #2
    OK.  From what you have posted you have $310k in debt.  Are you renting the house you are currently living in or is there a mortgage?  What kind of partner salary are you looking at? Is there a buy-in?  How sure is the partnership thing? Verbal or writing?  I would not spend my money before I made it.  If you do own the house you are living in I would sell it first even if you had to move into a rental.  Paying 2 mortgages has destroyed many people. I would not listen to financial advice from a banker trying to sell you a loan. You could get rid of your student loans in 1.5 years or less if you hold off on  building.


    • #3
      To me you are financially sound but have cash flow issues, so I'd try to conserve cash.  Also moving is typically more expensive than you think going in.

      I'd keep any extra cash, consider using toward the new house and then once you are settled you can apply any extra to the loans

      You might come out a few $$ behind this way but the piece of mind would be worth it for me




      • #4
        Currently own our house. Have about 100k left at 3.5% on it. Hope to sell for 200k. House 2 doors down sold for 215k last month. Partnership is in writing and should make approximately 450k. My buy in has been a reduced salary for 2.5 years. Very reputable group and I'm the first person they have hired in 12 years. We are a small private group so it fluctuates. Also we are not planning on building for 2 more years. My entire house payment including taxes and insurance is about $800 a month so I don't think that should kill me. Also the total cost of the house we are planning on building is about 600k. I guess my main question is should I pay extra money to the house to get a conventional loan and still have student loan debt at 3.5% or pay off student loans and get a "doctors mortgage"?


        • #5
          I agree with hatton1.  Don't sign up for multiple mortgages.  Pay off your loans AND the lot, THEN build a house. If you're going to be making an "extra" 10k a month this January, it won't take you long to do those two things (probably less than 2 years which sounds like that is the timeline of your house build).  Then, you'll be able to get a great deal on a new mortgage after you sell your current home.  If you are able to pay off your loans and the lot, you'll have nothing but a single mortgage for debt when you finally get your new home.  You'll be setting yourself up for good route forward.


          • #6
            You are in much better shape than average WCI poster who asks the question about should I buy this house.  I mention the caveat about 2 mortgages because my brother (a Lawyer) was making 2 payments for about one year and the stress of this led to a divorce.


            • #7
              If you have time, build up a kitty for the build.

              You can't take a conventional loan until the construction is completed. More often than not construction loans are able to roll over, but the rates aren't always the best.

              Building a home is a lot harder, time consuming and money pit than anything you'll experience, but it's your money and life....we did it twice and loved it....just don't get too customized otherwise the sell will be hard.

              I couldn't track the savings rate over the next two years but having 50% saved for total build will put you in a nice range for the rollover and maximize the mortgage with that income level. Remember, the cost of furnishing the house is expensive. Custom house comes rh furniture...not usually Ikea stuff. Landscaping can range too so budget for that... All this with there kids, so make sure spouse is active participant....


              • #8
                FWIW When I moved to my current position I had 18 months of paying two mortgages.  It sucked but I survived.

                Part of my package to move was money toward a new house so I really "had" to buy.

                You will make more than me and your first mortgage is less than mine so I think you'll be okay either way