First Post- which loan to pay down?

**emanon1501** · 07-25-2013, 07:16 AM

Originally posted by ladonnarosso View Post

My main question is this. We are left with about $500/mo after we have completed all the things in our budget. My husbands student loans and the car loan are driving me CRAZY!! After my husband works two more years, he will get $5000 of his student loan forgiven for public service, but would it be more beneficial to use the extra to pay off the car loan or get to work on the student loan because it has the higher interest rate?

I vote the car. The student loan is tax write off and the payment is lower than your car.

**MonkeyMama** · 07-25-2013, 08:17 AM

Originally posted by artwest

In my opinion, you should forget about paying off your debts until the baby comes. Just make minimum payments and throw as much money as possible into your EF until the baby arrives and we know everyone is healthy and everything went smoothly.

Agreed. I'd take it a step farther and maybe wait until baby is 6 months old to one year old. What you think now and what you think after the baby is born will be two entirely different things. I think it's important to let things shake out for a while. (With a death you aren't supposed to make any large decisions for 6 months or so. Kind of the same thing with a birth, for different reasons, but both events can be very life altering). Babies also just create a lot of "emergencies," in general. Though I think potential bed rest and NICU type problems are wise to prepare for, the vast majority of people I know struggled with their finances *after* the baby was born. Dealing with juggling work and the needs of a baby, and so on.

Personally, I would hit the car loan hard at that point. It's a smaller balance and it would free up $430 per month. Though the student loan and the interest rate wouldn't thrill me, I'd probably let it go until I was on better financial footing (if I woke up in your shoes tomorrow). It's only $200/month, and the interest is not terrible.

I assume there is some reason you can not get a lower interest rate on the mortgage? I would do what I needed to do to get into a position to refinance the home. Do you plan to stay in this home for a long time? You are paying way more mortgage interest than necessary.

**ladonnarosso** · 07-26-2013, 05:05 AM

The money designated for "Home Improvement" isn't a loan, but savings towards making home improvements, so we can change that at any time.

I do see what you are saying about beefing up savings until after the baby is here, and that makes a lot of sense. We will do that instead.

Also, the home we bought based off of only my "fresh out of nursing school" salary. It's a first time homebuyers loan that didn't need PMI, with nothing down. At the time I thought it was a great loan, but now interest rates have fallen so much that I wish I had waited. We have awesome credit, but we aren't able to refinance because we have very little equity in the home. We do plan on staying there for the next 4-5 years(which in the end we will have lived there for about 8-9 years) and hopefully keeping it as a rental property.

**HappySaver** · 07-26-2013, 12:39 PM

I agree about concentrating on beefing up the EF. You should have at least $25k in your EF and plan to keep it at that level going forward.

Also, you didn't say if you work? Will you need to add childcare to your budget? You could cut down in the Miscellaneous/Restaurants/Clothing line items, especially while saving for your EF and paying down debt is a priority.

After all that is in order, I agree with focusing on the car loan. That should go first.

**snafu** · 07-26-2013, 01:09 PM

another note...Like many teachers DH & I were paid our annual salary over 10 months. My mentor told me it was critical to divide annual income by 12 months, estimate deductions and set aside our best guess for July & August. Just pretend the sum isn't there.

I too suggest beefing up your Emergency Fund until baby and new routines are established. I suggest monitoring the various Mortgage Calculators and sites to watch for a low fee, lower interest rate for your mortgage, possibly Credit Union. You don't necessarily need a 'brick & mortar' financial institution, you need a 3._% interest rate. Every percentage of a point rate off is beneficial to you. Run the numbers to see what you are paying on principal, interest and escrow.

Are you in a COLA district? Your food categories total $ 707. which is high for two. Take-out from home lunches and a realistic menu plan offers more nutritious, less sodium, sugar, and unpronounceable chemical in meals. Those small steps offer potential to increase savings and meet your goal of whacking that car payment to zero faster.

Congratulations expectant mom. What an exciting, new step in life a baby brings. I'd like to mention that new babies need very little and outgrow stuff at a phenomenal rate. It's far better to resist the clever marketing and let friends and relatives know gently used duds are also appreciated. Better to use monies for the items needed, used and convenient long term.

**ladonnarosso** · 07-26-2013, 01:38 PM

Originally posted by snafu View Post

I too suggest beefing up your Emergency Fund until baby and new routines are established. I suggest monitoring the various Mortgage Calculators and sites to watch for a low fee, lower interest rate for your mortgage, possibly Credit Union. You don't necessarily need a 'brick & mortar' financial institution, you need a 3._% interest rate. Every percentage of a point rate off is beneficial to you. Run the numbers to see what you are paying on principal, interest and escrow.

Are you in a COLA district? Your food categories total $ 707. which is high for two. Take-out from home lunches and a realistic menu plan offers more nutritious, less sodium, sugar, and unpronounceable chemical in meals. Those small steps offer potential to increase savings and meet your goal of whacking that car payment to zero faster.

Congratulations expectant mom. What an exciting, new step in life a baby brings. I'd like to mention that new babies need very little and outgrow stuff at a phenomenal rate. It's far better to resist the clever marketing and let friends and relatives know gently used duds are also appreciated. Better to use monies for the items needed, used and convenient long term.

Thanks! We are very excited to have this baby

. Where can I find Mortgage calculators that you talk about? I would love to refinance, but I don't know if we can. My monthly payment of $915 breaks down as follows: PAYMENT Principal $210.03 Interest $596.19 Escrow $109.51 Total $915.73
Wow, that's depressing!

Also, we have definitely accepted all hand me downs and as a result haven't needed to buy pretty much anything for the baby except for things that would be awkward for others to purchase (like a breast pump).

I do work, but I'm a nurse and I will be switching to working weekends (and one day during the week) and so my income will actually go up when baby comes. I won't need to budget for childcare, because my mother and mother in law are going to alternate the one day/week that we will need childcare... thankfully! Full time quality childcare in my area costs $1000-1200 per month, which would set us up for financial difficulties.

**MonkeyMama** · 07-26-2013, 02:14 PM

Another poster, Petunia, did a HARP refinance, so you could look into something like that. (Maybe she will chime in?). Talk to banks and mortgage brokers - look around online.

Though you only plan to be in the home for 5 more years or so, I think there could still be value to refinancing. (Would free up some funds for 5 years, and lock in the interest rate for the long run if you do keep it. Home loans have lower mortgage interest rates than rental properties, so you'd likely want to refinance before you rent it out, if you can get a lower rate). 3 months ago I'd say, "Are you crazy??? Refinance!!!" But, interest rates have come up a bit and I am not sure it is quite the no-brainer given your situation. But I would definitely keep an eye on interest rates, and still worth seeing what kind of rates you can actually qualify for. Also, keep an eye on your property values. Where I live, home values are skyrocketing like crazy. Just to say, can you have more equity than you realize?

**ladonnarosso** · 07-26-2013, 03:05 PM

[QUOTE=MonkeyMama;362622]Another poster, Petunia, did a HARP refinance, so you could look into something like that. (Maybe she will chime in?). Talk to banks and mortgage brokers - look around online.
QUOTE]

Unfortunately, I just looked up the HARP program and it only applies to loans that are owned by Fanie Mae or Freddie Mac. My loan isn't owned by eitherof them

First Post- which loan to pay down?