zevo Posted April 1, 2008 Share Posted April 1, 2008 I am currently about to purchase a new home with my fiancee. My fiancee already owns a home and we are expected to clear a decent sized downpayment for the new home. For the new home we are going to have to take out a significant sized mortgage. I have a personal savings of x amount of dollars. I have two studnet loans at 4.5% interest and and 6.5% interest. For our new home we can get a mortgage rate at~5.8%. i was thinking of putting an additional x amount down towards the house and using x amount to pay off my 6.5 student loan whle leaving me some extra to hold on to for any unforseen occurences. My question is should i put more down towards the home and less to the student loan or the opposite? Should i put all down on the home? Is it justplain obvious to pay off the debt with the higher interest rate? Any suggestions would be great. I am not great with numbers and I am sure there are a few here on the boards that have some good input. I tried doing this without giving actual numbers to keep it realatively private. But thanks for any input. Link to comment Share on other sites More sharing options...
gmac17 Posted April 1, 2008 Share Posted April 1, 2008 For the new home we are going to have to take out a significant sized mortgage. don't do anything stupid just because your mortgage broker tells you that you can get the money.... Link to comment Share on other sites More sharing options...
RayFinkle Posted April 1, 2008 Share Posted April 1, 2008 Need more info: How long are the student loans for? How long is your new mortgage for? Is it a fixed rate? Will you be putting at least 20% down? Link to comment Share on other sites More sharing options...
zevo Posted April 1, 2008 Author Share Posted April 1, 2008 don't do anything stupid just because your mortgage broker tells you that you can get the money.... both my fiancee and i are pharmacists with excellent credit and no debt other than student loans. Link to comment Share on other sites More sharing options...
zevo Posted April 1, 2008 Author Share Posted April 1, 2008 Need more info: How long are the student loans for? How long is your new mortgage for? Is it a fixed rate? Will you be putting at least 20% down? student loans arefor roughly 24 years. Mortagage will be 30 year fixed. With the money cleared from the sale of our home and the minimum I planned on putingdown we will have 20% down. Link to comment Share on other sites More sharing options...
zevo Posted April 1, 2008 Author Share Posted April 1, 2008 BTW if anyone is looking for a 2 story, 3 bedroom, 1 full bath in Snyder let me know before we list. Link to comment Share on other sites More sharing options...
gmac17 Posted April 1, 2008 Share Posted April 1, 2008 both my fiancee and i are pharmacists with excellent credit and no debt other than student loans. your credit doesn't matter and either does your job. There are plenty of doctors out there with great credit and great jobs who went out and bit off more than they could chew and are now in big trouble. Link to comment Share on other sites More sharing options...
zevo Posted April 1, 2008 Author Share Posted April 1, 2008 your credit doesn't matter and either does your job. There are plenty of doctors out there with great credit and great jobs who went out and bit off more than they could chew and are now in big trouble. The mortgage we will be taking out is roughly 1.35x our minimum combined base gross salary ( not the standard 2.5xthat banks will tell you you can afford). With the extra shifts we pick up between us we make considerably more. Link to comment Share on other sites More sharing options...
Arkady Renko Posted April 1, 2008 Share Posted April 1, 2008 I know student loan interest deductions phase out at certain income levels, so that may be something to consider. Link to comment Share on other sites More sharing options...
plenzmd1 Posted April 1, 2008 Share Posted April 1, 2008 student loans arefor roughly 24 years. Mortagage will be 30 year fixed. With the money cleared from the sale of our home and the minimum I planned on putingdown we will have 20% down. Not quite sure I understand the whole picture, but here is my suggestion from a 10,000 foot level. I think I would pay the student loans off and add to the mortgage. I say that only as mortgage debt is a tax reduction(seraching for the right word there) , and I am not sure if student loan debt is. If it is, that may change the equation a bit. Forget all the doom and glommers out there now, I would love to be in the market buying a house right now. However, I will say my wife and I always went by the mantra of buying a house that we could afford if one of us lost our jobs. But, we are both in sales and that can be more fickle than I would think a phramacist is, especially considering the aging of America. I would think you all both have secure jobs considering all the old poots like me will be taking more drugs than ever over the coming decades. Prolly didn't help much, but thats all i can do with limited info Link to comment Share on other sites More sharing options...
Arkady Renko Posted April 1, 2008 Share Posted April 1, 2008 Not quite sure I understand the whole picture, but here is my suggestion from a 10,000 foot level. I think I would pay the student loans off and add to the mortgage. I say that only as mortgage debt is a tax reduction(seraching for the right word there) , and I am not sure if student loan debt is. If it is, that may change the equation a bit. Forget all the doom and glommers out there now, I would love to be in the market buying a house right now. However, I will say my wife and I always went by the mantra of buying a house that we could afford if one of us lost our jobs. But, we are both in sales and that can be more fickle than I would think a phramacist is, especially considering the aging of America. I would think you all both have secure jobs considering all the old poots like me will be taking more drugs than ever over the coming decades. Prolly didn't help much, but thats all i can do with limited info Student loan interest is deductible, but it phases out unlike the mortgage deduction. Link to comment Share on other sites More sharing options...
JimBob2232 Posted April 1, 2008 Share Posted April 1, 2008 Missing some key information here. 1) How long until you plan on retiring 2) How long do you plan on living in this home 3) Is your student loan interest tax-deductible (depends on income) Generally speaking, the larger your mortgage the better. Mortgage interest is tax deductible, thus your 5.8% interest is effectively much lower (~4%). If your student loan interest is deductible as well, your effective rates are also in the 4% range. In this case...stash the money elsewhere. You can get more than 4%. Link to comment Share on other sites More sharing options...
plenzmd1 Posted April 1, 2008 Share Posted April 1, 2008 The mortgage we will be taking out is roughly 1.35x our minimum combined base gross salary ( not the standard 2.5xthat banks will tell you you can afford). With the extra shifts we pick up between us we make considerably more. As I just put in my last post, sounds like you all are fine. Not quite sure of this 1.35 equation, back in my day was no more than .35 of monthly income should go to mortgage. This prolly the same thing. Many on here will blast me, but based on what you said, get a little aggresive, especially depending where you live. If you are in an area hit hard by the housing downturn, now is the time to pounce. Existing sales rose last month, inventory shrunk to lowest levels in 18 months in most major metro areas, the corner is turned I believe. Link to comment Share on other sites More sharing options...
plenzmd1 Posted April 1, 2008 Share Posted April 1, 2008 Student loan interest is deductible, but it phases out unlike the mortgage deduction. I do not know bout student loan deductability, but i can attest that mortgage interest phases out as well!!! Mother%$&*%. But I be a good citizen and pay all that i owe Link to comment Share on other sites More sharing options...
RayFinkle Posted April 1, 2008 Share Posted April 1, 2008 The mortgage we will be taking out is roughly 1.35x our minimum combined base gross salary ( not the standard 2.5xthat banks will tell you you can afford). With the extra shifts we pick up between us we make considerably more. I don't have the brain capacity right now to figure out your debt issue, although it looks like it might end up pretty close no matter what way you do it. With a home purchase, it has nothing to do with multiplying your base salary that doesn't mean squat. With a traditional home loan, banks will use the 28/36 rule. That is what you should be using as well. No more than 28% of your gross income should be used toward your monthly mortgage payment/PITI (Principal, Interest, Taxes, and Insurance). The 36% is your mortage (PITI) plus outside debt, meaning your mortgage and other debt (student loans, car loans, etc) cannot exceed 36% of your monthly gross income. Link to comment Share on other sites More sharing options...
EC-Bills Posted April 1, 2008 Share Posted April 1, 2008 I am currently about to purchase a new home with my fiancee. My fiancee already owns a home and we are expected to clear a decent sized downpayment for the new home. For the new home we are going to have to take out a significant sized mortgage. I have a personal savings of x amount of dollars. I have two studnet loans at 4.5% interest and and 6.5% interest. For our new home we can get a mortgage rate at~5.8%. i was thinking of putting an additional x amount down towards the house and using x amount to pay off my 6.5 student loan whle leaving me some extra to hold on to for any unforseen occurences. My question is should i put more down towards the home and less to the student loan or the opposite? Should i put all down on the home? Is it justplain obvious to pay off the debt with the higher interest rate? Any suggestions would be great. I am not great with numbers and I am sure there are a few here on the boards that have some good input. I tried doing this without giving actual numbers to keep it realatively private. But thanks for any input. Main advice I have to offer is for you two is to only buy a house you can comfortably afford with 1 salary. That way if the unfortunate happens and one of you no longer has a job, you will be okay. Use the other salary to build up savings, investments, clear debts, etc. With the money built up over time then you can then possibly see about getting a bigger house down the road that you can still comfortably afford on 1 salary. Link to comment Share on other sites More sharing options...
zevo Posted April 1, 2008 Author Share Posted April 1, 2008 I don't have the brain capacity right now to figure out your debt issue, although it looks like it might end up pretty close no matter what way you do it. With a home purchase, it has nothing to do with multiplying your base salary that doesn't mean squat. With a traditional home loan, banks will use the 28/36 rule. That is what you should be using as well. No more than 28% of your gross income should be used toward your monthly mortgage payment/PITI (Principal, Interest, Taxes, and Insurance). The 36% is your mortage (PITI) plus outside debt, meaning your mortgage and other debt (student loans, car loans, etc) cannot exceed 36% of your monthly gross income. I've worked with the ratios. 15% of our base gross income would be going towards monthly mortgage/PITI. I have also worked the numbers using much more strick ratios using what our actual take home paycheck is asI invest ~20% of my paycheck (15% in 401kand 5%in stock) While my fiancee is at 15%in 401k. I think alot of you guys on here think I am talking about buying a 600,000 home. The home we are looking at is roughly 360,000. We are expected to clear ~50 to 60 on the sale of our current home. We are looking to upsize as we have run out of room in our current home. Now is the time to upgrade. Link to comment Share on other sites More sharing options...
plenzmd1 Posted April 1, 2008 Share Posted April 1, 2008 I've worked with the ratios. 15% of our base gross income would be going towards monthly mortgage/PITI. I have also worked the numbers using much more strick ratios using what our actual take home paycheck is asI invest ~20% of my paycheck (15% in 401kand 5%in stock) While my fiancee is at 15%in 401k. I think alot of you guys on here think I am talking about buying a 600,000 home. The home we are looking at is roughly 360,000. We are expected to clear ~50 to 60 on the sale of our current home. We are looking to upsize as we have run out of room in our current home. Now is the time to upgrade. What cha waiting for!!! Do it. With the housing market where it is, I would be aggresive in buying a home now that you you think you will be comfotable in for a long while. I really think this is the bottom, and least here in the mid atlantic, so I would be maybe upping that 15% of gross up a bit and buy the house you really really want!!!!!Crimminy, you work for a reason, and its not to die with lots of money in your bank account, ya gotta spend a little no? Link to comment Share on other sites More sharing options...
Fan in Chicago Posted April 1, 2008 Share Posted April 1, 2008 I've worked with the ratios. 15% of our base gross income would be going towards monthly mortgage/PITI. I have also worked the numbers using much more strick ratios using what our actual take home paycheck is asI invest ~20% of my paycheck (15% in 401kand 5%in stock) While my fiancee is at 15%in 401k. I think alot of you guys on here think I am talking about buying a 600,000 home. The home we are looking at is roughly 360,000. We are expected to clear ~50 to 60 on the sale of our current home. We are looking to upsize as we have run out of room in our current home. Now is the time to upgrade. Reading through your posts you seem to have a good handle on your cash flow. Pat yourself and your SO on the back for that. I think you should pay off the student loan while making sure you make at least a 20% down payment. Get a pre-approval on your mortgage that will allow you to bargain hard on the house. Link to comment Share on other sites More sharing options...
MarkyMannn Posted April 1, 2008 Share Posted April 1, 2008 I don't have the brain capacity right now to figure out your debt issue, although it looks like it might end up pretty close no matter what way you do it. With a home purchase, it has nothing to do with multiplying your base salary that doesn't mean squat. With a traditional home loan, banks will use the 28/36 rule. That is what you should be using as well. No more than 28% of your gross income should be used toward your monthly mortgage payment/PITI (Principal, Interest, Taxes, and Insurance). The 36% is your mortage (PITI) plus outside debt, meaning your mortgage and other debt (student loans, car loans, etc) cannot exceed 36% of your monthly gross income. I agree with a lot of the borrowing advice you're getting here. Nothing beats over-spending and being really TIED into your house. I under-spent, and never really regretted it Another grossly simple equation on how much you can afford: Take what your realtor says you can afford, and divide that by 2 Seriously............. Link to comment Share on other sites More sharing options...
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