Should we pay off debt or save?

Question

I have just started doing some real estate on the side. I recently got a comission check for about $6000. After paying a few things I know have about $4000. My husband and I would love to buy a house in the next year or so and this would be great to put towards a down payment (a low priced house would be about 400,000).
Should we use this money to save or pay off 2 bills we have a personal loan that has 1100 left on it, we pay 75 a month and the interest rate is 9.9%. We also owe 2200 for our sons cord blood banking. We pay 49 a month and the interest is 11.9%.
We also have my car loan which is about 14000, but I think we will leave that for now.
I was thinking we could take the 49 and 75 that we usually pay in bills every month and save it. I also thought if we pay these things off, it will improve our credit and hopefully get us a better mortgage.
What do you think?

Answer 1

I recommend:
1) Find out what your FICO credit score is first. If it's in the mid to high 700's, then you're likely not going to need higher credit scores for better mortgage rates.

2) If you save the $4000, say in a CD or Money Market Account, you will likely get paid under 6% interest, with taxes coming out of it to lower it to under 4%. However, you are paying 10~12% on your loans. The net difference is you will lose about 6~8% per year on the $4000 by saving it.

If instead, you pay off the debt and saves the monthly debt payment of $124, in one year, you would have saved up $1488.

So, the question is when will you need the $4000? If you definitely want to buy a house within the next 12 months, then you should save it knowing that you are paying more interest for this convenience.

If not, then pay off your debt and you can accumulate enough cash in two and a half years for the down payment.

Good luck!

Just Be!

Answer 2

You should not be buying a $400,000 house unless you can pay cash for $2000 dollars expenditures like you are mentioning. get rid of those bills. Put some money aside so you will never borrow like that again.

If that is your family's only car loan that isn't so bad but remember that the principle and interest plus taxes and insurance on $400,000 is going to be something like $4000 a month so get your self in shape to make those payments!

Answer 3

Your plan to pay off the loans makes sense to me. You aren't going to find that kind of interest by saving, even in a CD.

Good luck with buying a house - it's tough to live in such a high-priced area. If you have a 10% down payment on a $400K house, your payments just for principal and interest will be about $2400 a month - with taxes and insurance would be closer to $3000, maybe more.

Answer 4

You're mortgage is going to be you're biggest expense. When you do buy your home, get an amorization so you'll know exactly how much you're paying each month. If you could pay the add'l principle each month, you would cut the life of your mortgage in half. Also,if you can afford it, take out more for your federal taxes so you could get a larger refund when you do your taxes. You could use that either to pay off your bills or applying it towards your mortgage.

Answer 5

PAY YOURSELF FIRST!! :-)

So pay of your revolving CREDIT or UnSecured credit then invest your money in:

- Real Estate
- Investments
- Stocks and Bonds

Start by establishing a BUDGET for your INCOME and EXPENSES today.

Start a regular SAVINGS plan with your lcoal Bank or Credit Union.

SAVE 6-months of your personal income for an emergency.


HOPE THESE TIPS ALSO HELP YOU! :-)