FundRobot » Investment Banking » Use the $10k to pay off student loans or down payment on house?

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Old   #1 (permalink)
 
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Default use the $10k to pay off student loans or down payment on house

$14k left on student loans. Should the available $10k go all towards that or down payment towards a new home? I'm in the "pay off debt before getting into another debt" mindset, but I may be missing something that one of you know about (somehow pay off loan with mortgage loan and simply have one higher mortgage payment?) Something along those lines...

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Old   #2 (permalink)
 
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Default use the $10k to pay off student loans or down payment on house

Can you afford a home? That's the real question. I would sit down with a real estate agent or a mortgage broker and figure that out first.

Plenty of people buy a home before their student loans are paid off. However, you don't want to be poor with no savings and a lot of debt.

You should repost this with more information. Put on it the interest rate of your student loans, your monthly income, and how much of a home you're looking to buy -- how much does it cost. Also put in your age and whether you have retirement savings. Then people might give you better answers.

Personally, I recommend that you have $1,000 in cash in a savings account, in case of emergency, and three months of savings that would cover your minimum needs (food, transportation, housing), in case you lose your job. Do all that before you think about putting money into a house. That's probably $10,000 right there.
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Old   #3 (permalink)
 
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Default use the $10k to pay off student loans or down payment on house

How much other money do you have? You might be best off to bank the $10,000 to normalize (level out) your cash flow while you make money to replace the $ you pay on the student loan. {If the student loan rate is relatively high, you could pay $1,000 a month - but if your finances change for the worse, you would drop back down to the regular payment - and still have some give and take in your bank account.}

You did not give us enough info about the prospective house, your job security, etc. But you cannot borrow more than 100% of the house value, so there is no way to get a mortgage loan to cover / recover your student loan. You should put 20% down on a house to avoid expensive PMI.
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Old   #4 (permalink)
 
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Default use the $10k to pay off student loans or down payment on house

do you have a 6 months salary or 9 months expenses in an emergency fund?
no? pay down the loans. & build up your emergency fund & start saving for that 20% down (once the student loans are gone you'll be able to save so quickly, you'll wonder why you kept the loans around as long as you did)

yes? move on to the next question.

if you buy the house, can you afford to pay a mortgage while paying off your student loans?

no? pay down the student loans.

yes? then use the $10k for a down payment.



FWIW: if it were me: I'd put the $10k on the loans & knock out that last 4k ASAP--especially if that were the only debt I had. (take a hard serious look at your budget & figure out how fast you can get rid of that 4k)

but like you, I'm a get rid of debt kind of person. I like putting my money in investments not debt. so I get rid of the debt.
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