This topic contains 4 replies, has 5 voices, and was last updated by Anonymous 7 years, 9 months ago.
- May 15, 2011 at 5:50 pm #215945
We are planning on buying a new house. We have enough money to put a 20% down payment. We also have credit card and car payment debt that is a little less than the 20% we could use for the house. The interest rate on the card is 4.99%. The car loan is 6.4%. The home loan will probably be 6+%. Since the interest rate on the credit card is less than the rate of the home loan, would it be better to put the 20% down on the house and then try to pay off the card and car loan in a few years or would it be better to pay off the card and car loan now and and just put 5% down on the house and have to pay PMI? Or maybe something in between like pay off the card but not the car (or vice versa) and put 10% down on the house. Is there a calculator out there somewhere to calculate the cheapest route?
We are working on paying down the credit card and car loan. At current rate they should both be paid off in about 4 years.
- May 21, 2011 at 2:37 am #282850
I have a little bit of a different take on this…..First off, no matter what the credit card companies tell you, you never have a fixed rate…They can change it at will….Now all of a sudden they see a house payment going out, and these pricks decide to increase your interest rate…. Credit Card companies are evil. Dump the credit card.
No matter what, never ever ever ever ever, go into a home loan that is an ARM….Make sure your mortgage is fixed!!!!
- May 21, 2011 at 10:48 am #282939
Pay off the car and credit first. The interest on the house is tax deductible, where as the others are not. so 6.25% on the mortgage actually becomes (6.25% x (1-marginal tax rate (say 25%) = 4.68%. As long as your PMI is less than (6.25% – 4.68%) 1.57% of your home value it is worth paying off your other debt first.
- May 28, 2011 at 3:50 am #284593
I would say get out of debt first, THEN go into debt for the house. You will be able to afford a higher house payment because of the lower initial down payment, because you will have less debt. I’d pay off all the debt, then save money like mad for a few months (or a year or so). If you are paying 200/month for a car, and say 200 a month for the credit card payments, you can save up 400 a month AT LEAST. Put that into a high-interest CD or account for 6 months or a year, and you’d have a fairly hefty sum of money on your hands that you could use to pay off the car.
Less debt is a good idea. If you buy the house now, you will be putting yourself under even further. But if you wait a year after you’ve gotten all your other debts paid off, you’re in a much better financial situation if the market shifts and your mortgage goes up. If it goes up while you’re still in debt for other things, you could be looking at a foreclosure, depending on your circumstances.
Best of luck!
- June 8, 2011 at 4:06 am #287048
The interest rates aren’t very high on the credit card or the car, so I would go ahead and put a down payment on a house. Good luck!
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