applejacks13
First Time Poster
Cash: $ 0.25
Posts: 1
Joined: 31 Mar 2017
Location: NC
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Hi, my wife and I are inheriting money (we don't know how much yet, but a hefty sum probably around 350,000). I have 270,000 in student loans (don't judge please). We are wanting to buy a house. My question is, do we pay off loans and only have 80,000 left, do we use it to buy land and build (that is what we want to do), or what? Most likely with the kind of house we want, it will be over 350,000. If we don't pay off the loans, and apply it to the house, do our chances of acquiring a home lessen with that much debt? Is student loan debt looked at differently? We are planning on relocating in the north east. Is it cheaper to pay on the student loans (which can be consolidated, paid on very little with the new programs of income based repayments, and forgiven in 20 years)- is that cheaper to pay on loans or mortgage?
Ideally of course I don't want any debt, but unless you're a millionaire- you will always be paying on something- student loans, mortgage, cars, etc. We have no credit card debt, no medical debt, no car loans, etc)- it would just be house or student loans.
This will be our only chance on being able to buy a home and put a down payment down- but not having that over my head is nice (and its scary with the changing political climate- who knows how student debt will be handled). But it's my wife's money and the benefactor would like to see her have a home, I just don't know what kind of home we can get with that much debt looming above us?
Please don't judge the student debt. This in an honest attempt to get advice and do the best thing.
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Fri Mar 31, 2017 4:56 pm |
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oldguy
Senior Member
Cash: $ 751.85
Posts: 3656
Joined: 21 May 2006
Location: arizona
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quote:
Please don't judge the student debt.
LOL, you had to warn us twice? Of course we'll judge, it was a dumb thing to do, especially if the degree only qualifies you for low-income jobs.
List the student loan rates & terms, we can give better advice.
The US mortgage system provides some of the best low cost capital in the world. Most other nations require variable interest rates, 10-yr rests, etc. But in the US, Joe Sixpac can go into a bank, ask for a $300k loan, insist in 30 years fixed rate, and get a 4% rate - so if any of your SL's are 'higher & shorter' than 4%, 30yrs, you'll want to max the mortgage.
One possibility is that both your mortgage and your SLs are 'keepers' - but not likely.
I mention that because the average lottery winner is broke in 7 years - they immediately scatter their winnings to the wind, prepaying cars, houses, credit cards - and then they save the last $10k "for their future", lol.
The best thing that a young couple could do with $350,000 is to maintain the lump sum & invest in the longterm 11%/yr index - that would be just over $8 million in 30 years. It's unlikely that you'll do that - but you can factor the $350k to $8M to attain your own goal - eg, $175k to $4M, and so on.
Alternately, if you don't retain the $350,000, you could invest $36,000/yr into your 401k accounts, again use the 11%/yr index, most 401k plans have that option. Coincidently, that to, grows to $8M in 30 yrs.
(DW and I used the later method since we had no lump sums - started when 401k's were invented, it got to one million in 14 years).
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Fri Mar 31, 2017 6:53 pm |
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