Paying for a house with cash & CCs: Does this qualify as "hair on fire"?

[Syonyk]

I'm quite aware of the general view on credit card debt, personal lines of credit, personal loans, etc.  They're "hair on fire" level emergency that needs to be dealt with immediately if not sooner.  Currently, everything is paid off in full, every month, zero debt.

The consensus also seems to also be that mortgages are "good debt" and you shouldn't pay them off early.

I find myself in the interesting and mildly annoying situation of buying a house with a bunch of cash on hand, a personal loan, a line of credit, and paying for most of the landscaping improvements with a credit card.

This, mostly, because of some entertaining (in the "black comedy" way) delays.  Had we paid for the house in cash, there wouldn't have been any of the delays.  Because we wanted a mortgage, the delays added up so we can't get one.  *sigh*  Quitting one's job, moving a few hundred miles to be closer to family in an environment we like living in, and taking 3 months off prior to starting a different job is apparently not what banks consider a reasonable risk anymore.  Even though our net worth significantly exceeds the house cost (just a lot is in 401k and IRAs I don't feel like touching if I don't have to).

I've got a 0% for 15 months card lined up that will be taking a lot of the lawn, garden, and appliance expenses, the personal loan is $24k at 9% (ew), the line of credit is about 6% (total on it unknown as I don't have the foundation bill yet), and other credit cards are at various standard CC rates (read as, "I don't know because they get paid in full regularly").

So, after moving, there's going to be somewhere between $40k and $60k of various-interest-rate debt that's very much not a mortgage, but is serving the same purpose.

My gut feeling is that this should be treated as a hair on fire level emergency and we eat rice and beans with no travel or TV or nicer furniture or anything until this is resolved in ~2 years (we're donating a lot of our larger furniture because it's old and college-student-quality and we don't have the trailer space to move it).  But I know I wouldn't have the same reaction were I to have a mortgage in the full house amount at ~4% interest ("Oh, I should probably pay this off inside 10 years because we don't generally like debt").

And, TBH, I'm really not excited about the concept of going from our current state of "Money isn't something we really need to keep tight tabs on because we've got our spending habits nailed down to far less than our income" to "tracking every penny until this debt goes away."  That, at least for me, looks like no hobby R&D equipment (which generally turns profitable after a year or so), working from a bedroom instead of a separate structure, and only tiny quantities of crappy beer (PBR?) instead of drinking nice local stuff.

So... thoughts?  Is mortgage-like debt that's not actually a mortgage reasonable to treat as a mortgage, or should it be treated like the unsecured debt it actually is, and aggressively attacked until eliminated, at the cost of not doing many other things until it's resolved?

[thedayisbrave]

The benefits of having mortgage debt are the tax benefits and relatively low interest rates (as of now).

So, no... CC debt, personal loans, etc exceeding 9% shouldn't be seen as a mortgage, even if they are being used to pay for a house.  This isn't "mortgage like" debt, period.  No matter how much you may want to call it such.

Why are you buying a house and saddling yourself with all this? Couldn't you just rent for a year or two? Or at least put off the landscaping & garden expenses???

[Elliot]

I definitely wouldn't buy right now if this is what you have to do to buy.

[Syonyk]

The benefits of having mortgage debt are the tax benefits and relatively low interest rates (as of now).

True.  I forgot about the tax benefits.  Which we definitely don't get.

So, no... CC debt, personal loans, etc exceeding 9% shouldn't be seen as a mortgage, even if they are being used to pay for a house.  This isn't "mortgage like" debt, period.  No matter how much you may want to call it such.

The 9% will be gone after first, and I may play a balance transfer game with 0% APR cards to shuffle it if I feel like it.

Why are you buying a house and saddling yourself with all this? Couldn't you just rent for a year or two? Or at least put off the landscaping & garden expenses???

Because when we started a year ago, we didn't expect any of this would be a problem.  A month to get the land details worked out (trivial split), quick manufactured home construction, and I'd be working my current position for at least another 6 months before we made our planned move - get the mortgage as a second home (which it would be used as for a while), then once everything was worked out, move out there to be closer to family.

At the time we signed the papers for the house, we thought this was entirely possible - everyone we talked to said this would be a quick process.  It turns out that because of how the land is being split, there's a ton of permits and paperwork and approvals that nobody told us a damned thing about until we were deep in the process.  Also, a surveyor that didn't do what he was asked to do but instead did what he thought would be nice, which led to him having to go back out again because planning & zoning got a good laugh out of his proposal.  After being told to do what he ended up doing by people who had already talked to planning & zoning to find out what they could do.  And the land hadn't been surveyed since the 70s, which meant some of the reference points were off by a few feet, and this takes time to resolve.

Since we're going to have the house and be paying for it, renting doesn't make sense - and runs into the same exact problem.  I'll be quite unemployed for 3 months, and I doubt anyone would rent us something.

As for the landscaping, some of it will get pushed back, but a lot of it is fairly critical.  The hillside we're building on is in an area that burns every few summers, and it's covered in cheatgrass (which burns if you look at it wrong).  So most of the early work is building a fire protection zone around the house, which will involve a blend of gardens and lawn.  Also, the 3 month period is what I'd set aside to do this, and I've already set a start date at the new position, so I may as well do something productive with that time.

Pretty much, we committed to this plan on what we believed was a timeline with a huge amount of slop in it for unexpected things, and then everything went far more pear shaped than feared - and I'm capable of some pretty damned pessimistic estimation.  I was overly optimistic.

So I'm trying to figure out the best way to deal with the situation.

[Syonyk]

I definitely wouldn't buy right now if this is what you have to do to buy.

Enough wheels were set in motion that by the time we figured out the mortgage would be a problem, we already had a house built and sitting, waiting on the permits to get a foundation poured.  I'm actually expecting to have to pay storage fees, since the house was finished 2 months ago.

It's well into sub-optimal at this point - I entirely agree.  I'm just trying to figure out the best way to reduce the sub-optimality.

One option I've considered is getting a home equity line of credit as soon as we can, and consolidating everything into that.  I don't get the mortgage tax deductions, but I would have a ~4.25% loan.

The bank offered a "cash out refinance" after we moved in as well, but I suspect that would just be a less spongey version of a home equity line of credit.

[Sibley]

Well, it's not ideal, but if you can swing it then refinance everything into a HELOC or  mortgage, that would help with the interest rates.

And do call your CC's and ask for lower rates. I recently called Discover and asked for a lower rate because my other CC had a much lower rate and I didn't feel like running all my daily expenses through a card with a higher rate. Now 0% for a year. Worth a try.

[Syonyk]

Well, it's not ideal, but if you can swing it then refinance everything into a HELOC or  mortgage, that would help with the interest rates.

I'll certainly look into this once we're in.  I don't know how long it takes to set up such a thing, though - if it's going to require us to be in the house for 6 months or a year prior to getting it set up, I may just pay shit off instead.  I'm pretty pissed at banks right now, though.

Realistically, we should be able to pay everything off in 2 years or less.  We won't have a mortgage payment or rent payment, I'll be getting paid fairly well once I start the new gig (major pay cut from my current position, but also an hours cut), and I've invested in some profitable side hobbies I can ramp up.

And do call your CC's and ask for lower rates. I recently called Discover and asked for a lower rate because my other CC had a much lower rate and I didn't feel like running all my daily expenses through a card with a higher rate. Now 0% for a year. Worth a try.

Not a bad idea at all.  That would be some breathing room as well - run expenses onto an 0% card, put all the incoming cash into the 9% loc.