Hello,
I've spent some time recently perusing the internet looking for financial advice and this blog has been the most interesting and helpful resource so far! My husband and I already tend to be frugal people so this perspective is up our alley. However there is room for improvement, and I present our situation to you for some advice on a few questions I'll ask below.
I am a recent graduate of physical therapy school, and did not have parental support so racked up about $112,000 in student loans at interest rates ranging from 6.3 to 8.3%! We recently moved from VT to OR to pursue residency program for myself, and are renting in Eugene OR as our house in VT is also being rented to reliable people. We recently refinanced our home in VT at 4% interest and received $48,000 cash-out that we put towards the highest interest student loans. This is our current monthly financial break down of rent/loan fixed expenses:
House payment $1,589 (loan total $165,000 at 4% interest 15 year mortgage)
Rent in Oregon: $1,200 (which is cancelled out by the $1,200 we receive in rent for our VT house)
Student loan payment:$910 ($67,136 at 5.8-6.5% interest rates, 10 year payment plan)
I'm still in the process of figuring our our fixed monthly expenses, but I estimate we realistically spent about $4,500 a month.
Our monthly income is $6,000 a month take home pay.
One additional expense has been continuing education for my residency program, which has been an average of $1,000 a month, which I will soon stop paying.
We have about $7,000 in our savings account.
My main question is this: We currently rent, which is basically throwing money down the drain. We are here on a semi-permanent basis (at least 2 more years, maybe more but maybe not) Should we take our money in our savings account, use it for a down payment on a small, affordable house (no more than 150,000 with a monthly payment of less than $1,000)? Is it worth the risk of moving and having to rent and/or sell in a few years?
Or should we just move to a more affordable rental house? I think we could save $300/month on rent. I've estimated every $100 additional I put into my loans a month saves 1 year of paying back. We could also put part of our savings into my student loans right now, if we did not need it for a down payment.
I hesitate to buy because we are hoping to have a baby soon and may need that money for maternity leave time. However, if we end up saving a few hundred a month (plus the extra $1,000 non budgeted monthly income) we could beef our savings up quickly.
It comes down to just focus on paying off the student loans or build equity in a 2nd home while paying off loans slower?