Author Topic: CASE STUDY: Pay Mortgage or Pay Student Loan UPDATED  (Read 8644 times)

waffle

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Re: CASE STUDY: Pay Mortgage or Pay Student Loan UPDATED
« Reply #50 on: September 16, 2015, 11:19:00 AM »
You get to deduct all of the selling costs from your profits so your capital gains shouldn't be that much.

Easye418

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Re: CASE STUDY: Pay Mortgage or Pay Student Loan UPDATED
« Reply #51 on: September 16, 2015, 11:34:20 AM »
You get to deduct all of the selling costs from your profits so your capital gains shouldn't be that much.

Could I add in moving costs to that as well? 

$390k - $331k = $59k -$35k (Estimated Closing Costs including Prop Tax of $8k)- $8.8k settlement charges from purchase-improvements= ~$2,280 capital gains.

$24,000 profit out the door + $23,000 equity + $5k-$6k escrow -$2.3k cap gains = $50,700 cash money.

Dump that on a $275k house plus a few thousand more and I will get rid of PMI and be down to $220k mortgage.
« Last Edit: September 16, 2015, 11:35:54 AM by Easye418 »

Dicey

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Re: CASE STUDY: Pay Mortgage or Pay Student Loan UPDATED
« Reply #52 on: September 16, 2015, 12:59:46 PM »
Why would you even be paying capital gains? Do you not qualify for the IRS exclusion? If it's because you haven't owned the home long enough, stay put until you qualify for the free money the IRS is willing to give you. Why didn't your CPA mention this? Absent a Very Good Reason, replace that CPA asap.

http://www.nolo.com/legal-encyclopedia/the-250000500000-home-sale-tax-exclusion.html

Next, Realtors lie can be overly optimistic about what your house will fetch to get your listing. Don't believe that your numbers will be as high as projected.

As a been there/done that FIRE'd person, I humbly offer the following list:

1.) Despite what you'll learned from the link above, don't sell the house just yet. Transaction costs are always more than you think they will be, especially of you sell and buy.

2.) Get a roommate. The number of people who have roommates and actually report the income is very small. Do or don't, as you wish, but it can be the easiest money you'll ever collect, especially with such a big house. Interview carefully and use the money to get rid of the PMI, build the 'stache or both.

3.) Consolidate the student loans with SoFi. If that doesn't work, consolidate elsewhere. Then decide on a payoff plan that may or may not be accelerated. Lots of information on that topic around the forum.

4.) Wait to start the baby factory. Another year or two or three with dual income will allow you to get on firmer financial footing for the rest of your lives. Try banking all of wife's earnings in the interim. Alternate plan is to wait until you get to X earnings level, or X job title.

5.) I don't see anything about cars or commutes. Make sure you're as aligned with MMM principles as is feasible in your situation.

6.) Use this time to plug all budgetary holes and get comfortable living on as little as possible.

Easye418

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Re: CASE STUDY: Pay Mortgage or Pay Student Loan UPDATED
« Reply #53 on: September 16, 2015, 03:27:39 PM »
Why would you even be paying capital gains? Do you not qualify for the IRS exclusion? If it's because you haven't owned the home long enough, stay put until you qualify for the free money the IRS is willing to give you. Why didn't your CPA mention this? Absent a Very Good Reason, replace that CPA asap.

http://www.nolo.com/legal-encyclopedia/the-250000500000-home-sale-tax-exclusion.html

Next, Realtors lie can be overly optimistic about what your house will fetch to get your listing. Don't believe that your numbers will be as high as projected.

As a been there/done that FIRE'd person, I humbly offer the following list:

1.) Despite what you'll learned from the link above, don't sell the house just yet. Transaction costs are always more than you think they will be, especially of you sell and buy.

2.) Get a roommate. The number of people who have roommates and actually report the income is very small. Do or don't, as you wish, but it can be the easiest money you'll ever collect, especially with such a big house. Interview carefully and use the money to get rid of the PMI, build the 'stache or both.

3.) Consolidate the student loans with SoFi. If that doesn't work, consolidate elsewhere. Then decide on a payoff plan that may or may not be accelerated. Lots of information on that topic around the forum.

4.) Wait to start the baby factory. Another year or two or three with dual income will allow you to get on firmer financial footing for the rest of your lives. Try banking all of wife's earnings in the interim. Alternate plan is to wait until you get to X earnings level, or X job title.

5.) I don't see anything about cars or commutes. Make sure you're as aligned with MMM principles as is feasible in your situation.

6.) Use this time to plug all budgetary holes and get comfortable living on as little as possible.

I am very comfortable with the number we will begin at.  North DFW is booming.  I know my dead last number and it is about $20k lower than that.  We won't get there.

1.  I got net sheet of all the costs associated with selling.  I understand the buy side will have a bit.  Prepared for it.  Moving isn't strictly about the mortgage payment.

2.  Negative.  Personal choice.

3.  Thought about this.  At the rate I can pay off my loans, its a very miniscule savings for going through the efforts of re-fi-ing them. 

4.  Baby factory will break ground middle of next year.  First production, 9 months later.  Time>Money.

5.  I commute 90 minutes each way (sucks ass, but I do it).  I own both of my cars.

6.  Plugging already taken place.  Bankrolling $2,000 cash a month, putting it towards student loans.

Thanks for the checklist and feedback though.  Always helpful.
 
« Last Edit: September 16, 2015, 03:34:44 PM by Easye418 »

Merrie

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Re: CASE STUDY: Pay Mortgage or Pay Student Loan UPDATED
« Reply #54 on: September 18, 2015, 05:23:46 AM »
Just curious what you consider a "very miniscule" savings by refinancing. Since the actual procedure itself, through SoFi, is so easy, why not spend 5-10 minutes to save a 'very miniscule' amount? Unless your amount is something like a buck fifty, you're still making a pretty decent hourly wage for the time spent filling out that application online. I applied with Darien Rowayton Bank at the same time, to see who gave me a better offer, but *they* were such a pain I went with SoFi.

I mean, I can relate to stuff like not wanting to switch your car insurance to save $10 a year. That to me is not worth the hassle.

But seriously, SoFi is so easy.

jwright

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Re: CASE STUDY: Pay Mortgage or Pay Student Loan UPDATED
« Reply #55 on: September 18, 2015, 07:27:32 AM »
You get to deduct all of the selling costs from your profits so your capital gains shouldn't be that much.

Could I add in moving costs to that as well? 

$390k - $331k = $59k -$35k (Estimated Closing Costs including Prop Tax of $8k)- $8.8k settlement charges from purchase-improvements= ~$2,280 capital gains.

$24,000 profit out the door + $23,000 equity + $5k-$6k escrow -$2.3k cap gains = $50,700 cash money.

Dump that on a $275k house plus a few thousand more and I will get rid of PMI and be down to $220k mortgage.

No - do not add moving costs.