Author Topic: Case study- two mortgages, one underwater  (Read 2535 times)

smiller088

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Case study- two mortgages, one underwater
« on: December 02, 2014, 09:52:20 AM »
As the title says, fiance and I have two mortgages, one we can't get out of (at least any way we've looked at it).

Topic Title: What should we do to better our financial situation?

Income:
              Mine: about $27,000/year before taxes. I make 22.28/hr working part time as a registered nurse (we live in a shitty, low paying area for nurses). I also work an as needed job where I make 22.75/hr, but this income is highly variable and at a location further away. So $2138/month, less obviously after taxes.
              Fiance's: about $46,800/year before taxes. He makes 25/hr as a registered nurse as well. He does massages for one client off an on, she pays him $100 per massage, but this is highly variable also and definitely not the norm as far as massage income goes. $3600/month, less after taxes.

Current expenses:
             Mortgage 1: $867/month. I'm looking at refinancing since I currently have a 30 year mortgage, which I know understand is not a good thing.
             Mortgage 2: $550/month. This one's the killer. It's at a 9.4% interest rate (he bought it before the housing crash, and it was not a government backed loan, so he has been unable to refinance). The house is in really bad shape, its almost unlivable. We bought our current home in a hurry while I was pregnant because we did not feel this house was safe for a child (please no punches, my pregnancy was not expected so we did not have the opportunity to properly plan for a baby financially). Right now fiance is working full time night shift and going to school to complete his bachelor's degree, so has little extra time to fix the house (unless he doesn't sleep). I don't have any house fixing skills whatsoever.
            Car insurance: $150/month for two cars (we don't have any car debt otherwise)
            Cell phones: $180/month for two iPhones (I'm currently looking at other, cheaper plans)
            Groceries: $400/month maximum. I cook most of our food, and I shop at Aldi to save money. This includes dog food and misc home stuff, cleaning products, etc.
            Credit card debt: $1900 total. I know, I know. But I just found this site last week and have already paid off $1000 on one of the cards since, and will pay another $600 when I get paid tomorrow. I know this is an emergency and needs to be paid off immediately.
            Gas: I fill up once a week for $40, fiance fills up more often due to working more. Probably $400/month.
            Medical bills: $94/month to pay off our son's birth. $50/month to pay off bills from a car accident fiance and and son were involved in in March. Thankfully medical bills don't have interest, but they still suck.
            Gas (home): $40/month
            Electricity: $50/month
            Internet: $28/month (we had a cheaper plan through Frontier that was awful and unreliable, and we prefer to have Internet because fiance is in online school).
            Student loans: $328
            Health insurance: $150/month
        Total: $3237 in expenses

Expected ER expenses: I'm not sure what this means.

Assets: I currently have $10,897 in an employer 401k plan. I contribute 4% and my employer matches up to 4%. Fiance doesn't have a 401k, and I want to punch him because of it.

Liabilities: I may have mentioned these above, but I should note that fiance has about $20,000 in student loans (his current schooling is mostly being paid for by our hospital).

Specific Question(s): What should we do? At this rate we'll be working forever, and it is beyond frustrating that we are paying out the ass for a piece of junk house. We have a friend who is a lawyer who doesn't really see a way out of the crappy house. For example, if we sold it for what its worth, we would still owe on the difference. My fiance has considered filing bankruptcy to get rid of it, but we don't think that is a good idea, and in our state the bank can still come after you for the remaining cost on the home. Also, how have you all managed to convince your significant others? My fiance is an extremely hard worker and is realistic, but doesn't see the point in 'depriving' ourselves to pay off our debt. He doesn't think we make enough money for it to be worth it (ie, if we 'deprived' ourselves for a few years we'd still only pay off the debt in 7 years rather than 10). That being said, we aren't big spenders. We don't have nice cars, our nice TV was a gift, a lot of the furniture in our home was a gift, and I shop at second hand stores for our quickly growing son's clothes. My fiance wears the same clothes he did 10 years ago. I was definitely the spending culprit, I loved to buy clothes, jewelry, etc, but I've stopped, I swear! My bicycle is getting fixed right now and being attached with a baby seat, so hopefully I can ride around town more rather than drive, but I'm new to cycling and a bit nervous about riding with my son during a Midwestern winter. I'm not sure my fiance could be convinced to ride his bike more. He does have an extremely annoying habit of clown car driving that I'm working on.

Okay, if anyone made it through my rambling, thank you! I appreciate any and all advice, criticism, etc.


MDM

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Re: Case study- two mortgages, one underwater
« Reply #1 on: December 02, 2014, 10:29:22 AM »
smiller08, welcome to the forums.

Don't understand "it was not a government backed loan, so he has been unable to refinance."  Just because the current bank won't refinance doesn't mean others will also refuse.  You may truly be "unable" to refinance, but have you checked a wide variety of options?

Even with the high interest mortgage, your situation doesn't look all that bad.  You might try the spreadsheet you can get from the "How To Write A Case Study" thread.  Plugging in the numbers from your OP (with some guesswork) it has you getting to FI in ~19 years.  It will take longer if expenses go up, or shorter if they go down (and vice versa for income).

Good luck!

TerriM

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Re: Case study- two mortgages, one underwater
« Reply #2 on: December 02, 2014, 10:54:00 AM »
Out of curiosity, if the second house were fixed up, what would it rent for?  And what is the rental market in your area like--easy to rent houses, hard?

Does the house have good "bones" or does it just need to be demolished?

CU Tiger

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Re: Case study- two mortgages, one underwater
« Reply #3 on: December 02, 2014, 11:01:34 AM »
Case study- two mortgages, one underwater
« on: Today at 09:52:20 AM »
As the title says, fiance and I have two mortgages, one we can't get out of (at least any way we've looked at it).

Topic Title: What should we do to better our financial situation?

Income:
Mine: about $27,000/year before taxes. I make 22.28/hr working part time as a registered nurse (we live in a shitty, low paying area for nurses). I also work an as needed job where I make 22.75/hr, but this income is highly variable and at a location further away. So $2138/month, less obviously after taxes.
Fiance's: about $46,800/year before taxes. He makes 25/hr as a registered nurse as well. He does massages for one client off an on, she pays him $100 per massage, but this is highly variable also and definitely not the norm as far as massage income goes. $3600/month, less after taxes.
If you and your husband are both RNs, have you considered moving to an area where you could both make more money doing what you do – since you describe the area you live as a bad place to make money as a nurse? It’s worth considering anyway. If you can make $25/hour one place and $35/hour in another town  - doing the same work, why wouldn’t you want to make more money?
Current expenses:
Mortgage 1: $867/month. I'm looking at refinancing since I currently have a 30 year mortgage, which I know understand is not a good thing. Refinancing is only a good thing if it saves you money. There are costs that go with the process. Run the numbers to see what you would save. It may be worth more to figure out how to get rid of the other house!

Mortgage 2: $550/month. This one's the killer. It's at a 9.4% interest rate (he bought it before the housing crash, and it was not a government backed loan, so he has been unable to refinance). The house is in really bad shape, its almost unlivable. We bought our current home in a hurry while I was pregnant because we did not feel this house was safe for a child (please no punches, my pregnancy was not expected so we did not have the opportunity to properly plan for a baby financially). Right now fiance is working full time night shift and going to school to complete his bachelor's degree, so has little extra time to fix the house (unless he doesn't sleep). I don't have any house fixing skills whatsoever. How much could you sell it for? If you sold it and lost a little, getting this off the books may be worth it. Is it rentable? If you clean it up and fix anything that is flat-out dangerous, maybe you could rent it out for a year to buy yourself time to find a buyer.
Car insurance: $150/month for two cars (we don't have any car debt otherwise) Go online and check rates. Call your insurance agent and see if they can help you get the number down. If you tell them you aren’t happy with the rates you currently have, sometimes they “magically” find you a cheaper policy.

Cell phones: $180/month for two iPhones (I'm currently looking at other, cheaper plans) You know you can do better. There are awesome resources here about this. Also, I’ve noticed that people who have the iPhones tend to loooove their technology and want to update every 1-2 years. Don’t do that! It’s a PHONE – not a lifestyle.

Groceries: $400/month maximum. I cook most of our food, and I shop at Aldi to save money. This includes dog food and misc home stuff, cleaning products, etc. Lots of threads on here about getting grocery bills down, shopping in bulk, cooking from scratch. Buying INGREDIENTS and cooking them is healthier and cheaper (mostly) than buying tons of processed foods. Also, consider adding a few meatless meals a week. Rice and beans/pulses are filling and delicious. People suggest challenging yourself to cut your grocery bill by some number (say $50) for a month or two. Then try to cut it again, until you reach what is your personal limit. Maybe $400 is the best you can do…but maybe it’s not. Maybe you can get it down to $325 and put that extra $75 towards his student loans.

Credit card debt: $1900 total. I know, I know. But I just found this site last week and have already paid off $1000 on one of the cards since, and will pay another $600 when I get paid tomorrow. I know this is an emergency and needs to be paid off immediatel  Get rid of the cards if you can’t pay them off every month. At least freeze them or hide them in some inaccessible place. People are different, my husband uses CCs and pays them off every month. I find that using them encourages me to spend more that I would if I used cash, so I don’t use them. Find out which kind of people you are and act accordingly. Paying the interest that CCs charge is just insane, a sort of stupid tax: “Here, have this thingummybob that you really don’t need and pay an extra 13.99%!”
Student loans: $328 How much is your TOTAL student loan? Is it the $20,000 you mention below? Are you paying extra payments now?
Health insurance: $150/month
Total: $3237 in expenses

Expected ER expenses: I'm not sure what this means.

Assets: I currently have $10,897 in an employer 401k plan. I contribute 4% and my employer matches up to 4%. Fiance doesn't have a 401k, and I want to punch him because of it. Make it a priority to get him to sign up. If he is missing a match, y’all are letting free money slip through your fingers.[/b]
Liabilities: I may have mentioned these above, but I should note that fiance has about $20,000 in student loans (his current schooling is mostly being paid for by our hospital).

Specific Question(s): What should we do?
1.   Look into renting the yuk house, or try selling it for as close to the amount you owe. It seems like it’s really a drag on you right now, so getting rid of it may be a huge lift towards FI.
2.   Pay off your CCs
3.   Start investing more towards retirement. Read up on IRAs (both Roth and regular) to see what has most benefits (taxes, etc.) for someone with your income.
4.   Pay off the student loans
5.   Consider working more/different jobs that may pay better. Once your children are in school maybe you can work more hours? I have a friend whose mother worked as an RN for my home state – doing rural health nursing. State work had fantastic vacation and retirement benefits.
6.   Try not to worry too much, you are not in HORRID shape. There are people older than you with five times as much debt and extravagant lifestyles who wish they were in yoru shoes. Just make up your mind that you are not going to be the typical, work-and-spend until I die consumer sukkah. Some planning and discipline will get your net worth up to positive faster than you think!

smiller088

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Re: Case study- two mortgages, one underwater
« Reply #4 on: December 02, 2014, 02:13:16 PM »
Thanks everyone SO much for your responses. I will talk to my fiance about our options for the house- I would prefer to just sell it and get what we can for it while taking a loss, just because having it adds stress.

As for our jobs, my fiance is currently getting ICU experience, which will make him more marketable. Then we are considering travel nursing. Travel nurses are paid very well (compared to our current pay), but we were advised to get ICU experience first. After he gets this experience I am all about moving to a better paying area!

Our car insurance is expensive because of the accident my fiance was in in March- it was due to weather, but technically he was at fault. We can try to see if we can get a lower rate.

I know we can do better with grocery costs. I like to cook and have a bad habit of buying ingredients I need for a certain recipe even when there's other things in the house. We don't eat much processed food, but could definitely cut back.

Once my son is in school I could work more, but he is only 13 months, so that is a long way away.

mm1970

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Re: Case study- two mortgages, one underwater
« Reply #5 on: December 02, 2014, 02:18:22 PM »
I just have one question (I don't know much about your house situation, I keep thinking there has to be a way out of it).

Why is your husband getting a bachelor's degree if he's already an RN?  What will this do to benefit him? I've known people with bachelor's to go to nursing school.  But not the other way around.

smiller088

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Re: Case study- two mortgages, one underwater
« Reply #6 on: December 02, 2014, 03:46:24 PM »
Mm1970 he has an associate's in nursing. Many RNs have their associates, but if you want any chance at advancing you need a bachelor's. Plus, many hospitals are moving towards only hiring bachelors level nurses.