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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: innyvinny on June 29, 2012, 03:46:22 PM

Title: Focus on the student loan or the cash cushion?
Post by: innyvinny on June 29, 2012, 03:46:22 PM
Hello Mustachians!  I always want to put an 'o' in that word.  No matter though - I have a bit of a quandary and was looking for some guidance.

Quick and dirty version: I am I currently am carrying about $32K in student loan debt (ACK!).  I am also in a living in a rented room in a large house that, while cheap and offering paid utilities, leaves me worried that my non-Mustachian landlord might be defaulting on the mortgage.  I'm concerned that I may open my door to officers telling me I (along with husband and baby) have to vacate the premises before the end of the day.  Fun stuff.  The thing is...there isn't really a way to tell if this is actually happening, or if I'm just being really paranoid. 

I'm not sure which of these two...problems...should be getting the bulk of my paycheck.  The husband is advocating that we save as much as possible in the event of a forced eviction; I'm thinking the student loans need to be done away with.  What should we do??

ETA: I did read the post on "Springy Debt," but the thought of having to put potential storage fees on a credit card makes me physically hurt.  A HELOC isn't an option since we don't own the house.

Thanks, all!

Title: Re: Focus on the student loan or the cash cushion?
Post by: arebelspy on June 29, 2012, 04:28:46 PM
Even if your landlord defaults on their obligations, if you are a legitimate tenant with a lease, the bank is obligated to give you the full notice as required by law (usually 30 days). 

If this is the case, I wouldn't worry too much about it, because you should have plenty of warning and time to move.  Save an emergency fund cushion so you can pay moving expenses and rent and security deposit for the new place (and probably don't count on getting your deposit back from your current place in any reasonable amount of time, if at all, without going to court).  Then go ahead and work on those student loans.

Good luck!
Title: Re: Focus on the student loan or the cash cushion?
Post by: innyvinny on June 29, 2012, 05:07:26 PM
Title: Re: Focus on the student loan or the cash cushion?
Post by: Dicey on June 29, 2012, 08:08:59 PM
I hope others with more knowledge will add to this, but when I look on Zillow, I can see homes that are in "pre-foreclosure". Public records or the tax assessor's office could yield more clues. I'm in complete agreement with ARS's advice, forget the loans for now. Pay the mins until your housing is resolved. If you're worried about the money to pay storage fees, you need to amass a bigger emergency fund, pronto.

I'm not sure if your situation does qualify for a 30 day notice. I suspect that since you say you are "living in a rented room", even if you have an agreement in writing, in the eyes of the law it may not be the same as a valid lease. Otherwise, everyone facing foreclosure would keep renting out rooms to avoid eviction.

If a search of records does reveal that your landlord's mortgage is on a banana peel, start packing up your stuff and keep it packed. What you are most likely to receive is a very short notice. If your things are mostly packed, it will be easier to make a hasty departure. If you've taken ARS's advice, you'll have money for temporary shelter while you find new, more secure digs.

I have a rental property in a senior community. My tenant was elderly, lived alone and was a worrier. I really liked him, so I'd call him periodically to check in. I always let him know that I had made my mortgage payment so he didn't have to worry about the roof over his head. He would always laugh, but I know it made him feel better.
Title: Re: Focus on the student loan or the cash cushion?
Post by: James on June 29, 2012, 08:23:56 PM
Certainly the last thing you want to do is put your trust in speculation.

First, clarify your situation.  As arebelspy asked, do you have a lease or are you just paying cash to whoever owns the house?  Have you asked the owner if the mortgage is paid up?  If you don't have a lease I suggest getting a formal lease and clarifying with a local real estate attorney what will happen if the house is foreclosed.  I bet if you just walk in or call and ask they will give you the broad outline of your position without charge.

Second, clarify your goals.  You should have a set amount you would need in case you need to move.  What would it take to rent a new place?  How much?  How quickly?  If you don't know, find out.  Once you know, set aside that amount and go back to hitting the student loan.  Saving "as much as possible" for the eviction is vary vague, I'd clarify that for your own peace of mind if nothing else.
Title: Re: Focus on the student loan or the cash cushion?
Post by: innyvinny on June 29, 2012, 11:54:51 PM
I appreciate everyone offering advice.

Right now, it is a cash for room situation...not sure if we could get actual paperwork, so I'll have to find an attorney to talk to. 

Thank you for the suggestion about packing up, Diane. I'm on a craigslist selling binge right now, so that should help on a few fronts (a bit of extra income, less stuff to pack).

After sitting down with the husband, we've settled on $8k for starters.  That should cover storage fees, and a temporary place to stay if we don't hole up in my mother's house (which I am not above doing, believe me...).  I'm going back to the minimum payments on my loans and will focus on covering our asses for now. 
Title: Re: Focus on the student loan or the cash cushion?
Post by: arebelspy on June 30, 2012, 09:01:10 AM
Good call, and good luck.

I don't think you need an attorney (yet), find a standard lease online and ask the landlord to sign it.