Dear Mustachians,
I'm trying to get our (wife and me) debt under control. After reading some of MMMs posts it seems the best place to focus is the mortgage on our house or our student loans since we don’t have any credit card debt.
Assets: We have about $20K in company stocks (place I work for).
Liabilities: We have about $20K in student loans (one loan (S10K) at 3.25%, other loan (10K) at 5.15%). Required payments per month are $121 and $106. We also have two mortgages on our house. One is an adjustable loan (adjusts once per year, current rate 3.375%, loan amount $230K), current required payment per month $1250 (half goes to principal half goes to interest). The second is a Home Equity Loan (rate is 8.725%, loan amount $50K), current payment required per month $490 (some goes to principal most goes to interest). Total amount still due on the loans is $280K. House is valued at $325K.
Specific Question: Should we cash in our stocks, pay down the principal on the house and refinance the rest. Paying $20K to the principal will make our loan to value ratio 80%. I’ve tried refinancing the loans into one loan as they stand now but no company can do it because the second loan was not part of the original purchase price.
Or should we use the 20K to pay off the student loans.
House specifics:
The house is 2200 sq ft finished with a 700 sq ft unfinished basement.
Our family is made up of 2 adults, 2 young children (kindergarten and 2nd grade), 2 cats and the occasional dog that comes to stay with us (foster dog).
I live less than a mile from work, kids school is 4 miles from our house.
If we rented we could find a place close to work for about $1200.
Thank you for your input.