I am hoping to get some feedback on my situation as I feel like it is somewhat unique. My wife and I are both 25 and are planning building our dream home starting in the spring of 2018. Here is a rundown of our situation.

Gross Income: $120,000

Currently saving about $4,500/month - living with my parents until the house is built

$80,000 in cash

$80,000 inheritance coming at the end of the year

Hoping to save another $60,000 - $70,000 before the house is built

Total cash to put down would be around $200,000 - obviously leaving $30,000ish in cash

Expecting the house to cost around $400,000

Have $39,000 in student loans left

- payment is $475/month

- average interest rate is 5.5%

Option A: Put down the entire $200,000 on house:

- mortgage all-in on the remaining $200,000 is $1,730

- student loan payment continues to be $475

- total monthly payment of $2,205

Option B: Pay off the student loans and put down $160,000 on house:

- mortgage all-in on the remaining $240,000 is $1,932

- student loan payment is $0

- total payment of $1,932

- also since the $475 monthly payment would be gone, we would save an additional $7,000 over the next 12-16 months

- could stretch it and put down an additional $10,000 using the $7,000 saved, would lower mortgage to $1,882

Other notes:

- this is not including the interest deduction that helps somewhat with lowering taxes

- does not include the interest we would save by paying off the loans early

- there are 3 student loans for $4k, $12k, and $23k so we could pay some off and leave some..

So what option do you think is the best? When writing it out like this, it seems to lean towards paying off the loans now, but I also have thoughts that I want to put down as much as possible to keep the mortgage payment lower.

Any thoughts?

**forgot to mention there is 7 years left on all three of the student loans**