SAHM - should I put all the (little) money I have (or part of it)

[Anonymous]

into refinancing our home to get a lower mortgage monthly payment or just leave it alone and suck it up for the next years barely making to the end of each month?

All I have in this world (financially) is a little inheritance my parents left me (about 90k) - we have a mortgage payment of 2400k monthly and since we started paying his student loans we only have 660.00 monthly left for food and entertainment. We have a car payment that will end in Oct. 2012, and when we are done, that will bring an extra 550 per month.

I was considering put some of my money into our condo so we can refinance it and lower our monthly payments. Our total mortgage value is 313k but I think our house is valued at around 305 (we gave a down payment of 145k when we bought in 2006). My husband used to have a pretty bad credit score (536) when we bought the house, but I took charge of our finances about 2 y ears ago and manage to pay all his cc debits and got his fico score to 738 - what can help getting a better rate I think. Right now our rate is 6.45%

As I said, next year we will finish the car payments so that will bring an extra $550 monthly and in about 4 to 5 years I will be back into the workforce and will bring some income. We have to pay the student loans for the next 10 years (1400/month).

Anyways - if you were in my place, would you invest the only the money you have (or part of it) into your home?

[Anonymous]

When you consider closing costs, I find it takes a pretty good chunk of change to make a re-fi worthwhile. Run the numbers, see if it's worth it.

You didn't mention the possibility of using a little bit of your inheritance to pay off the car. Why not? You would almost double your disposable income if you did. And then you could start directing some of the car payment savings to the student loans.

[Anonymous]

Anonymous wrote:When you consider closing costs, I find it takes a pretty good chunk of change to make a re-fi worthwhile. Run the numbers, see if it's worth it.

You didn't mention the possibility of using a little bit of your inheritance to pay off the car. Why not? You would almost double your disposable income if you did. And then you could start directing some of the car payment savings to the student loans.

That was actually my initial thought, but then I took into consideration that the value of the car will only fall while the house, even if it takes a while, will eventually rise and I can recoup the money when it is time to move (in 6-7 years down the road).

[Anonymous]

You can also put the student loans into forebearance until the car payment is done. I wouldnt put the inheritance into the house at this point.

[Anonymous]

Anonymous wrote:

Anonymous wrote:When you consider closing costs, I find it takes a pretty good chunk of change to make a re-fi worthwhile. Run the numbers, see if it's worth it.

You didn't mention the possibility of using a little bit of your inheritance to pay off the car. Why not? You would almost double your disposable income if you did. And then you could start directing some of the car payment savings to the student loans.

That was actually my initial thought, but then I took into consideration that the value of the car will only fall while the house, even if it takes a while, will eventually rise and I can recoup the money when it is time to move (in 6-7 years down the road).

The value of the car is falling NOW. You still have to pay for it. Get it out of the way, and make the savings work for you somehow.

[Anonymous]

I agree with PPs. Pay off the car. It doesn't matter if it's value is dropping, you still have to pay it off. When you sell in 6-7yrs you should be able to get your money back if not earn from the sale of the condo. Run the numbers and make sure that you won't break even or just barely make a positive difference w/ refi

I would still pay of the car and start working on DH's student loans. Absolutely.

[Anonymous]

Pay off the car and look into whether you can change your student loan repayment plan. If you are on a ten year plan, maybe you can change that to the 30 year plan, which would be well worth it if your interest rate is low enough.

[Anonymous]

Ugh. When are you planning on moving, do you think? I hate to say it, but at this point, your rate will be so much lower that it will make a fair difference. If you will be in the condo for many years to come, this might make sense. If you WON'T, then pay off the car, and save the rest of your funds for the cash you may have to come up with when you do sell if you're short. I think that a lot of this hinges on how much longer you'll stay in the condo though.

[Anonymous]

What is your current interest rate? If I understand your post, you are currently underwater on your mortgage (owe $313, value is $305) and to refi and get the best rate, you would probably have to pay it down to 80%, or $244, which would take about $70K plus closing costs. But it would drop your monthly payments down considerably. To really value the savings you would have to calculate in the tax effects...

I'm in a sort of similar situation: SAHM, with about $100K in the bank not really doing anything but we will need it as we are currently $2-3K/mo negative on cash flow. So will soon start to take from the savings...probably by September. It will be a very slow bleed, probably allowing me to SAH for another 2-3 years. I am considering a refi and putting a chunk into the refi thus reducing our monthly payments.

[Anonymous]

Oops, just read your post--6.45% is your current rate, and 4.54% is today's average 30 yr fixed rate.

Some things to consider:
- if you refi, you are only refinancing the current balance so that should drop your payment a bit;
- refi'ing to a new 30 yr fixed will add about 5 more years to your mortgage (assuming you never refi'ed and you don't make additional payments-which you should do when you can);
- you will probably need to pay down a good chunk to get to the 80/20 ratio. On the plus side, if your mortgage was $250, you principal and interest would be $1,273, probably less than you are currently paying (I don't know your prop taxes and ins, but you would need to add those in);
- what else would you do with the money (opportunity cost) and would there be a way to use that money to make more money to then pay down the mortgage?

[Anonymous]

First off, do you think your jobs (and your marriage) are stable?

Pay off the car. That's a no-brainer, I'm assuming you have $10k or so left there and that frees up $550 a month right away. I'd do that no matter what.

I'd refi the mortgage with the remainder. You can save a few hundred a month right away and you are less in total debt.

Sure, it's a potentially depreciating asset, but being underwater is a chain that REALLY can wear someone down.

Student loans seem like they're in the low six figures, you can't refi those or make them go away.

[Anonymous]

I would have created my own account - separate from my husband's.

[Anonymous]

Anonymous wrote:First off, do you think your jobs (and your marriage) are stable?

Pay off the car. That's a no-brainer, I'm assuming you have $10k or so left there and that frees up $550 a month right away. I'd do that no matter what.

I'd refi the mortgage with the remainder. You can save a few hundred a month right away and you are less in total debt.

Sure, it's a potentially depreciating asset, but being underwater is a chain that REALLY can wear someone down.

Student loans seem like they're in the low six figures, you can't refi those or make them go away.

This is exactly right. Refinancing the house is a more complicated decision, informed by your risk tolerance for depleting your savings, how long you're realistically staying in the condo, the difference in monthly payments, etc.

[Anonymous]

I'd sell the house and move someplace more affordable.

[Anonymous]

Anonymous wrote:I'd sell the house and move someplace more affordable.

You'd sell a house that's underwater, and already a bargain for the this area, to "move someplace more affordable"? Then I don't think you have any place offering advice on this particular topic.