Extra monthly cash: pay down mortgage or save for downpayment (not the same thing!)

[Anonymous]

Our house (bought at the peak of the market ) is probably worth about what we owe on it (e.g. 350 owed, 350 sales price). My goal is to sell and upgrade within 1-2 years, hoping to find a sweet spot when we can sell for a profit but still afford somethign better

We only have abotu 30k in savings that we coudl use for a downpayment, but have about $500 extra a month now. Do i spent that money paying down the mortgage in hopes to cover realtor/closing fees and get cash back out of it, or do I save more for a downpayment?

[Anonymous]

save. stay liquid. you can always bring that savings to the table if you need to.

[Anonymous]

I think this is a push with respect to getting you into a new house faster. But you are probably paying say 4% in interest and you're only going to make 1% in a savings account, so this argues towards paying down the mortgage. But unless you are in a position to buy a new house without selling your old house, it's not going to help you get in a new house.

That being said, if $30k is all the savings you have in the world, I would keep saving. Cash is king.

[Anonymous]

We have decent retirement and college (150 and 25) funds (early 30s, kids <5), but that 30K is our only other savings.

I don't see that'd we'd be approved for another mortgage without getting rid of our current one, so we do need to get out of our current house before buying a new one.....which may mean that we're better stashing our $ in the mortgage?

Since we're current on payments, and no longer underwater, we're not goign to be eligible for any bailouts. Also seems pretty unlikely (knock on wood!!!!) that the market will go back down again, so the cash we put towards the mortgage shoudl come right back to us at a sale right?

[Anonymous]

Don't forget the realtor fees. That will come out of your profit. Truthfully, I don't think you have enough in retirement, college and general savings. I'd work on boosting those before thinking of trading up your house.

[Anonymous]

Anonymous wrote:Don't forget the realtor fees. That will come out of your profit. Truthfully, I don't think you have enough in retirement, college and general savings. I'd work on boosting those before thinking of trading up your house.

Really? I thought we were doign pretty good on our retirement savings - we're only 33......

[Anonymous]

I wouldn't necessarily count on the housing market not crashing again. I think it's better to be liquid just in case.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Don't forget the realtor fees. That will come out of your profit. Truthfully, I don't think you have enough in retirement, college and general savings. I'd work on boosting those before thinking of trading up your house.

Really? I thought we were doing pretty good on our retirement savings - we're only 33......

I don't think you are doing bad, but I think saving for retirement should be more of a priority right now. We are the same age and have about $100k more in savings (retirement, 529 - 2 kids under 4, savings). We just bought a house for $550,000 with 25% down.

Is there a reason you can't stay in your house? Commute, size, etc.?

[Anonymous]

Anonymous wrote:I wouldn't necessarily count on the housing market not crashing again. I think it's better to be liquid just in case.

Yeah, I mean, there's a reason real estate is a leveraged investment. Let the bank take the risk. Don't sink your own money into the house.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Don't forget the realtor fees. That will come out of your profit. Truthfully, I don't think you have enough in retirement, college and general savings. I'd work on boosting those before thinking of trading up your house.

Really? I thought we were doing pretty good on our retirement savings - we're only 33......

I don't think you are doing bad, but I think saving for retirement should be more of a priority right now. We are the same age and have about $100k more in savings (retirement, 529 - 2 kids under 4, savings). We just bought a house for $550,000 with 25% down.

Is there a reason you can't stay in your house? Commute, size, etc.?

We want to move to a better neighborhood and school area. We got a transfer for K-5 but have to deal with transporting them. so we don't have to move, but really want to

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Don't forget the realtor fees. That will come out of your profit. Truthfully, I don't think you have enough in retirement, college and general savings. I'd work on boosting those before thinking of trading up your house.

Really? I thought we were doing pretty good on our retirement savings - we're only 33......

I don't think you are doing bad, but I think saving for retirement should be more of a priority right now. We are the same age and have about $100k more in savings (retirement, 529 - 2 kids under 4, savings). We just bought a house for $550,000 with 25% down.

Is there a reason you can't stay in your house? Commute, size, etc.?

We want to move to a better neighborhood and school area. We got a transfer for K-5 but have to deal with transporting them. so we don't have to move, but really want to

If you can put up with transporting them through grade 5, I'd do that. Saving $500/month is only $6,000/year, so in 2 years, you will only have $42,000 for a down payment. Will that really be enough? If you can hold out for 5 years, you will be able to double your down payment, possibly have increased income, and possibly more room for profit in your house.

[Anonymous]

I don't get it - won't you need 20% for a down payment?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Don't forget the realtor fees. That will come out of your profit. Truthfully, I don't think you have enough in retirement, college and general savings. I'd work on boosting those before thinking of trading up your house.

Really? I thought we were doing pretty good on our retirement savings - we're only 33......

I don't think you are doing bad, but I think saving for retirement should be more of a priority right now. We are the same age and have about $100k more in savings (retirement, 529 - 2 kids under 4, savings). We just bought a house for $550,000 with 25% down.

Is there a reason you can't stay in your house? Commute, size, etc.?

We want to move to a better neighborhood and school area. We got a transfer for K-5 but have to deal with transporting them. so we don't have to move, but really want to

If you can put up with transporting them through grade 5, I'd do that. Saving $500/month is only $6,000/year, so in 2 years, you will only have $42,000 for a down payment. Will that really be enough? If you can hold out for 5 years, you will be able to double your down payment, possibly have increased income, and possibly more room for profit in your house.

I forgot to mention that as your kids enter school, your childcare costs will decrease (unless you are a stay a home). Even if you are a stay at home, once they are in school, you could work part time to help increase your savings. I think staying put is your best bet.

[Anonymous]

OP back


I totally agree that we’re not in the ideal place to think about upgrading, BUT I see an advantage of stretching in the near future, getting more house in this buyers’ market, and getting out before we really ‘need’ to. Who’s to say that we won’t be priced out of our desired area once the kids reach the end of 5th grade?


Here’s how I justify it:

I – the ‘breadwinner’ - work for the gov’t, so my salary will slowly keep rising. DH is in academic so his won’t

I estimate our child care costs will only go down $600/month once DC1 starts school – we’ll still need after care, and activities/etc.

My exceedingly generous parents have offered to loan us cash for a downpayment. I’d feel comfortable borrowing up to $50k from them – knowing we’ll pay it back (& they have plenty to share)

[Anonymous]

I'm 17:09, at least that is my most recent post . Based on the extra $500/mo you have, I think you can afford a larger mortgage, but I don't see how $30,000 is enough for a down payment. My advice was to save until you have a larger down payment and more savings overall. But, if your parents are willing to loan you $50,000 I guess you don't need to worry about that. With this new info, I'd put the extra towards your mortgage, since as someone pointed out your interest rate is higher than what you would get by stashing the money in a 1% interest savings account.

As for the market crashing again, your house would lose value (depending where you live) and you could lose the extra money you put towards your mortgage if you tried to sell. But at the same time, if you just save the money, you will own more on the mortgage when trying to sell, thus have a larger loss. I don't think either option puts you further behind, but paying down the mortgage could put you further ahead (hope this makes sense).