Money Matters
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pay off loan or save the cash for home updates/closing costs?

we have a 80/15 loan on our house.  the 15% loan is at a high interest rate. we pay $80/mo in interest for it. we are thinking of just paying the whole loan off. its $11K.  i'm just worried we will need that cash for closing on the new house and/or buying a new roof for this house when we go to sell. and i wonder how it might effect the stuff the bank looks at like income, cash, assests, etc.  i'd love to get out of that high interest rate as it is a huge waste of money considering we have the cash BUT i'm scared to put it all into the house....what do you think?

Re: pay off loan or save the cash for home updates/closing costs?

  • hoffsehoffse member
    Sixth Anniversary 2500 Comments 500 Love Its Name Dropper
    When are you thinking about selling? How long will it take you to save that money back up?  Having property values risen in your neighborhood?

    There are a lot of other things to consider in this, as you can see.

    How high is your interest rate?
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  • we are hoping to sell anytime between now and a year from now.
    it would take us a long time to save $11K back up. we would hope to recoup it from the sale of the home.
    we purchase the house as a foreclosure and have fixed it up. due to this i believe we will do well with the sale of the house.
    the interest rate is 8%

    thanks for your help.....
  • If you are selling the home within the next year then I would not pay it off.  You never know what will come back as needing repaired in the inspection, and you may need that cash available.
    If you stand to gain money on the sale of the home, then I would not dump that money into it, and instead use it on the purchase of your next home to make sure you have a 20% down payment to avoid PMI.

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  • hoffsehoffse member
    Sixth Anniversary 2500 Comments 500 Love Its Name Dropper
    Yes I agree with PP's - don't pay it off if you are this close to selling.  It's much better to have that money in reserve.
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  • I agree with the other PPs to keep your savings.  Especially if there is a possibility you will need to buy a new roof in order to sell your house.  That is unfortunately a lot of cha-ching.  You'd hate to lose a buyer because a new roof is their deal breaker, but you don't have the cash to do it.
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