Save or pay loan

rwhite0714 · May 2014

We are looking to buy a house probably in about 2 years. We have paid off all of our credit card debt and both cars will be paid in a couple months. The only debt we will have is student loans. However, it is A LOT in student loans. I have seen you want to have about 20% for a down payment on a house we still have a bout 10k to go for that to happen.

Should we focus on saving for the down payment or putting extra cash towards paying off our loans?

Advice please

vlagrl29 · May 2014

I think it may depend how much interest is on your loans and how much the total is on them. If your interest is low, I would save for a DP on a house.

hoffse · May 2014

vlagrl29 said:

I think it may depend how much interest is on your loans and how much the total is on them. If your interest is low, I would save for a DP on a house.

Yep, this.

H and I are house-hunting, and my best advice is make sure you buy a house you can afford COMFORTABLY. While a mortgage isn't necessarily "bad" debt, it does tie you in significantly more than rent does. H and I have a ton of student debt too (two law school degrees), and "comfortable" for us means a mortgage where we can afford to pre-pay on our student loans significantly. For us it's not just about getting debt free - it's a safety net too. If one of us were to lose our job, we don't want to be screwed by our student loans. Our goal is to buy a house that will enable us to be student debt free in 7 years. We have over $250K in student loan debt, so that's a pretty aggressive goal... but we can do it if we don't allow ourselves to tie up too much money in a mortgage. I would set a similar goal (debt free in 3 years, 5 years, whatever) and then work backwards from there to see how much house you really ought to be buying. You might find that it's less than you are saving for.

Also don't forget to save for closing costs, moving expenses, things you may need to buy after you move (appliances, lawn care stuff), etc. I posted a question about how much to save for that a few posts down.

Wulfgar · May 2014

I agree with Hoffse, MW bought our house prior to me moving back in State and it was a stretch house for her. Now that I am making decent money again and she has a new job that pays more her stretch house is more comfortable from a mortgage standpoint. Since it is an older house and we have been here for 7 years, we need to spend more money on routine maintenance such as roof and painting the house.

I personally would split the extra money between savings for the down payment and paying off the student loans that way you see progress in two areas even if it is slower. Also, I would save up another 5 to 10% of the cost of your house for repairs and other unforeseen events that cost money.

KatieCutie05 · May 2014

Honestly, I'd just pay off the loans then get a house. or at least just pay off say half before getting a mortgage. I bought a house with still having a lot of debt.... And we did it the smart way... or so we thought because our mortgage was just as much as rent... Or like 100 more. A small percentage of our income and we got a USDA loan so we got 0% down and a very small PMI.... Ya know until a year later my husband lost his job and had to take a 12k pay cut. We are house poor and not because of the mortgage but because of the student loans. Not to mention that we r stuck here until we can break even after realtor fee and closing costs. All our plans to pay off debt early and fix up the house went out the window. I'm living in Walmart furniture but hey I have a house. Big whoop.

Save or pay loan

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