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Old 03-23-2013, 05:07 AM
 
Location: MD's Eastern Shore
2,255 posts, read 2,746,401 times
Reputation: 3942

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I have been trying to find a way to trim up some of my bills and just came up with an idea I need to throw out there for advice.

I currently have a USDA mortgage out that I owe about 138000 @ 5% for the next 28 years. I've been in the house for 2 years now. The tax assesment I just recieved showed the "tax" value at 138000. Regular assesment was at 144000 2 years ago when I bought it.

I owe 11,000 @ 200/month on an econo car which I bought new a year ago. I also have a paid for 07 RAM 4X4 in excellent shape with 57000 miles on it.

If I sell the RAM, (which I wasn't even considering until this latest brainstorm of mine this evening), took out my mutual fund investments (NOT IRA'S), and my reserve I would have about 38000 to work with. Though that would take me down to only 2 month's of reserve left for my bills. My seasonal job builds things right back up in the summer though.

I was thinking 20% off 138000 would be 28000 which would take my refinance loan amount to 110,000. That would knock off a big chunk per month right there. The rest of the money would put me right in striking distance to pay off my car. I like the truck but don't exactly need it at the moment. I've just started a business which will take a bit to get going so I will need a truck later. I am pretty sure I could easily come up with the 6 to 7 grand to put down on a new $30,000 truck by the end of the summer. A 72 month loan would put that around the 350/month mark. I have been in the habit of getting long term loans to keep a lower monthly payment but paying off in half the time as my job is seasonal and based on weather and economy so I like the buffer.

Any ideas? It's late and I felt like putting this out there to see what advise I would get and also keep it in my memory. My quick calculations tell me that this plan would give me a paid off car and a new truck by the end of the year along with a cheaper mortgage rate and paying less in interest on the house then my current mortgage with car payment and payed off truck---if that made any sense. 150/month less then I'm paying now for basically the same thing but in the near future when this new truck would be payed off I would be paying 500 less per month. My credit is excellent. One problem I see is that it's putting me at a bit of a risk because it will really drain my accessible funds.

I didn't know if it would be better to put this here or in the mortgage catagory but it involves more then just a mortgage so I put it here.
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Old 03-23-2013, 06:44 AM
 
Location: Pennsylvania
5,416 posts, read 9,595,014 times
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If it was me, I wouldn't do it. Draining the reserve too much is risky, and selling a paid off truck only to buy a new one in a few months seems counter-intuitive. It might be better to be patient and sock away the potential new earnings you'll have to refinance in a year or two.
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Old 03-23-2013, 08:30 AM
 
Location: The Triad (NC)
26,939 posts, read 58,233,645 times
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Quote:
Originally Posted by marlinfshr View Post
I have been trying to find a way to trim up some of my bills...

USDA mortgage... $ 138000 @ 5% for the next 28 years.
A bit high on the rate but overall not the least outrageous.

I owe 11,000 @ 200/month on an econo car which I bought new a year ago.
The math (11,000/200 = 55+12 ) implies a 67 month loan term... at what rate?

I also have a paid for 07 RAM 4X4 in excellent shape with 57000 miles on it.
So long as you don't need it for a daily driver... a paid for old truck is a good thing to have around.
You don't mention the OTHER (and far more important) side of the ledger:
How much income is currently available?

$138,000 @ the 2.5 ratio would have your annual GROSS income at about $55,000.

Last edited by MrRational; 03-23-2013 at 08:40 AM..
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Old 03-23-2013, 08:36 AM
 
3,643 posts, read 9,268,096 times
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Seasonal income and new business = increased need for funds both to cover off work periods and the needs of a new business. Most fail because of capital requirements.

Do not do anything else with your finances right now. I would keep the truck and work with what you have. Don't rock the boat with a lot of "creative thinking" because you are in a changing environment right now. Keep your credit report clean right now due to the new business.
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Old 03-23-2013, 10:04 AM
 
Location: Wouldn't you like to know?
9,113 posts, read 15,335,111 times
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I would only buy a new vehicle if I was going to use it for 200K plus miles and drive it to the ground...

Too many people buy way over their head a depreciating asset...


Just something to think about.
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Old 03-23-2013, 10:18 AM
 
1,139 posts, read 2,740,603 times
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Quote:
Originally Posted by marlinfshr View Post
I currently have a USDA mortgage out that I owe about 138000 @ 5% for the next 28 years.

I owe 11,000 @ 200/month on an econo car which I bought new a year ago.

.
If car loan rate is less than 5%. IMO, put the 38K towards the mortage so your USDA loan is at 100k @ 5% and this will reduce your monthly payment..take that difference and put that towards the car.
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Old 03-23-2013, 03:38 PM
 
Location: MD's Eastern Shore
2,255 posts, read 2,746,401 times
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Thanks for the reply's. Sometimes it's nice to get some input from ones who don't know me and may look just at the numbers given. I've been thinking about this some more and it sounds good at first glance but after your comments I re-looked at things. It actually would not make any sense to sell a perfectly good low mileage, payed off truck only to finance a new one several month's later. My car, even as it is now with 11000 owed at 3 1/4%, is on track to be payed off in half the time as was my goal. I know me too well. I will buy another truck! So you all are right. Why take on more payments. As it is now, within 2 years I'll have 2 low mileage vehicles with no payments which was one of my goals when buying the car.

That being said, I like the idea of a smaller mortgage payment but I also like the idea of some funds in the bank. especially with a seasonal career. So, if this summer goes well on my regular job which I see no reason for it not to. It may be better to take the EXTRA money I save and combine it with some of what I have now and refinance with my 20% down goal towards the end of the year. I may be wrong, sure isn't the first time, but I really don't see the interest rates climbing too much by the end of the year. That might be the better option then taking the extra money and paying off the car.

Perhaps I can concentrate on boosting my wife's credit history (recent immigrant with none yet) so a possible refinance later can use both of our incomes. I am payed as an independent contractor as well as an employee so being able to add her income would help smooth things out. I'll ask about that in the mortgage section though.

I guess what triggered this thinking is that this year hasn't gotten off to a good start. The weather has been bad and spring refuses to get here. When temperatures are in the 30's and 40's and it's raining, asking for my services is the last thing on peoples minds so the work hasn't been there. Combine that with branching off on my own I get a lot of idle time to think. So truthfully, I get to feeling down about starting this. I know, however, that businesses require patience to get going. So I've started this to add several month's to the season while keeping my current work while I'm still able to do it. By the time this job goes hopefully my start up will be going good.
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Old 03-24-2013, 09:59 AM
 
9,904 posts, read 14,036,507 times
Reputation: 10800
Quote:
Originally Posted by marlinfshr View Post
I have been trying to find a way to trim up some of my bills and just came up with an idea I need to throw out there for advice.

I currently have a USDA mortgage out that I owe about 138000 @ 5% for the next 28 years. I've been in the house for 2 years now. The tax assesment I just recieved showed the "tax" value at 138000. Regular assesment was at 144000 2 years ago when I bought it.

I owe 11,000 @ 200/month on an econo car which I bought new a year ago. I also have a paid for 07 RAM 4X4 in excellent shape with 57000 miles on it.

If I sell the RAM, (which I wasn't even considering until this latest brainstorm of mine this evening), took out my mutual fund investments (NOT IRA'S), and my reserve I would have about 38000 to work with. Though that would take me down to only 2 month's of reserve left for my bills. My seasonal job builds things right back up in the summer though.

I was thinking 20% off 138000 would be 28000 which would take my refinance loan amount to 110,000. That would knock off a big chunk per month right there. The rest of the money would put me right in striking distance to pay off my car. I like the truck but don't exactly need it at the moment. I've just started a business which will take a bit to get going so I will need a truck later. I am pretty sure I could easily come up with the 6 to 7 grand to put down on a new $30,000 truck by the end of the summer. A 72 month loan would put that around the 350/month mark. I have been in the habit of getting long term loans to keep a lower monthly payment but paying off in half the time as my job is seasonal and based on weather and economy so I like the buffer.

Any ideas? It's late and I felt like putting this out there to see what advise I would get and also keep it in my memory. My quick calculations tell me that this plan would give me a paid off car and a new truck by the end of the year along with a cheaper mortgage rate and paying less in interest on the house then my current mortgage with car payment and payed off truck---if that made any sense. 150/month less then I'm paying now for basically the same thing but in the near future when this new truck would be payed off I would be paying 500 less per month. My credit is excellent. One problem I see is that it's putting me at a bit of a risk because it will really drain my accessible funds.

I didn't know if it would be better to put this here or in the mortgage catagory but it involves more then just a mortgage so I put it here.

yeah... Sorry, I should not say this, as this will pinch you, but isn't that what they call "American way"? Getting yourself in debt on seasonal jobs that can go boink any time?

Brother (or sister), here's used to be immigrant way.
Sell the truck.
Sell the econo car and buy REAL econo box for cash. You can get one on craigslist for $5-6K, as in made in Japan Civic.

Now, as of your mortgage.... You ever heard of recasting? Here's how the thing works. As re-FINANCING will cost you. Hear me out. Re-CASTING basically re-calculates your monthly mortgage payments. Cherry on top of sundae is - COSTS ONLY $250. Have done it 3 times.
To qualify for recasting, aka loan modification, you have to place lump sums into your mortgage principal for 2-3 months. Which you can easily do, by ridding of the metal you bought. Simply split proceeds from sales into 2-3 lump principal payments to your mortgagor. Then request recasting. Takes about 1.5 month to get it done.
What it will do, it will GREATLY knock down your monthly payment.
From that on, you have 2 paths:
1. back to American way: oh, looksie, I have now more cash on hand every month, lemmie go and buy a Harley (a Ford pickup truck, a RAM, or another huge poorly made chunk of metal)
2. the smart way. You keep paying as much more into your mortgage principal, every month, as you can possibly afford. Which builds up equity very fast. Then, you recast again, and keep paying same or more. We killed $100K mortgage in such manner in one year.
Thank me later. AND DON'T YOU DARE TO TAKE ANY LOANS AGAINST THAT EQUITY TO BUY MORE TOYS.
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Old 03-24-2013, 10:00 AM
 
9,904 posts, read 14,036,507 times
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Also, if you have a wife and she is "American dream wife" that does not work - let her start to!! Family is teamwork.
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Old 03-24-2013, 12:15 PM
 
Location: MD's Eastern Shore
2,255 posts, read 2,746,401 times
Reputation: 3942
Actually, any job can go "boink" at any time. I just happen to live in a tourist town on the edge of a rural area. Since I'm not traveling anymore and bought a house I have to make the money in the season. There is not much work here in the winter. However, my seasonal income is the same as a year round income. I just have to keep my paws out of funds over the winter because that is what I pay my bills with. So far I've been good with that. I do, however, usually come up with a little extra for enjoyment and saving. So in reality, a seasonal career is not too bad. I just don't have the time to enjoy the "in season" things in my town since I'm working, usually from before sunrise to sunset. However, I enjoy my career and what I do so that makes up for it. I've started a business to add several month's to the season by preparing for it. It just may take some time to get going while waiting for my business to get established.

I can actually come up with some funds without selling my truck at the time. Though it will cut deeply into my "safety" funds. The USDA loan was the better at the time because of my self employment. It also left funds in the bank in case of emergency (seasonal career). I was also worried with the way housing was going. I settled in Jan 11 so I think I timed it right. My mortgage is still cheaper then if I had been renting and I don't have to worry about the house being sold.

My truck (that poorly made piece of metal) is payed off and I agree with the others that it would not be smart to sell it. At about 6000 miles per year that payed for truck should easily last another 15 or more years if I chose. I'll also have a payed off car within 2 years with 50 to 60,000 miles. Why buy a $5000 car with over 100000 miles to start? Besides, at some point I'll need my truck when my business takes off.

As far as re-casting, I never heard of it it. But that doesn't mean anything. If I understand what your saying, I pay (say 20000) towards principal during a couple month's. For simple math that would mean the principal owed would be 118,000 (20 less then 138). Then my mortgage company would recalculate that 118000 over the remaining 28 years giving me a new, lower mortgage payment at the 5% since it's still the original loan? It would basically be like I payed that amount initially when I bought the house? Correct? Might be worth it to ask my mortgage company about it if I have a hard time with refinancing. Also something to think about in overall terms as I add up all costs because as you said, refinancing does cost something.

And, BTW, my wife does have a year round job and helps as well though the house is on me. She had no work experience when I bought it so she could not be on the mortgage. Now that she has had a job for a while her income included would help with the approval process since hers is considered a "real" job and mine is considered "self employed" which makes things difficult. Of course with no credit history at the time for her it might not help because that would drive the interest rate to the same as what I have now. Or more. If they even would consider her. That is where it might be worth it to consider re-casting as you mentioned.

Again, thanks for the reply's. It gives me some things to think about and shows me not to just jump into doing something that might not be very smart. It would be nice to have a couple hundred more a month that can just be put away.
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