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Mortgage: $488k
(subprime 3.9% is resetting Sept 2009 at 11%+.)
Credit Cards: $70k
Income is: $75 / year for the past 5 years.
401(k): ~140k (less 30% as of last quarter)
Wife Income: 0 for the next 1 or 2 years still.
Mutual Funds: $187k (from capital gains).
My idea is to hold onto the Mutual Funds and make it last until Wife goes back to work.
I inquired on a refi loan, and i was adviced to to pay down the Mortgage (out of jumpbo loan $417) and the Credit Cards. But this will lead me to lose my money cushion.
I just applied for a Loan Mod program, and still waiting to see what I can work out to extent my current subprime / payment of $1800/month.
Part of this Mutual Fund is to finance my 3 kid's private schooling (around $50k for the next 4 years)
Any advice on how to go about paying down mortgage / holding off money?
I think my advice is going to be much like M.I.D in FL, painful though it may be, when you have a JUMBO the lenders are very very very unhappy if you have much CC debt at all, regardless of other assets.
If you can figure out a way to get your loan balance under $417K and get CC way way down (like under $30K...) you are MUCH more likely to get refinanced at a more palatable rate.
The worst part about NOT doing the the things to "pretty up" your prospects of refi are that that you would be paying HUGE interest rates on everything with the loan scheduled to reset to 11% your payment will skyrocket.
Stay ahead of the curve and get all your ducks in a row and you will be able to come out ahead, the money you take out of mutual funds will not be easy to 'earn back', but even hard would be the huge payments that would you more behind the 8-ball...
Location: Sometimes Maryland, sometimes NoVA. Depends on the day of the week
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21% of your income is going to pay for private school? Is public school not an option? Unless you live in DC proper, I'm thinking if home values are in the $300-500k range, the public school should be pretty decent (since socio-economics are a big part of school quality). I know it doesn't help your debt load, but it would sure help your cash flow to put the kids in public school.
I won't pre judge why you have a 488K loan on a 75K single salary.
You need to save yourself/family first and put that first. Forget about your kids private school tution.
Unless the public school is in a very bad part of town or is considered dangerous, you need to re direct your money from your kids private school education to paying down your CC debt.
Send your kids to public school and re direct that money into paying down debt. It's the best advice anyone will give you.
I had friends from my med school/residency attend exclusive prep schools like GDS and Sidwell Friends in DC and also Pembroke Pines in Kansas City. They attended ivy schools for undergrad (Yale, Harvard, Princeton). I went to public school all throughout, even public state university.
You know what, we all ended up in the same profession, making roughy the same money and have the same friends. And my parents saved a ton of money by going to public school I know my middle school in Alexandria VA had about 50 percent free lunch kids. My high school had about 30 percent free or reduced lunch. But I turned out all right.
Too many parents focus on their kids education but they forget to take care of themselves first.
So use that money to pay the CC down, and than pay down the mortgage principal. I'm not sure how you even can qualify for a loan mod if they see you have that much in your taxable mutual fund.
I hate to say this... but I agree... you can not afford the private school unless it is an absolute must.
Depending on your current mortgage rate, you either want to pay off the credit cards and not refi (reserve some cash for the next year or two until your wife goes back to work). If you are in an ARM or high rate, then pay down to 417K and refi while rates are good. Then pay down the CC's as much as you can.
75K is not enough to afford 488K mortgage and the private school
That private school funding is from my father-in-law's (technically) share of the equity of this current house when he transferred it to me and my wife's (his daughter) name in 2006.
My first original house under me and my wife's name: 1998-2006 (bought 135k, sold 485k). This became an investment property for the business with father in law. Hmm, I bought using VA loan 0 down/0 closing but at 8% apr.
2nd house, bought under me and father in law's name in 2003 (down payment was from FIL & MIL). 80% first mortgage. This my primary residence with wife and kids. Eventually, 20% equity was open to make improvements and help the business in the last 2 years.
By 2006, mother in law passed away. First house was sold, business closed. It was making roughly 120k gross; 30k net. So it looked good on paper--but that's because wife was not drawing salary while attending the business. It afforded us she to be stay at home, and flexibility.
How much of that money from FIL is towards the kid's tuition? I figured, it was enough to cover at least the first 2 to 12th grade. 3rd kid came in 2006, and she's not in private shool (yet) which might go to public but I am expecting wife to be going back to work by then.
Mortgage: $488k
(subprime 3.9% is resetting Sept 2009 at 11%+.)
Credit Cards: $70k
One piece of advice I would give you is cutting your credit card debt. In the spring I had a CC and settle at 45% of the balance. It was pretty easy. The trick was coming up with the lump sum.
Call you CC company saying you lost your job and have been talking with an attorney about filing bankruptcy. Ask them if they will settle for less. Also mention a family relative is trying to help you with clearing up you debts.
Ask to have a letter sent to you with your new payoff.......
One piece of advice I would give you is cutting your credit card debt. In the spring I had a CC and settle at 45% of the balance. It was pretty easy. The trick was coming up with the lump sum.
Call you CC company saying you lost your job and have been talking with an attorney about filing bankruptcy. Ask them if they will settle for less. Also mention a family relative is trying to help you with clearing up you debts.
Ask to have a letter sent to you with your new payoff.......
Would settling affect my credit score? I will need it fairly healthy in order to refi and keep the house.
I live and work in Los Angeles county; and I rather keep the house I'm currently in for another 15 years at least.
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