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So here is the story...My wife and I have been throwing around the idea of selling our home to pay off all of our debt. Some details, I'm 31 and she is 30, one son and a second child on the way. We both are safe in our careers and have an annual household income of 220k that will continue to rise with step increases each year. Both have solid credit scores, mine is 819 and hers is 790. We bought a beautiful home that we love on 5.25 acres for $470k--which when when you include taxes and insurance equals approximately $2700 monthly which was well below what we were approved for. We previously had a rental that we sold and and made a profit so were able to knock out a fair amount of debt and use the rest for a down payment on our current house.
Our total bring home dollar amount each month after taxes is approximately $11,000 per/mo.
Our current debts are as follows;
Home: 408k--payment of $2700 per/mo.
Solar: 38k--payment of $294 per/mo
Truck: 70k-payment of $1000 per/mo.
Car: 20k--payment of $280 per/mo.
Boat: 29k--payment of $260 per/mo.
Student loans: total balance for combined loans 49k--total minimum payments of $400 per/mo. (although we pay extra on them so we actually pay around $550 per/mo.
Groceries: approximately $1300 per/mo.
Life Insurance: 2x 850k policies--$117 per/mo.
Cell phones: $200 per/mo.
Home/auto insurance: $175 per/mo.
Braces: 3000k--$200 per/mo.
No Credit card debt
Total: $7076 each mo.
+11,000
-7076
-------------
= $3924 approximate left at the end of each month for entertainment, dining out, projects, etc.
We have approximately 10k in savings, contributing 350$ per/mo.
I have approximately 50k in my pension with monthly contributions.
My wife has approximately 18k in a 401k with max contributions.
We currently have 200-250k of equity in our current home. Option 1: Sell our current home and downsize to a house we could pay cash for and own outright with no financing. Option 2: Use the profit to pay off all debt, live with family for approximately 6 months to save for a down payment for a similar house we are in now with approximately the same monthly payment however have 0 debt other than a mortgage/insurance and basic living expenses
We feel comfortable in our situation now however we feel that its rare to hear of anyone who owns their home outright and has no monthly debt or at the very least have no debt other than their home...especially with a solid income. We feel it would be a great example to our children as well as open up endless possibilities for future opportunity and absolute financial freedom. Wanted to get thoughts, opinions, and possible other options to help us decide if these options are the best options for us or if we just stay status quo and pay off our debts over time while staying in our current house. Much appreciated!
1. With 4K a month left over why don't you have more in retirement savings or other savings for that matter?
2. Why didn't you list interest rates with the debt and length of repayment?
3. If it's a house you love, that's easily manageable, your incomes are going to grow by leaps and bounds why not keep it, knock out your other debt and increase savings and tackle the mortgage at the end?
Your 1 year old kid and the unborn child aren't going to understand the situation so that's not a factor or shouldn't be in what you are doing
We both are safe in our careers and have an annual household income of 220k
Our total bring home dollar amount each month after taxes is approximately $11,000 per/mo.
We bought a beautiful home that we love on 5.25 acres for $470k--
We currently have 200-250k of equity...
which when when you include taxes and insurance equals approximately $2700
Home: 408k--payment of $2700 per/mo plus Solar: 38k--payment of $294 per/mo
Option 1: Sell our current home and downsize...
Unquestionably.
Turn in the truck as well.
And shift to term life insurance policies.
Quote:
We feel comfortable in our situation now however...
Nope you aren't as over extended as many your age but that isn't the standard for 'comfortable'
Does that $11,000 per month net of taxes also include your HI and HSA and IRA and 401K deductions too?
I doubt it.
Calling the true net $9000 (x12 ÷52) puts the 'comfortable' household monthly expenses at a $2076 level...
which should include utilities too. Find a property that allows you to do that.
With the $1000 per month from housing plus the $1000 per month from the truck...
start paying off those other debts.
As to the excess cash (equity) tied up in the house... don't lose control of that. Invest it.
Last edited by MrRational; 06-05-2017 at 11:49 AM..
Out of curiosity my wife and I make about the same but take home is just $8600 or so, how do you manage to get $11k? We do have a 6% state income tax but I can't imagine that would be that much of a difference.
Out of curiosity my wife and I make about the same but take home is just $8600 or so, how do you manage to get $11k? We do have a 6% state income tax but I can't imagine that would be that much of a difference.
$220k gross and you only get $8,600, something is wrong with your math, I think $11k seems right.
I get an additional $1200 for cash reimbursement for not accepting employer provided medical, dental, and vision since we have coverage through my wife's work. my pay structure is different than most also in the fact that my work week is a 56 hour work week so we have a built in "over max pay" that means a few months out of the year I actually get paid 3 times vs. the standard bi weekly. I'm not 100% sure why yours would be so much less, however I'm sure the reasons I've listed most likely play a part.
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