[USER]

Debt Payoff?
Debt:
Primary home: $572,000 at 5.08%
*Could sell today and make a 60-70k profit
Rental: $114,000 at 3.75%

*Could sell today and make 150k profit
Student Loan: $355,000 at 6.5%, paying minimum on SAVE plan currently $853/month

I want to sell my rental house. I can either throw all of the profit at my student loan, pay an additional $2,000-$3,000 monthly and pay it off in 5.5 years.

Or, I can sell both of my houses and take all of the profit to put into a large down payment on a newer house that is roughly the same or cheaper than my current house (which will lower my mortgage payment). Reason being: I want a newer house.

My current house is too expensive and too high maintenance.

I have an almost 2 year old and pregnant with baby 2. I am weighing the pros and cons of using up all of my extra income to payoff debt vs spend it on her happiness over the next few years.

I could continue paying the minimum on my student loan, which will eventually be forgiven anyway, plus payment will be lower once I have a second kid, or choose to stay in debt for the sake of my family’s happiness and memory building in our family’s best years.

What would you do?

[Charlotte]

The two things are not mutually exclusive. The belief that you have to spend a ton of money to make your children happy and build memories is completely false.

[Stacey]

My concern, and not starting a political debate, but aren’t SAVE and PSLF on the chopping block??

[Tony]

What does ‘spend on her happiness’ mean? Most children hardly remember anything before the age of 5, and you can just ‘adjust’ photos to make you look like awesome parents.

It’s much less expensive to photoshop your children into a photo at Disney World than it is to go there.

Whether I sell or keep the rental depends on how well it’s cash flowing.

If it’s possible to cover your monthly student loan payments off your net rental income (after expenses) I would just do that and let my rental keep building equity.

[Valerie]

Can you afford the student loan payments if the Save plan is eliminated?

I would plan for that to happen and make moves accordingly.

[Kelsey]

Regarding the student loans.. we just met w someone from student loan planner after much research here and elsewhere and have a fabulous plan regarding our loans now that is much less expensive long term than I was anticipating.

They explain things very well and are well versed in the nuances of the student loans especially in the middle of all these changes, esp regarding SAVE.

[Stef]

What memories do you think a two year old and an infant would be building in the next few years? The baby years are easy, anyone can take care of the kid.

It’s when they are preteens and teens that they will really need you and only you.

That said, I’m all about ease and happiness especially if you work and have little kids.

If you can fix your primary home once and for all, that might be cheaper than a new home (moving is stressful especially with little kids) but if that’s not feasible then by all means move to keep things as simple as you can during these exceptionally stressful years.

Kids get much easier once the youngest can reliably go to the bathroom alone.

[Kerri]

Anything can happen with those loans. I personally would not bank on my highest balance and highest rate debt being wiped clean. Could you sell the primary and move back into the rental?

I’d want the loans gone. Your children are small, they will not know about or remember much of this time in their lives.

Get debt free before they’re older and be much more financially free when they’re older and can remember.

I will say…memories don’t have to involve spending money. And there is no set of “best years” in my experience either.

They all come with their own unique set of challenges and joys.

[Frank]

Probably pay off the student loan. But how much do you have invested?

[Rick]

How does the expected maintenance compare to 8-12% selling and moving costs on the combined value of both homes?

Potentially higher with cap gains taxes (maybe only on the rental) and depreciation recapture on the rental?

While it is not an apples to apples kinda decision the impact of those fees and taxes are surely not insignificant.

[Sarah]

First; what do you remember about life under the age of 8? Me: not much. 8 years old is not too late to start taking vacations. Second: you took out the student loans, you should pay them back.

Period. You can take cheap vacations when kids are little bit under the age of 4, they need naps and won’t be able to enjoy the type of vacation you are dreaming of until they are closer to 8 years old anyway.

Live cheap while kids are young. They get exponentially
More expensive as they get older. You will want to pay off student loans now.

[Dawn]

There are hefty tax consequences if you sell a rental, so just make sure you understand how much you are truly going to walk away with.

Just want to make sure that’s already considered in your 150 K profit.

[Author]

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