guitarguy wrote:We have roughly $35k left total on 4 private student loans, all variable rates from 2.2 ~ 3% (prime minus some small %, can't find this info on the website for whatever reason).
Our only other debt is $99k mortgage @ 5.125% fixed. I have investigated refi's multiple times and unfortunately had zero luck. We have an FHA loan with right around zero equity (I know...I know...but that's the spot we're in). According to mortgage companies there has to be a minimum monthly payment reduction to do an FHA streamline refi, and since they doubled the MIP rates since we initiated our loan, the monthly payment reduction would be close to negated by the higher MIP rate. Therefore refi, as far as I can figure out, isn't an option.
Up until now we have been paying down the student loans with smaller balances (most with 6.x% rates). With those gone to start 2013, we stopped prepaying any debt and started banking the money we were throwing at it. We're trying to start a family now, so we're anticipating a significant drop in income before long, and we figured saving some extra cash would be a good thing. Once we have things figured out, we can always make a big payment on debt or utilize the money elsewhere (home improvements a likely candidate for at least some of the savings). Once my wife is situated with her switch to part (or no) time working, and our income is again stabilized, we can make some decisions.
1. Given our uncertainty in the coming year (or hopefully just months), is stopping debt prepayment and saving the extra instead a good plan?
2. When we do decide to start prepaying debt again (after income changes are sorted out, when we can come up with a sustainable plan) should we focus on the loans or the mortgage? My inclination is the mortgage at least to the point where we can get rid of the MIP altogether (will take about $20k of payments), but the only thing is the variable rate on the loans is scary. Should I worry about prepaying the mortgage with student loans having these variable rates?
A couple of asides: We contribute to 401k accounts enough to max employer match, and also maxing 1 Roth IRA. We're planning on keeping this up while also working on eliminating debt. We're also saving for our next car purchase. As important as getting out of debt and retirement planning is to us, saving enough to make sure we don't need to take on any more debt is also important.
guitarguy wrote:Income wise, I'm the primary earner in our family at ~$64k (plus variable income on the side...maybe $12k or so). Wife makes around $22k a year in a retail job. Our monthly income loss will be $1300 or so (her current take home) at the most if she quits work altogether, which she doesn't expect or want to do. She wants to continue working a couple days a week if possible. But with a new baby.....we'll have to see on that. We do have access to free daycare (Grandma can't wait ) so I think wife working a day or 2 a week is pretty reasonable to count on. I said 'significant' income reduction, but I don't expect to have a serious shortfall even if she quits working altogether since her income essentially equates to our "extra" money each month. Our shortfall will come in the way of not being able to continue to put as many dollars toward paying extra on debt and saving for things like vehicles, house stuff, and vacations.
damjam wrote:Sure your wife's income is your "extra" right now. What about the cost of the baby?
I may have misinterpreted your post but from what I read I see the following:
If your wife continues to work 1 or 2 days a week that money just goes straight toward paying for baby stuff. If your wife does not continue to work, you will be in the hole every month paying for baby stuff. The end result is you will not be doing any saving and possibly going into debt once the baby arrives.
Have you been tracking your spending? Is there more wiggle room than you have let on?
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