Condo vs IBR vs Life, please advise

[gstrub]

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So I have to make a decision about next year and what to do financially. I am looking for some advice. Here is my situation:

-6 yr residency program in expensive city (in July will have 5 left)
-200k in loans, in forbearance this year. Estimated IBR payment will be $400/mo
-renting apt currently, affordable, in great location
-paying a $500/mo car payment, which will be done next year
-will likely do fellowship, then academics, in OTO.
-I have a 5 digit credit card debt after away rotations, applications, interviews, and moving 3200 miles.

So, the decision I have to make is about next year when my car is paid off and I now have an extra $500/mo + a raise. This would allow me to either begin the IBR or buy a condo. I could get a decent condo for around $225k right now which is an excellent price, and I would qualify for a physician loan through SunTrust which would also be a good deal. However, I can't do both IBR and buy a condo. Finally, I could just pay 500/mo to my credit cards and get them paid off quickly as they are all around 10% APR.

So the way I look at it, which would be better in terms of investment? I calculated it out, and it looks like by doing IBR payments for 5 years plus fellowship and then 4 years at the full rate in an academic center, I could be looking at a huge loan forgiveness (over $200k). If I let the juice run on those loans (half are at 2.7% and half are at 6.8%), I could potentially buy a condo and save close to 70k on rent for 6 years, but would then have to sell it, and buying and moving are major pains, and would then be looking at over 300k to pay back after I finish residency.

Personally, I am leaning toward staying in this apt and starting the IBR, but that worries me too...what if it turns out in 10 yrs that the law changes and I don't get the loan forgiveness?

Please help!

 

[EM_Rebuilder]

So I have to make a decision about next year and what to do financially. I am looking for some advice. Here is my situation:

-6 yr residency program in expensive city (in July will have 5 left)
-200k in loans, in forbearance this year. Estimated IBR payment will be $400/mo
-renting apt currently, affordable, in great location
-paying a $500/mo car payment, which will be done next year
-will likely do fellowship, then academics, in OTO.
-I have a 5 digit credit card debt after away rotations, applications, interviews, and moving 3200 miles.

So, the decision I have to make is about next year when my car is paid off and I now have an extra $500/mo + a raise. This would allow me to either begin the IBR or buy a condo. I could get a decent condo for around $225k right now which is an excellent price, and I would qualify for a physician loan through SunTrust which would also be a good deal. However, I can't do both IBR and buy a condo. Finally, I could just pay 500/mo to my credit cards and get them paid off quickly as they are all around 10% APR.

So the way I look at it, which would be better in terms of investment? I calculated it out, and it looks like by doing IBR payments for 5 years plus fellowship and then 4 years at the full rate in an academic center, I could be looking at a huge loan forgiveness (over $200k). If I let the juice run on those loans (half are at 2.7% and half are at 6.8%), I could potentially buy a condo and save close to 70k on rent for 6 years, but would then have to sell it, and buying and moving are major pains, and would then be looking at over 300k to pay back after I finish residency.

Personally, I am leaning toward staying in this apt and starting the IBR, but that worries me too...what if it turns out in 10 yrs that the law changes and I don't get the loan forgiveness?

Please help!

With the way the housing markets have been, I would probably not buy a house.

No clue where you are, but its sounds like a relatively high priced place as where I am, 225K buys a REALLY nice 2500 sq ft+ house.... If you could pick up a 3/2/2, brick, later model home for <100K.. I'd consider doing it, but I would assume the area you are in does not have that good of housing. I would not buy a 225K house on a residents salary - not a good financial decision.

I bought a home in medical school, did light work and made almost 30K on it. I bought a higher priced home in residency and sold it for almost 45K less than I paid for it... I learned some hard lessons about the housing market from that experience...

 

[Scorcher31]

You are basically bleeding out a huge chunk of money through your credit cards. Personally Id pay that off first then then put as much as I could toward your highest interest rate loans while doing irb on the rest. Because nice houses cost a fortune in NJ Im not buying until I know where Im going to work as an attending. Houses aren't always a bad idea but its just not something im comfortable buying at this point. Don't forget you end up having property taxes/school taxes, Insurance, closing costs, interest, any and all repairs (which can really add up). I agree if you can get a house for dirt cheap thats acceptable then go for it, but I wouldn't invest into a 200k home for residency.

 

[dynx]

So I have to make a decision about next year and what to do financially. I am looking for some advice. Here is my situation:

-6 yr residency program in expensive city (in July will have 5 left)
-200k in loans, in forbearance this year. Estimated IBR payment will be $400/mo
-renting apt currently, affordable, in great location
-paying a $500/mo car payment, which will be done next year
-will likely do fellowship, then academics, in OTO.
-I have a 5 digit credit card debt after away rotations, applications, interviews, and moving 3200 miles.

So, the decision I have to make is about next year when my car is paid off and I now have an extra $500/mo + a raise. This would allow me to either begin the IBR or buy a condo. I could get a decent condo for around $225k right now which is an excellent price, and I would qualify for a physician loan through SunTrust which would also be a good deal. However, I can't do both IBR and buy a condo. Finally, I could just pay 500/mo to my credit cards and get them paid off quickly as they are all around 10% APR.

So the way I look at it, which would be better in terms of investment? I calculated it out, and it looks like by doing IBR payments for 5 years plus fellowship and then 4 years at the full rate in an academic center, I could be looking at a huge loan forgiveness (over $200k). If I let the juice run on those loans (half are at 2.7% and half are at 6.8%), I could potentially buy a condo and save close to 70k on rent for 6 years, but would then have to sell it, and buying and moving are major pains, and would then be looking at over 300k to pay back after I finish residency.

Personally, I am leaning toward staying in this apt and starting the IBR, but that worries me too...what if it turns out in 10 yrs that the law changes and I don't get the loan forgiveness?

Please help!

Well the only absolute in the case above is pay off the credit card. There's no investment housing or otherwise that will match that.
After that, before you even consider buying a house...I mean even dream about the idea you need to save some money up. Home ownership can be great but expensis can pop up QUICK and put you in a lot of trouble. I'd rec 6 months of expenses PLUSS 10K so when the water heater leaks all over and you're busting down walls to fix the damage you aren't out on your ass.

 

[gstrub]

I am just thinking that in the long run, the loan forgiveness should be a top priority. In other words, yes I may be paying 10%/year interest on credit card, but over the course of 5 years, lets say that's only 8k. Each year I am enrolled in IBR will save me god knows how much more than that. I guess what I am saying is the fewer years I have to pay student loans off as an attending (and therefore paying the full monthly payment of around 2500/mo), the better.

So I think the tentative plan is to continue to rent, enroll in IBR, and use whatever I can leftover to pay off credit card. At least I don't have to move again...

 

[dynx]

I am just thinking that in the long run, the loan forgiveness should be a top priority. In other words, yes I may be paying 10%/year interest on credit card, but over the course of 5 years, lets say that's only 8k. Each year I am enrolled in IBR will save me god knows how much more than that. I guess what I am saying is the fewer years I have to pay student loans off as an attending (and therefore paying the full monthly payment of around 2500/mo), the better.

So I think the tentative plan is to continue to rent, enroll in IBR, and use whatever I can leftover to pay off credit card. At least I don't have to move again...

Well I don't have any faith that loan forgiveness will be a reality. At least not the 10 year variety. You can't go wrong paying down your loans early though and if it works out that they get forgiven, well thats awsome, if not...you'd have needed to pay them anyway.

 

[Scorcher31]

Im another one that isint taking the risk on loan forgiveness. I cant imagine the government is going to let that happen. Im thinking 10 years down the road people are going to be really unhappy when they have let their loans build up by just paying irb and they are hit with all that debt.

 

[JacobMcCandles]

Keep in mind that if the loan forgiveness program is actually still around and they are forgiving loans then you'll have to pay taxes on the amount forgiven. I'd put as much as I can towards the credit cards. Having a $500/mo car payment is also insane at this stage of your life, unless it was actually an incredibly cheap car that you're only financing for 1 or 2 years.

 

[shantster]

Keep in mind that if the loan forgiveness program is actually still around and they are forgiving loans then you'll have to pay taxes on the amount forgiven. I'd put as much as I can towards the credit cards. Having a $500/mo car payment is also insane at this stage of your life, unless it was actually an incredibly cheap car that you're only financing for 1 or 2 years.

You don't have to pay taxes if it's the PSLF program (10 years). I'm also in the camp that it is not going to be around when the class graduating now is going to be eligible for it. It started 2007 so the 10 years will be 2017, and if the government is still in debt, that's going to be an easy program to cut.

I agree with the credit card debt should be the first thing that gets money. Where else are you going to get a guaranteed 18-22% (whatever your rate is) return on the investment? A condo would not be a wise investment unless you know for sure you are staying there for fellowship and attending job, which you can't know. Depending on your location, 5 years is right when you might break even on the rent vs. buy.

 

[JacobMcCandles]

You don't have to pay taxes if it's the PSLF program (10 years).

Thanks for correcting me. It looks like I was assuming the IBR loan forgiveness and PSLF were operating under the same tax guidelines.

 

[Prncssbuttercup]

Pay off the credit cards...

 

[chavtwo]

Pay off the credit cards. Then work on IBR. Forget about buying a house.

 

[MrCheetah]

So I have to make a decision about next year and what to do financially. I am looking for some advice. Here is my situation:

-6 yr residency program in expensive city (in July will have 5 left)
-200k in loans, in forbearance this year. Estimated IBR payment will be $400/mo
-renting apt currently, affordable, in great location
-paying a $500/mo car payment, which will be done next year
-will likely do fellowship, then academics, in OTO.
-I have a 5 digit credit card debt after away rotations, applications, interviews, and moving 3200 miles.

So, the decision I have to make is about next year when my car is paid off and I now have an extra $500/mo + a raise. This would allow me to either begin the IBR or buy a condo. I could get a decent condo for around $225k right now which is an excellent price, and I would qualify for a physician loan through SunTrust which would also be a good deal. However, I can't do both IBR and buy a condo. Finally, I could just pay 500/mo to my credit cards and get them paid off quickly as they are all around 10% APR.

So the way I look at it, which would be better in terms of investment? I calculated it out, and it looks like by doing IBR payments for 5 years plus fellowship and then 4 years at the full rate in an academic center, I could be looking at a huge loan forgiveness (over $200k). If I let the juice run on those loans (half are at 2.7% and half are at 6.8%), I could potentially buy a condo and save close to 70k on rent for 6 years, but would then have to sell it, and buying and moving are major pains, and would then be looking at over 300k to pay back after I finish residency.

Personally, I am leaning toward staying in this apt and starting the IBR, but that worries me too...what if it turns out in 10 yrs that the law changes and I don't get the loan forgiveness?

Please help!

Man, what is wrong with you? You're paying FIVE HUNDRED DOLLARS a month for a car, yet you have over ten THOUSAND dollars in CC debt? You ought to get your financial priorities straightened out before venturing into home ownership.

 

[TexasPhysician]

There is so much wrong with this financial situation. Car debt, school debt, credit card debt, and the OP wants to add house debt. Don't buy anything else.

 

[The White Coat Investor]

So I have to make a decision about next year and what to do financially. I am looking for some advice. Here is my situation:

-6 yr residency program in expensive city (in July will have 5 left)
-200k in loans, in forbearance this year. Estimated IBR payment will be $400/mo
-renting apt currently, affordable, in great location
-paying a $500/mo car payment, which will be done next year
-will likely do fellowship, then academics, in OTO.
-I have a 5 digit credit card debt after away rotations, applications, interviews, and moving 3200 miles.

So, the decision I have to make is about next year when my car is paid off and I now have an extra $500/mo + a raise. This would allow me to either begin the IBR or buy a condo. I could get a decent condo for around $225k right now which is an excellent price, and I would qualify for a physician loan through SunTrust which would also be a good deal. However, I can't do both IBR and buy a condo. Finally, I could just pay 500/mo to my credit cards and get them paid off quickly as they are all around 10% APR.

So the way I look at it, which would be better in terms of investment? I calculated it out, and it looks like by doing IBR payments for 5 years plus fellowship and then 4 years at the full rate in an academic center, I could be looking at a huge loan forgiveness (over $200k). If I let the juice run on those loans (half are at 2.7% and half are at 6.8%), I could potentially buy a condo and save close to 70k on rent for 6 years, but would then have to sell it, and buying and moving are major pains, and would then be looking at over 300k to pay back after I finish residency.

Personally, I am leaning toward staying in this apt and starting the IBR, but that worries me too...what if it turns out in 10 yrs that the law changes and I don't get the loan forgiveness?

Please help!

You've gotten a lot of good advice in this thread.

Stay in the apartment for the next 5 years. Stay in the car for the next 5 years. When you pay it off next year, keep putting $500 a month into a savings account you will now call your "car fund." In 4 years when you become an attending, you'll have $24K plus interest in it. That's enough to buy a very nice used car, or a brand new cheaper car. Never buy a car on credit again. It's stupid and you're not.

Pay off the credit cards STAT. Find the local conservative radio station and listen to Dave Ramsey in the evenings. You'll only need to listen to an hour or two to figure it out. Again, you're not stupid. In the game of Life, you want to receive interest, not pay it.

Condos make lousy investments. Paying down 6.8% student loans is an awfully good guaranteed return. You might be giving up a free lunch through IBR/PSLF. But that's a bit of a gamble, and you'll have to pay taxes on the forgiven part anyway, plus you'll have paid more in interest over the years. I'd lean toward paying them off.

Enjoy residency. It's a wonderful time, despite the new stresses and long hours.

 

[TMP-SMX]

10 year PSLF is not taxed. The 25 year cancellation is taxed.

 

[ToasterThief]

Yeah, buying a house during residency is almost never the right choice. You've got CC debt on top of that so add me to the list of people telling you to pay off the CC debt first.

 

[EM_Rebuilder]

You've gotten a lot of good advice in this thread.

Stay in the apartment for the next 5 years. Stay in the car for the next 5 years. When you pay it off next year, keep putting $500 a month into a savings account you will now call your "car fund." In 4 years when you become an attending, you'll have $24K plus interest in it. That's enough to buy a very nice used car, or a brand new cheaper car. Never buy a car on credit again. It's stupid and you're not.

Pay off the credit cards STAT. Find the local conservative radio station and listen to Dave Ramsey in the evenings. You'll only need to listen to an hour or two to figure it out. Again, you're not stupid. In the game of Life, you want to receive interest, not pay it.

Condos make lousy investments. Paying down 6.8% student loans is an awfully good guaranteed return. You might be giving up a free lunch through IBR/PSLF. But that's a bit of a gamble, and you'll have to pay taxes on the forgiven part anyway, plus you'll have paid more in interest over the years. I'd lean toward paying them off.

Enjoy residency. It's a wonderful time, despite the new stresses and long hours.

I echo this statement. I've been out nine months now in a new place with a recent new child. Most the folks I work with are 10+ years older than me.

I miss the beer nights, the venting to each other, cookouts, quick lunches after conference, etc. Residency plugs you in with essential guranteed friends who have some sort of common goal and a similiar day to day life. My wife misses their wives as again the spouses had similar common goals and similiar day to day lives.

I tell students that although there are many things that suck about residency, there are certainly some great relationships and memories that develop!

 

[CopToEM]

I'm also of the camp that you should pay your credit cards off asap. Until your financial situation has solidified it would be fairly reckless to buy a condo - especially in this market. In order for a condo to be an investment and not a liability you certainly have to increase its value - either through market inflation or renovation. Market inflation isn't going to happen anytime soon. It's certainly not something, given today's climate, that you're going to flip in 5 years time for enough money to make it worth it. The risk v. benefit ratio is leaning far toward the risk side of things in my opinion.

Further, if you default on your credit cards that's one thing... but to end up in a sticky unforeseen situation and have to undergo foreclosure is another. Don't risk bankruptcy so early in your career.

Lastly, I agree that with that amount of credit card debt it seems unbalanced to be paying a $500/mo car payment. If you're current on it - great - if not get out from under that debt blanket as well. A car is in no way an investment and for your purposes I believe that half that car would have done just as well.