Opportunity to payoff mortgage in 1.3 years. Should I do it?

[PharmacistFl12]

I have a very tough decision to make starting 2018. I currently have a mortgage of $100,000 and student loan of $117,000. I will have save enough money by end of 2018 to payoff my mortgage completely and be a homeowner. I know financially, the smarter decision is to make a big payment towards my student loan at 6.5% interest. Reasons for my indecision are: 1) Student loans offer a lot more flexibility in case if I lose my job or become sick. 2)Owning my house will give me a psychological relief in case I lose my job. 3)I work for a large retail chain. Recent development is scaring me big time. Our company decided to start a salary freeze and according to corporate 40% of new grads can't find a job. They have 20+ pharmacist in one district looking for hours just to have 30 hours weekly!!! What are your opinions?

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[Z-Qualizer]

LOANS!!!

 

[297point1]

This is easy.

Mortgage rate is likely significantly lower. Mortgage balance is lower. You can walk away from a mortgage (it is unpleasant, but can be done). You can also always sell your house and downsize if need be.

Student loans? You are stuck with those, and they can't be discharged in bankruptcy (cue some nabob to give examples of how it can be done, but for most people it can't).

Pay the loans. Think with your wallet and not with your mind.

 

[PharmacistFl12]

This is easy.

Mortgage rate is likely significantly lower. Mortgage balance is lower. You can walk away from a mortgage (it is unpleasant, but can be done). You can also always sell your house and downsize if need be.

Student loans? You are stuck with those, and they can't be discharged in bankruptcy (cue some nabob to give examples of how it can be done, but for most people it can't).

Pay the loans. Think with your wallet and not with your mind.

Thank You. The smart financial decision is to payoff loans first. It was just the psychological feeling of owning a house that was tempting me to be indecisive.

 

[Dr Wario]

I have to second, third and fourth paying off those student loans because they cannot be discharged and carry a higher rate.

 

[PharmacistFl12]

I have to second, third and fourth paying off those student loans because they cannot be discharged and carry a higher rate.

But if you lose your job, you don't have to pay because you can apply for forbearance. There's no option with a mortgage. Unfortunately, I don't have to anyone to fall back on. I have to support both of my elderly parents.

 

[quickpic007]

But if you lose your job, you don't have to pay because you can apply for forbearance. There's no option with a mortgage. Unfortunately, I don't have to anyone to fall back on. I have to support both of my elderly parents.

how much months emergency $? should have at least 6

 

[lord999]

I definitely agree student loans first in context.

This would be a more interesting question if the mortgage rate exceeded the student loan rate. How much is flexibility worth percentage-wise given equal debt and that there is adequate baseline financial resources?

Making it concrete, say I have $100,000 split evenly into $50k debt between student loans and the mortgage. I have $10k above my six month spending that I am free to allocate. Paying off the debt is the only thing I can do (so do not bring in the stock market yet where you can increase your $). What is the difference in interest rates such that you would choose paying off the more flexible arrangement in the mortgage) first over the more onerous student loans? Or you can argue the opposite arrangement that student loans can go IBR whereas mortgages do not scale that way under normal conditions (by the way, you can buy an option to have it income flexible payments with FHA/VA loans, but almost everyone chooses not to which has been a debated housing policy matter within VA).

 

[PharmacistFl12]

how much months emergency $? should have at least 6

Emergency fund is not a problem. I have 2 years emergency fund. Problem is the job market is so crappy, i'm afraid of not landing a job and having to compete with new grads if I get laid off.

 

[VA Hopeful Dr]

This is easy.

Mortgage rate is likely significantly lower. Mortgage balance is lower. You can walk away from a mortgage (it is unpleasant, but can be done). You can also always sell your house and downsize if need be.

Student loans? You are stuck with those, and they can't be discharged in bankruptcy (cue some nabob to give examples of how it can be done, but for most people it can't).

Pay the loans. Think with your wallet and not with your mind.

Don't forget the tax break for mortgage interest that the OP likely doesn't get with student loans due to the fairly low income restrictions on that.

 

[PharmacistFl12]

Don't forget the tax break for mortgage interest that the OP likely doesn't get with student loans due to the fairly low income restrictions on that.

Definitely, the tax deduction is #1 reason for me to not pay off mortgage before student loans. The only reason for indecisiveness, is the comfort of knowing I own my own house and not worrying about being homeless if I get laid off.

 

[pezdispenser]

Emergency fund is not a problem. I have 2 years emergency fund. Problem is the job market is so crappy, i'm afraid of not landing a job and having to compete with new grads if I get laid off.

How much is that in dollars? $70k? You don't need that much. Cut it down to 6 months of expenses or $20k and use the $50k or whatever the excess is to pay down your student loans. Also start making extra payments towards your loans now. Don't wait until the end of 2018 because you'll have to pay an extra $10k in interest if you do that. You should be able to pay off your loans in 6 months. At this point, you can reduce your emergency fund even further, or leave it and it will last longer because you don't have student loan payments to make. Then divert that money towards your mortgage and it should be gone as well in a year or so.

You are another example of how people start feeling insecure because of their debts and do counterproductive things like hoard tons of cash, just like this other thread: What would you do with $100k? So I will repeat what I said there: being debt free gives you tremendous security and confidence, and this makes you so much more marketable in the workforce that you won't even be worried about job security anymore.

 

[pharmacystudent1011]

I have $200k in student loans currently at 4.0% interest. I am questioning whether I should put 10% of my paycheck toward 401k or 5% and put the rest into my loans? My company matches 5%.

 

[VA Hopeful Dr]

I have $200k in student loans currently at 4.0% interest. I am questioning whether I should put 10% of my paycheck toward 401k or 5% and put the rest into my loans? My company matches 5%.

Pay the minimum towards your loans and the rest into retirement savings of some variety. Conservatively speaking, you should get at least a 6% ROI which is higher than your loan interest.

That's all assuming the economy stays good.

 

[VA Hopeful Dr]

Definitely, the tax deduction is #1 reason for me to not pay off mortgage before student loans. The only reason for indecisiveness, is the comfort of knowing I own my own house and not worrying about being homeless if I get laid off.

Long as you have a decent emergency fund, nothing to worry about.

 

[PharmacistFl12]

How much is that in dollars? $70k? You don't need that much. Cut it down to 6 months of expenses or $20k and use the $50k or whatever the excess is to pay down your student loans. Also start making extra payments towards your loans now. Don't wait until the end of 2018 because you'll have to pay an extra $10k in interest if you do that. You should be able to pay off your loans in 6 months. At this point, you can reduce your emergency fund even further, or leave it and it will last longer because you don't have student loan payments to make. Then divert that money towards your mortgage and it should be gone as well in a year or so.

You are another example of how people start feeling insecure because of their debts and do counterproductive things like hoard tons of cash, just like this other thread: What would you do with $100k? So I will repeat what I said there: being debt free gives you tremendous security and confidence, and this makes you so much more marketable in the workforce that you won't even be worried about job security anymore.

I have $65k in bank savings and taxable stock investments. You're comments are very accurate. Having high debts make you feel insecure and scare you into doing counter intuitive things. Going all in towards student loans and getting rid of it ASAP is the best move financially.

 

[PharmDBro2017]

I have $200k in student loans currently at 4.0% interest. I am questioning whether I should put 10% of my paycheck toward 401k or 5% and put the rest into my loans? My company matches 5%.

When are you fully vested and actually get the 5% though? Most companies don't immediately start you there.

 

[Momus]

100k isn't a big mortgage. The interest on that is very low also (<4%).

Pay off your high interest student loan, and the next 2 yrs, pay off your mortgage, it's easy. If you are really in a pinch later, you can rent out 2 of your rooms for $350/room, that will cover your entire monthly mortgage payment and more.

You are likely to be debt free in the next 4-5 yrs tops since you have a good saving habit. You are in a good position, don't think to hard on this. You are gonna be fine.

 

[WhiteCoatWonder]

100k isn't a big mortgage. The interest on that is very low also (<4%).

Pay off your high interest student loan, and the next 2 yrs, pay off your mortgage, it's easy. If you are really in a pinch later, you can rent out 2 of your rooms for $350/room, that will cover your entire monthly mortgage payment and more.

You are likely to be debt free in the next 4-5 yrs tops since you have a good saving habit. You are in a good position, don't think to hard on this. You are gonna be fine.

this is great advice. ive seen this successfully done by at least 3 attendings that ive had the chance to work with. i thought itd be more hassle than its worth but with a good rental agreement, its no sweat and a little extra folding money.

 

[sosoo]

if job security is a concern, pay off your mortgage first. if something happens, u won't be homeless. u can then work at a McDonalds and still survive.

 

[CountBy5s]

I guess you should do what you feel is best. Pay of the house then lump that money over onto the loans and be debt free in a few years. Or rent the house you just paid off. Then use that income to pay on your new house or your student loans.

Logic will say pay off the higher interest first. Heart the home. Remember student loans payment plans can be restructured etc. But I would hate to lose my home...

Just my thoughts

 

[quickpic007]

Emergency fund is not a problem. I have 2 years emergency fund. Problem is the job market is so crappy, i'm afraid of not landing a job and having to compete with new grads if I get laid off.

it dont really matter then, people like you always worry and end up hoarding money =) u will do fine paying house if it rocks your socks
plus you may get a student loan bailout!

 

[sakigt]

If job security is your fear Id work on something to improve that. If you had to move you would be stuck with a paid off house. Board certification, PRN work elsewhere... etc

 

[brianuseruser]

Loans, but it is not as straight forward ad everyone makes it seem. If you died tomorrow, paying off the house would leave something tangible for your family. A paid off loan does squat. Also, if you lost your job tomorrow you could go to an income based repayment plan and essentially pay nothing. Your mortgage would not. That said, we paid off my wife's loand first, then we are paying off the mortgage. I am going for PSLF do I am paying the minimums. It is whatever your risk tolerance is. Or you could refinance the loans and then go all in on the mortgage but you'd lose the security blanket if you lost your job tomorrow.

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[rph3664]

Pay the student loans off first. EOS.

 

[PAtoPharm]

I have a very tough decision to make starting 2018. I currently have a mortgage of $100,000 and student loan of $117,000. I will have save enough money by end of 2018 to payoff my mortgage completely and be a homeowner. I know financially, the smarter decision is to make a big payment towards my student loan at 6.5% interest. Reasons for my indecision are: 1) Student loans offer a lot more flexibility in case if I lose my job or become sick. 2)Owning my house will give me a psychological relief in case I lose my job. 3)I work for a large retail chain. Recent development is scaring me big time. Our company decided to start a salary freeze and according to corporate 40% of new grads can't find a job. They have 20+ pharmacist in one district looking for hours just to have 30 hours weekly!!! What are your opinions?

I'm afraid I don't have any advice regarding your loans vs. mortgage dilemma, but in response to the bolded text above -- Walgreens corporate actually said that? Did they say what stats (e.g., PDI) they based it on?

 

[WVUPharm2007]

Always pay mortgage last due to the (likely) low interest rate. Plus, if things go South, you can sell the house and move on. You can't sell your degree.