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  1. #1
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    Financial Advise

    I know alot of people are in the same boat as me here. I have student loans to pay off somewhere in the neighborhood of 5.5% APR while my mortgage rate is in the neighborhood of 4.8% APR.

    Should I pay off my student loans first with the higher rate or should I pay off my mortgage with that money going into something I will own? I am no expert so I thought I would seek some advice. TIA.



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    Re: Financial Advise

    Also consider that your mortgage interest is tax deductible, so it gives you even more reason to pay off the student loan principal first.



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    Re: Financial Advise

    That kind of an interesting question. I would literally calculate them both using excel and see which one makes more sense.

    When my wife and I looked into it the big advantage to not paying down student loans is that they are above the line deductible (good for use but depends on you situation).

    The nice thing about paying off student loans early is they may rebate some of the origination fee (if there was one).

    Lots of variables to take into account. Good Luck!



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    Re: Financial Advise

    Quote Originally Posted by jtdoyle1 View Post
    Also consider that your mortgage interest is tax deductible, so it gives you even more reason to pay off the student loan principal first.
    Student loan interest is tax deductible on the front page of the 1040 - you don't have to itemize to take that deduction like you do with the mortgage.

    A better question to ask is which of the loans has a variable or adjustable rate...


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    Re: Financial Advise

    Quote Originally Posted by Benny34 View Post
    I know alot of people are in the same boat as me here. I have student loans to pay off somewhere in the neighborhood of 5.5% APR while my mortgage rate is in the neighborhood of 4.8% APR.

    Should I pay off my student loans first with the higher rate or should I pay off my mortgage with that money going into something I will own? I am no expert so I thought I would seek some advice. TIA.
    I'd pay off your student loan first since it is unsecured debt. Also, all of your mortgage interest should be tax deductible. Unless things have changed in recent years, only a portion of your student loan interest is deductible.

    Either way, I would not sweat it too much. Neither one of those loans is at a real high rate.



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    Re: Financial Advise

    Quote Originally Posted by TykeClone View Post
    Student loan interest is tax deductible on the front page of the 1040 - you don't have to itemize to take that deduction like you do with the mortgage.

    A better question to ask is which of the loans has a variable or adjustable rate...
    Neither loan has a variable rate.



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    Re: Financial Advise

    Quote Originally Posted by Benny34 View Post
    Neither loan has a variable rate.
    Then the question becomes whether or not you itemize.


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    Re: Financial Advise

    So is this a situation where you have a certain chunk of money laying around and you are going to make a payment on one or the other or are you thinking of overpaying your payments and knocking down the principal? It is hard to know which would be better without knowing the principle on each.


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    Re: Financial Advise

    with mortgage you could tap equity if you had to as well.


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    Re: Financial Advise

    I'd do the student loans, for several reasons - first, it is likely that is the lesser of two loans. You can probably get that paid off first and then commit more to your mortgage.

    Secondly, and hopefully this never happens to you, but student loans cannot be discharged in a bankruptcy. Always good to get rid of unsecured debt that cannot be discharged, even if it is incredibly unlikely. Hope for the best, plan for the worst.




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    Re: Financial Advise

    Not entirely relevant, but an FYI, Federal student loans are forgiven upon death (assuming not suicide). When the wife and I got life insurance after purchasing a townhouse, that definitely entered the equation.



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    Re: Financial Advise

    Make the minimum payments and put every extra dollar into pork bellies. People will never stop loving bacon.



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    Re: Financial Advise

    Quote Originally Posted by TykeClone View Post
    Then the question becomes whether or not you itemize.
    And do the student tax breaks go away in 2011?


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    Re: Financial Advise

    Quote Originally Posted by Benny34 View Post
    I know alot of people are in the same boat as me here. I have student loans to pay off somewhere in the neighborhood of 5.5% APR while my mortgage rate is in the neighborhood of 4.8% APR.

    Should I pay off my student loans first with the higher rate or should I pay off my mortgage with that money going into something I will own? I am no expert so I thought I would seek some advice. TIA.
    I'd advise you to seek advice next time.



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    Cool Re: Financial Advise

    Pay off your student loans first. The interest rate is higher and I'm assuming the balance is smaller so you can get it paid off faster and have a "feel good" moment. Then you have more cash flow to put towards your mortgage.

    Also keep in mind you should have some cash saved up for emergencies. I'd have at least $500 set aside in the bank if not more.

    I know there are a lot of Dave Ramsey fans on here. Google Dave Ramsey, he has a good site which gives good advice on this sort of thing. Just don't forget to save for the future as well.


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