Financial Advise

Discussion in 'Off-Topic' started by Benny34, Oct 20, 2010.

  1. Benny34

    Benny34 Member

    Nov 29, 2007
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    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.
     
  2. jtdoyle1

    jtdoyle1 Well-Known Member

    Apr 11, 2006
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    Also consider that your mortgage interest is tax deductible, so it gives you even more reason to pay off the student loan principal first.
     
  3. CySmitty

    CySmitty Member

    Jan 3, 2008
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    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!
     
  4. TykeClone

    TykeClone Burgermeister!

    Oct 18, 2006
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    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...
     
  5. ruxCYtable

    ruxCYtable Well-Known Member

    Aug 29, 2007
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    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.
     
  6. Benny34

    Benny34 Member

    Nov 29, 2007
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    Neither loan has a variable rate.
     
  7. TykeClone

    TykeClone Burgermeister!

    Oct 18, 2006
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    Then the question becomes whether or not you itemize.
     
  8. Tre4ISU

    Tre4ISU Well-Known Member

    Dec 30, 2008
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    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.
     
  9. simply1

    simply1 Well-Known Member

    Jun 10, 2009
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    with mortgage you could tap equity if you had to as well.
     
  10. BryceC

    BryceC Well-Known Member

    Mar 23, 2006
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    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.
     
    • Like Like x 1
  11. isukendall

    isukendall Well-Known Member

    Nov 30, 2006
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    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.
     
  12. Senolcyc

    Senolcyc Well-Known Member

    Apr 20, 2010
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    Make the minimum payments and put every extra dollar into pork bellies. People will never stop loving bacon.
     
  13. Wesley

    Wesley Well-Known Member

    Apr 12, 2006
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    And do the student tax breaks go away in 2011?
     
  14. cigaretteman

    cigaretteman Well-Known Member

    Nov 8, 2006
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    I'd advise you to seek advice next time.
     
  15. jamesfnb

    jamesfnb Well-Known Member

    Apr 9, 2006
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    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.
     
  16. Ficklone02

    Ficklone02 Well-Known Member

    Apr 11, 2006
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    Personally I like to mix it up, so if I were you I'd pay the min on the mortgage, put some extra towards the student debt, and take the excess and find yourself an investment vehicle to put that towards.
     
    • Like Like x 1
  17. ISUKyro

    ISUKyro Well-Known Member

    Oct 28, 2006
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    You want good advice for $$$$

    Don't get married
    Don't have kids
     
  18. Three4Cy

    Three4Cy Well-Known Member

    Jan 19, 2010
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    Student loans are an installment debt on your credit, which is better for building your credit score.
     
  19. ameshammer

    ameshammer Member

    Dec 31, 2008
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    This is terrible advice.
     
  20. Benny34

    Benny34 Member

    Nov 29, 2007
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    Some sound advice in here, thanks to everyone who contributed. As assumed a couple of times the mortgage is a higher principle than the student loans. I was trying to figure out which I should pay extra on assuming I have some extra money and dont have any unforseen expenses. I think I am leaning towards the student loans, but I have wondered with decently low rates if it is more worthwhile to try to pay the minimums and invest somewhere else. Either way thanks for all the advice here.
     

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