Save for a house or pay off debt?

Question

Hubby & I have been married 3 yrs, are young (under 30), no kids, have secure jobs. We also have acquired $80K debt- student loans, furniture, upside down truck... We currently rent. Our next door neighbors want to retire next year and don't want to risk their home sitting on the market for another year, as most homes have been in our neighborhood. They want to "help us out," and are taking at least $175K off the value of the home... it's absolutely pristine and 90% maintenance free, comes w/brand new appliances, etc. They really want us to buy it b/c they know us and they don't have to have a middle man or wait for the house to sell. BUT... even w/the awesome price they gave us, as golden as this sounds, I don't think we could swing it. I know we're young, but if we keep playing the credit game and just pay minimum payments on all our bills as we have been, all our debts will be paid off in 2030, and they (lenders) would have made over $25K in interest alone off us.

Answer 1

you are on the right track pay off this debt before making more.

Answer 2

I'm 28 and trying to pay off my debts before thinking about buying a house or having a family. The interest on your debts is higher than what you'd have on a mortgage so it makes sense to pay them off first, otherwise you'll be paying your mortgage payments and your debt payments at the same time.

Answer 3

If the size of your debt will grow faster than the value of your home then of course you should pay off the debt first!  You already KNOW that's what Dave would tell you!

Answer 4

don't do it.  you have plenty of time to get a house and with no kids and 2 incomes, you could easily save for a down payment.  put every f'n penny towards the high interest debt and use cash for groceries and other expenses...cut back as much as possible... the student loans have low interest so those come last.....get the truck and credit card debt taken care of......the interest is just eating your money.

Answer 5

To be honest - I can see positives to both sides of this.  YOu seem to have a good handle on why paying off bills and waiting on the house is a good idea.

But to add more things to think about here are some things on the other side of the coind.  All the money that you are paying in rent  for those 8 years (waiting until 2016 to buy a home  is also being thrown away (much like interest on the debt.)

Right now housing prices are at an all time low and to top it off the neighbors are adding in a $75K discount.  It may be struggle now but in 8 years your incomes will increase, as will the value of the home, but your mortgage payments will be the same.

It may be tight to swing it but if  you can - in 8 years you will have a little bit of equity in your home. In fact because of the deal the neighbors are offering you will prectically start out with equity in your home.

You can talk to a mortgage company or bank - for no chargge (or a minimal fee for running your credit reports) and they an tell you what sort of loan you would qualify for, the interest rate and the payments - and base your decision on that.  Remeber though when mortage comapnies tell you what you can "afford" in terms of monthly payments - they don't consider - things like you might want to occasionally go see a movie or EAT - so don't necessarily go for the highest loan they offer you.

Answer 6

I do not think you should risk it--pay off your debt with the highest interest  and stop using your credit cards-get rid of everything you do not need-ie cell phone,cable, internet ect... you can live with out it-my husband and I did then same-then buy a house that is with in your means-it will be a starter home-300k house is not a starter home-(depending on where you live) get a fixer up-your young you can do physical work.  do not become a statistic be smart