double house payments or save the money for a land payment?

[sfloggie]

DisplacedPA,

Your last paragraph (plan) is what we did for our land in OK and in VA. Your plan looks good.

We brought the land in OK in 2006 with down payment from a home equity and financed through Farm Credit. For reasons shown, we sold the land in 2007 for profit and paid off the home equity retaining the balance of the profit.

In 2008 we sold our home and brought a condo. We used the home equity in the condo plus some old 401k roll over money for a down payment on the land we still own.

We are working on a Conservation Purchase or Easement for land near and at the river. The money we receive will be used to pay down the farm loan, or pay off the home equity.

In 2015 we will have both the home and land paid off thus being debt free as you are working toward. Moss was smarter than me starting the debt free process long before me. I am thankful he and others share their experience..it is never too late.

Best to you and your family,
Jim

Jim

 

[displacedPA]

DisplacedPA,

Your last paragraph (plan) is what we did for our land in OK and in VA. Your plan looks good.

We brought the land in OK in 2006 with down payment from a home equity and financed through Farm Credit. For reasons shown, we sold the land in 2007 for profit and paid off the home equity retaining the balance of the profit.


Jim

Jim I have been doing my research on farm credit. I found a branch near the area that we would like to buy land. I have one question about how farm credit works> Will I be able to take a home line of credit to pay for a down payment for the land even if my home is not paid off I would thnik yes. how much would you borrow for a down payment for the land? 20% 25% jsut curious?

If you were in my shoes would you go for the five year plan and have it paid off. or go for the seven year plan. If I go with the seven year plan by year five I will owe 60k on our current morgage.

 

[bucktaker]

If it was me I would do both, pay extra principle and save the cash for a land purchase. Large land purchases without a residence are hard to justify to the banks,

It also depends on the current interest rate and term of your mortgae, check your rates and term, if better are available refi, to better terms. Its money in your pocket....

Also given the ecomony who is to say if your current property is at the bottom of its price drop you could be sending more money to the bank that you never recoup on a sale???

 

[LD1]

I think a realistic timeline of your goals (when you want to buy new land and when you want to sell your current house) really needs to be laid out for sure.

Interest rates from the bank usually arent as good on a LAND-ONLY purchase. So....If you plan on buying in say....2 years, are you going to need to finance that new peice of land? And at what interest rate compaired to what you have now? You'll have to run the #'s because I dont know where you are with your current loan and @ what rate. But IF you buy new land in 2-3 years and finance it, are you really going to be money ahead vs saving your double payment so that way you can just pay cash when you find land you want????

The longer it is you want to wait before purchasing the land, the better it is going to be to get your current mortgage paid down.:thumbsup: An extra ~$840/month to pay down your current mortgage is ~$50k in 5 years. How much will be left on your current mortgage vs if you just made the minimum payments is going to be how much you actually save. You say IF you do that, you will still owe 60k, but how much would you owe in 5 years IF you DONT make the extra $840/month pymt????

 

[displacedPA]

I think a realistic timeline of your goals (when you
The longer it is you want to wait before purchasing the land, the better it is going to be to get your current mortgage paid down.:thumbsup: An extra ~$840/month to pay down your current mortgage is ~$50k in 5 years. How much will be left on your current mortgage vs if you just made the minimum payments is going to be how much you actually save. You say IF you do that, you will still owe 60k, but how much would you owe in 5 years IF you DONT make the extra $840/month pymt????

I would owe 115K in five years if I dont make any extra priniple payments.

 

[smstonypoint]

I am always happy to tell other people what they should do.

I thought I read in a post that the OP was in his 20s, but I can't find the post now. At any rate, I would advise the OP to take into account his options for saving for retirement. If your employer offers funding matches for a 401-K, contribute up to the maximum provided by the employer. Also, take a look at Roth IRAs. The earlier you start saving/investing for retirement, the easier it is to accumulate a nest egg.

Steve

 

[beppington]

I am always happy to tell other people what they should do.

I thought I read in a post that the OP was in his 20s, but I can't find the post now. At any rate, I would advise the OP to take into account his options for saving for retirement. If your employer offers funding matches for a 401-K, contribute up to the maximum provided by the employer. Also, take a look at Roth IRAs. The earlier you start saving/investing for retirement, the easier it is to accumulate a nest egg.

Steve

IMO this statement could also read, "The sooner you pay off your house, the easier it is to accumulate a nest egg."

In your suggestion, money is put away that shouldn't reasonably be accessible until retirement ... which is good. In my suggestion, the typically huge amount of interest to be paid is reduced significantly ... also good.

Some people sleep better with a nice nest egg. Others sleep better in a paid-off house. I myself like the idea that no mortgage co can foreclose on me :thumbsup: To each his own, though, of course. Although even if one prefers a paid-off house, one should still make sure one at least has a sufficient emergency fund.

 

[MoKelly]

IMO this statement could also read, "The sooner you pay off your house, the easier it is to accumulate a nest egg."

In your suggestion, money is put away that shouldn't reasonably be accessible until retirement ... which is good. In my suggestion, the typically huge amount of interest to be paid is reduced significantly ... also good.

Some people sleep better with a nice nest egg. Others sleep better in a paid-off house. I myself like the idea that no mortgage co can foreclose on me :thumbsup: To each his own, though, of course. Although even if one prefers a paid-off house, one should still make sure one at least has a sufficient emergency fund.

Well ... here is my situation.

My mortgage is at 3.02 APR. Pretax rate.

I can buy AA rated and insured Missouri municipal bonds at a yield of 2.45%. At a 35% Federal and 6% Missouri tax rate that is equal to a 4.15% rate. Next year, the Federal tax rate will go to 39.6% and the Health Care tax of 3.8% on passive income will kick-in. That raises the combined tax rate to 49.4% on non-Muni interest. So, in 2013 the pretax equal rate rises from 4.15% to 4.84%.

Do I pay-off a motgage at 3.02% or put the money into a Muni at 4.84%? Hummmmm ....

 

[LD1]

I would owe 115K in five years if I dont make any extra priniple payments.

Something just isnt adding up then:confused2:

IF you pay an extra 839/month over the next 5 years.....you would owe 60k on the house. IF you dont make any extra payments, 115k would be the #. That is a 55k difference.

BUT...839/month x 12 months x 5 years = 50k.

So.........if that is correct, you must have a pretty darn good interest....or I am figuring something wrong. Because at those figures, you are really only saving 5k in the 5 years.

And in the situation you are in, and wanting to buy land if the right opportunity presents itself, I personally would rather have 50k in the bank vs owing 55k less on the house.

Yes, it is still going to cost you 5k more when it comes time to sell the house, BUT, if that 50k in the bank saves you from financing the new land, that alone would be worth it. Plus the closing costs are going to be ~5k or so less if you pay cash for the new land vs finance.

 

[LD1]

I just played on the spreadsheet for a few minutes and something just isnt jiving here:confused2:

I/We need a little more info:thumbsup:

>I owe 126K on the house I paid 164k.

Based on this^^^ (unless you refinanced) The 164k to get an $839 payment would have to be a 30 year loan @ 4.59% and started 9-1-2000 to have a current balance of ~126k

I would owe 115K in five years if I dont make any extra priniple payments.

But based on the above 30yr@4.59, and a payment with no additional principal of $839, I am showing you would only owe 102k in 5 years. NOT 115K.

So what are the terms of your loan??? Because Unless we are missing something, your normal payment of $839 for the next 5 years (50k total) is only going to knock off 11k off the balance:confused2:

So you can see my confusion. What is your current interest rate? Did you re-finance? if so...when, how much, and for how long? Being able to plug these #'s in myself would make it a lot easier to give advise here