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

[displacedPA]

Well as we all know the economy is not so great. I bought our home in 2010 it is a three acre lot with aprox. a 1300sq foot house. the house is in good shape and I have done lots of upgrades. kitchen, bathrooms added a Vermont castings wood stove. removal of popcorn ceilings ect. My wife and I would love to live house payment free someday. Our dream is to buy a piece of land aprox 28-35 acre live on the property in a old home on the property in fifth wheel or trailer until we can build our forever house.

I have been on a plan to pay the house down since day one. If I continue on the track I'm on currently We could pay off the house by 2019. I have had several ppl tell me don't make double payments its a waste of your money. I however see it as a means to an end. However I'm not even sure I could sell it for what I bought it for.
The price was not astronomical when I bought but currently valued thirty thousand less than I paid for it.
We also do not have any other payment or consumer debt. the only other payment I have is the tractor which I could pay off tom. but I took advantage of the 0% for 60.

I would like to be on a 3 or four year plan for buying a piece of property and being able to move there.

My question is should I keep making double house payments or should I take that monthly payment and some down money and go try and buy my piece of property? I will then be in double debt with a home and a land payment but I would try and sell the house asap after I bought the land..

 

[Western]

You could put the extra payments in a savings acct. and start looking for land, the money would still be there if you haven't bought land. So you could make one large principle payment at the end of the year if you wanted.

Are you making the double or the extra monthly payment with interest and all?

If so your not saving much, just shortening the payoff time, if you pay it directly towards the principle, you will save $ on the long term interest.

 

[beppington]

My question is should I keep making double house payments or should I take that monthly payment and some down money and go try and buy my piece of property? I will then be in double debt with a home and a land payment ...

"Double debt"? Run, run, run away from this plan of yours! What if you get laid off? Or hurt? You might lose BOTH.

... but I would try and sell the house asap after I bought the land..

Slow down & do them consecutively, not simultaneously. You're trying to buy more than you can afford right now. You're trying to juggle. You're trying to go in further debt. All of those are risky. Life will still be here in a few years. Think longer term. Pay off the house. Sell the house. Buy the land. Avoid being a slave to a lender. Sleep better at night.

Also, as for double house payments ... That's great! But I hope you mean you're paying one full payment every 2 weeks? If you do the math, I think that's the method that also gives you a great boost to pay-off.

 

[gbw]

I would not give extra money to the bank. If you want to put extra money away that's fine, but put it where you can get to it if you need it. You sure won't be able to get it back out of that house if the need arises.

Right now you're making accelerated payments to lose money. I'm not sure how much a 1300sf / 3ac. home could cost, but whatever it cost initially, losing $30,000 in less than 2 years given a market already very down when you purchased, sounds like something's very wrong.

You may want look at pressuring the bank into a short sale or just walking away, except that both will ruin your credit. Is your credit worth $30,000 plus interest? No way to know what the house will be worth in 2019.

Get an extra job if you can and save. Cash is king, there will always be land available when you really can afford it - sounds like you cannot right now.

 

[MoKelly]

Well --- I see it as an opportunity. With interest rates at historical lows and house prices at historical lows, I would do the folowing:

- Make sure you have the current low mortgage rates.

- Make one house payment as required.

- Use the extra 2nd house payment to buy the land you want. Prices and interest rates may never be this low again.

- Don't sell your current house until home prices recover. Warren Buffet said yesterday if it was practical he'd buy all the single family houses he could at today's prices. He is a smart man. Look at the money he made loaning money to Goldman and GE at the height of the banking crisis.

Just my take. Of course, my advice may be worth exactly what you paid for it.

MoKelly

 

[CurlyDave]

The problem with paying extra money on a mortgage is that you lose the use of the money for very little extra gain.

Your credit rating won't be any higher, your payment might drop by a few dollars per month. But, if you ever need that extra money back, it just isn't available.

Even at low interest rates, I would put it in the bank. In hard times, cash is king.

 

[tractchores]

Unless your mortgage rate is very high I would save the money and/or put it towards the property you want. When you're ready to move you'll then have the option to sell the house or maybe rent it. If you go to mortgage it at that point you may have higher rates or a tougher time. I own a fair bit of real-estate and the trouble with putting too much money towards the mortgage is that it's not liquid and can be VERY difficult to get out and you don't gain that much (you gain interest - whatever tax deduction you would have got). given today's mortgage rates you're better off saving the money and investing it in something with moderate risk & return.

 

[TCJatko]

I agree with the advice to save your extra payments. You might need it.

 

[beppington]

Well we also don't know how much cash he has. If he's living paycheck to paycheck, that's a different matter. If he's got a $100K "emergency fund", that's a different matter.

 

[displacedPA]

well I suppose I can clairify a few things,

My wife and I are not living paycheck to pay check. I have 12months living expenses saved up. that is morgate electric, and food fuel. ect I do not factor in cell phones or cable these are not nesseities to me and just luxeries.

>I owe 126K on the house I paid 164k. the zillow report this month says its worth 140k.

>My original thought of paying down more on the house was the bank is not giving me hardly any intrest at all.
why not start paying down the house more so we can get it back when we sell. I do see though where if I have a tough time selling the house then I can not get my money back out of it.

>I figured out that if I were to stay on my current path I would save 84K in intrest alone. This is why we started the double payment thing..


"Use the extra 2nd house payment to buy the land you want. Prices and interest rates may never be this low again."

Mokelly are you sugesting I use that money as a land payment>? until i can sell my current house?