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?

 

[beppington]

OK, so at least you have equity & therefore would be silly to walk away from the house simply because it seems to be losing value.

I don't think Zillow is all that accurate, but your house may be worth a lot more or less than they say. You would have a better idea on that of course

Maybe I'm old fashioned, but I still prefer no debt; i.e. to avoid the feeling of being enslaved. "Must go to work to pay bills"

It's good that you're getting other opinions, though, as the historically low current mortgage rates do seem to at least improve your borrowing situation. At least I guess. You still have to pay it back, though. Plus the interest. And you still have to deal with low-down, dirty lenders & all their tricks. And you can still be foreclosed on.

 

[gilbertmsg]

I would save the extra payment money until the right piece of land came along. As far as I know, there is no more land being made and a place you really like only comes every so often. It will be hard to finance acreage with a mortgage payment at another location. This is my reasoning for saving the second mortgage payment for a good down payment on your new property.

Good Luck!!

Eddie

 

[Tomtint]

This is JM. Right now and for the past 2 years has been a great time to buy property. If you wait to buy untill the overall economy rebounds, than real estate prices will also rise accordingly. You are always chasing the ball. If you have the stomach and wherewithal to acquire land now and hold your current home for a few more years than I believe you will be in better shape than selling your home short today to build another in the future.

 

[displacedPA]

wife and I just talked it over at dinner.

option#1
it seems that if we pay off our house in the five or six years then we could hopefully sell and get what we paid for it. it could be more who knows the market in a few years like others have said. I think it is the best way to get the cash for a new piece of property then we are debt free and have the $ to buy land.

option#2
We could also save that extra payment which most of you so far think is a good idea. I would save that for part of a property payment. then sell the house. Pay off the bank and what ever I have left after the sale goes towards the land as well. not sure where Id live in all this we don't have family nearby or anything. however I do have a lead on a nice 5th wheel we could live in for a while.

hmm still pondering

I do think it will be hard to get a loan on just poperty without having a house planned for it. Its just a matter of double payment or save it?

 

[sfloggie]

Evening, I agree with MoKelly plus I did what you want to do (twice). Once in OK and again in VA.

First. A dollar is not worth a dollar, so having cash (except emergency fund of 12 mos if one can ) is not prudant. And interest is none existent. So putting it in the bank is not helping it grow.

Second. Land will always be here, but not always where one can enjoy it or even buy it at an affordable price.

We got the house and looked for at least 20 acres land in a growth (progressing) area. We wanted at least twenty as most states give the tax benefits of a farmer if you have at least twenty.

Having the land without living on it allows one tax deductions for everything you do on it in the year you do it. Also, letting a good farmer farm some or most of it gives you the Land Use tax reduction and land management practices. Yes, it is a roll over deduction, but you should never have to pay it.

Finance the land with your local Farm Credit. They allow you flexible payments either monthly, quarterly semi-annual or annual. Plus they share the profit at the end of the year. We got back $2700 from them this year.

After you find the area, locate the local Farm Credit, find a good real estate attorney to everything at closing ( instead of a title company), find a good farmer who is leasing land and ask if they know of any land for sale (especially estate land). We did this twice.

We kept our OK land for a year and then sold it for about 100% higher. We sold early because of three troublesome neighbors.

Next we brought estate land in VA. We were looking for 20 acres and saw a farmed piece. We checked and found it was estate land of 113 acres with 1000 feet on a river. We brought it two years ago through Farm Credit as we did in OK. We at a home line of credit so we used it and cash for the down payment.

We love it and the deductions. I have had four heart attacks so this is great for my wife if I have a last one that is bad. She can sell the land, farm equipment as the land has increased the past two years. Our 401k was down 26% in 2011, flatlined in 2011, but is up 6% this year. The land is only going up as homes are being built around us.

Long winded with bottom line to put the money aside for a down payment on land, look for the land now, talk to Farm Credit now, find that farmer now (farm credit or the local farm agency can tell you) and find a real estate attorney. We looked for three years in VA before we found our land.

Best to you..write me private if I can help further.

Jim

 

[LD1]

I say pay the mortgage off ASAP:thumbsup:

Because regardless of weather you pay it down quick, or drag it the full term, when you find that "right" piece of land you want to buy, and are ready to sell your house, it is going to be worth the same weather it is paid off....or if you still owe 50k on it.

BUT.....IF you still owe 50k on it, it "may" have only cost you an extra 30k to of had it paid off. (just hypothetical examples).

I personally dont like saving money as long as I have debt. Because letting money sit and earning 0.00000000001% interest just does interest me when I have loans costing me money daily.

I think what you really need to do is set a realistic timeline, and then spend some time on a spreadsheet and do some #'s. For example.....Let's say in 5 years you want to buy land and sell the house. Run some #'s. See how much you would still owe on the house and how much you would have in a savings account IF you DONT make double payments. And then do the same for IF you do make double payments. And see which one will put you farther ahead in that amount of time. Not sure what your interest rate is, But I'd venture a guess that your mortgage payment is a tad over $1000/month. So make double payments of ~2k or so, then once paid off, wait a year and bank that 2k. You will have 24k+ to put down on a nice peice of land. Then sell your house and take that money and pay off the new land purchase:thumbsup:

 

[strum456]

I say pay the mortgage off ASAP:thumbsup:

Because regardless of weather you pay it down quick, or drag it the full term, when you find that "right" piece of land you want to buy, and are ready to sell your house, it is going to be worth the same weather it is paid off....or if you still owe 50k on it.

BUT.....IF you still owe 50k on it, it "may" have only cost you an extra 30k to of had it paid off. (just hypothetical examples).

I personally dont like saving money as long as I have debt. Because letting money sit and earning 0.00000000001% interest just does interest me when I have loans costing me money daily.

I think what you really need to do is set a realistic timeline, and then spend some time on a spreadsheet and do some #'s. For example.....Let's say in 5 years you want to buy land and sell the house. Run some #'s. See how much you would still owe on the house and how much you would have in a savings account IF you DONT make double payments. And then do the same for IF you do make double payments. And see which one will put you farther ahead in that amount of time. Not sure what your interest rate is, But I'd venture a guess that your mortgage payment is a tad over $1000/month. So make double payments of ~2k or so, then once paid off, wait a year and bank that 2k. You will have 24k+ to put down on a nice peice of land. Then sell your house and take that money and pay off the new land purchase:thumbsup:

I am in the same basic sutuation as the OP. My land is alread bought and paid for, but I am paying on a mortgage for my house 15 miles away. I am plannning to pay off this mortgage as fast as possible, so I can bank money for a year and then build. Hopeuflly I could sell the house I am living in now and have no mortgage at all.

 

[strum456]

The way I look at it, my mortgage is guranteed to cost me 4.8 apr, no matter what. I havent been able to find any investments that good. Of course, this comes second after the emergancy fund.

 

[Wnc3]

Two thoughts:
get the house paid off by paying additional principle (maybe less than double payments)

Find a piece of property with at least some improvements (power,road,fence,water well,shed,etc.) and get the owner to owner finance it.
They will make more interest off you than they can at the bank.

 

[displacedPA]

I say pay the mortgage off ASAP:thumbsup:


I think what you really need to do is set a realistic timeline, and then spend some time on a spreadsheet and do some #'s. For example.....Let's say in 5 years you want to buy land and sell the house. Run some #'s. See how much you would still owe on the house and how much you would have in a savings account IF you DONT make double payments. And then do the same for IF you do make double payments. And see which one will put you farther ahead in that amount of time. Not sure what your interest rate is, But I'd venture a guess that your mortgage payment is a tad over $1000/month. So make double payments of ~2k or so, then once paid off, wait a year and bank that 2k. You will have 24k+ to put down on a nice peice of land. Then sell your house and take that money and pay off the new land purchase:thumbsup:

well I ran a five year plan just for numbers sake.

These numbers are based off of the fact We can sell our house for what we bought it for.

by making the extra 600.00 a month payment to principle I will be further ahead by 3,273.19 at the end of five years.
and at the end of the five years what I owe on the house will be 75K

i suppose its something right...