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I've got a situation here and my dh and I can't agree. We are big Dave Ramsey fans and have been following his plan lately. My dh is about to start a telecommute position where he travels M-W but is home on Th-F. We want this b/c we want to move back to TX next year and this job allows that. YEAH! We are so excited about that. Anyway now my question... We have paid off all consumer debt, so right now we were suppose to focus on paying off my van and his car this year. I wanted to have them paid off by Christmas. This is following Dave's Debt snowball. BUT now that we will be moving and buying another house next year I think we should stop trying to pay off the vehicles and save all that money in a savings for our next house, moving expenses, etc. My dh wants to continue and pay off the vehicles but then we would have no money for a down payment, no moving expenses etc. He is counting on the money we will get from selling this house to cover all that. Since I'm more conservative with $ than he is we don't see eye to eye. What do you think?
Here is more info:
Ok we bought this house last year for 405,000, we have to live here one more year for tax reasons. We won't make as much as my dh expects b/c we aren't staying here long enough, at the time when we sell we will have lived here exactly two years. This year current prices for our house would be $430,000 (that is going by selling price in our neighborhood) Our original plan was to stay here up to five years and sell hopefully with enough to pay for half of our TX house. Now that we can move home and are going to more quickly, we will only profit around $20,000. That is not enough for a down payment, moving expenses, new home costs (for example we will be buying a home with a couple acres and so will need alot of outdoor equipment we are in a townhouse right now and have nothing like that). PLUS our TX mortgage will be SOOO much cheaper than what we pay right now, but his pay will be the same. So we are going to be saving over $1500 a month in housing expenses alone, then you have the fact that everything is cheaper in TX.
I see you guys point, I do, but I though we could save for the move, then pay off the vehicles once we are there with the extra money we save on the housing payment.
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Sorry but I agree with your DH. I do see your side of it and both ideas aren't bad - just my opinion on what I would do. Call Dave!!
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I have to agree with your DH also. Keep paying off the vehicles. Do you know how much equity you have in your house?? That will give you an idea of how much you will have to go towards your new house and closing costs and such. Just a thought.
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I guess I need a little more info. Would you be moving only when your current house sells? Is there a possibility you would move before the house sells and have 2 payments? Is your dh's company going to cover any moving costs? Have you looked at the costs of a move? Are you planning on hiring movers or doing the U-haul thing?
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It really depends on what you paid for your house and what the housing market is. If we sold our house, we'd have a couple hundred thousand to work with, but we've had our house for 12 years!
How 'bout a compromise? Only pay half of what you want for the cars and half toward the move?
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Ok we bought this house last year for 405,000, we have to live here one more year for tax reasons. We won't make as much as my dh expects b/c we aren't staying here long enough, at the time when we sell we will have lived here exactly two years. This year current prices for our house would be $430,000 (that is going by selling price in our neighborhood) Our original plan was to stay here up to five years and sell hopefully with enough to pay for half of our TX house. Now that we can move home and are going to more quickly, we will only profit around $20,000. That is not enough for a down payment, moving expenses, new home costs (for example we will be buying a home with a couple acres and so will need alot of outdoor equipment we are in a townhouse right now and have nothing like that). PLUS our TX mortgage will be SOOO much cheaper than what we pay right now, but his pay will be the same. So we are going to be saving over $1500 a month in housing expenses alone, then you have the fact that everything is cheaper in TX.
I see you guys point, I do, but I though we could save for the move, then pay off the vehicles once we are there with the extra money we save on the housing payment.
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I'd probably do the half and half suggestion....
Are you paying a lot of interest on the car loans? If so keep paying on those but save half of what you normally would to go towards moving expenses, so you don't have to put those on a credit card.
You can buy a house w/o a big down payment (although better to have one) but the car loan is the probably worser of the 2 evils....
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Congratulations on achieving your financial goals! How thrilling.
I'm also for paying off the cars. Why? Because you have many more flexible options when it comes purchasing a house. Plus, paying off the cars is a 'given'. When you'll move, how much your current house will sell for, how much your next house will cost, and the terms of the sale are all unknowns.
That said, I strongly advice you to work on your savings, too. If you don't bulk up your savings you just might get right back into charging up the credit cards when the added expenses from the move take place.
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Well I probably agree more with dh, but not 100%. I'd say keep paying on the vehicles on the regular payments, but maybe don't spend every last dime trying to make sure they're paid off. If there's a small amount owed on them at the end of the year, it's not the end of the world. You probably do need to have some small cushion of money since it sounds like you won't have that much equity in your house, but I'd cross that bridge when I came to it.
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I would want to pay on the cars, however I wouls also want 20% down on my house so as to avoid PMI for not having 20%.....
Can you sell one or both of the cars and buy something cheaper, thus reducing/ eliminating some of the car payments?
I would want the 20% down, but not certain what the math would be of saving $ on car interest vs. the cost of PMI until you are 20% vested in the house.
I totally admire DRamsey but also believe that life sometimes can not be broken into such simple decesions because things like mandatory moves, family issues, etc come up.