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Mortgage Debt Reduction
by Scott Bilker
Dear Scott,
My husband and I are in debt for about 28k and have recently sold our
home. We are looking to buy a more expensive house in a better
neighborhood and school district for our two kids to start school in. I
am currently working a lot of overtime, but am not sure if I should try
to payoff some of the debt or save for a down payment. Could you please
help me??
--Anna
Answer
Anna,
Great question! Actually, I was in this exact, and I mean exact debt
too, situation when I purchased my house.
The answer is to save for the down payment.
If I could do it any way I want, I would prefer to pay back the debt
then cash advance the down payment for the house but you can't do that.
You must have a down payment from you own money to buy a house. You can
have money gifted to you by family members and even borrow from your
401(k) to get the down payment. One thing you cannot do is borrow money
for the down payment from credit cards.
Save, save, save.
Good luck with your new house!
--Scott
Question 2
Scott,
Thanks for the info! I just want to clarify something. We are going to
borrow from my husband's 401k and we do have some savings, but should I
try to save to get to a 20% down payment and have no remaining money, or
should I just pay off stuff to lower my monthly bills and put down less
than 20%?
Thanks!
--Anna
Answer 2
Anna,
I would save for the 20% down payment. It sounds like your close and
there is the benefit of not having to pay for mortgage insurance when
you put 20% down.
Regards,
Scott
Scott Bilker is the author of the
best-selling books, "Talk Your Way Out of
Credit Card Debt", "Credit Card and Debt Management", and "How to be
more Credit
Card and Debt Smart". He is also the Editor and publisher of the FREE
DebtSmart®
E-mail Newsletter (http://www.debtsmart.com).
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