Monday, August 13, 2012

Next Debt...Mortgage?

*sigh*  Life would be nothing without the twists and turns.

G-man is applying for another job.  This one is actually the next step in his career path, and has the potential for growth.  Without going into alot of detail about the Government pay scale....which I may have in a previous post but are too lazy to check.....basically he has capped out in his current job.  If he stayed in this job for the next 20 years, he would make no more money than he is now (other than federal raises, which have been frozen for 2 or 3 years).

So this is the next logical step.  He is currently a GS 8, and this job has the potential to go up to a 12.  If he gets it, he would get it as a 9, and hopefully in a year or 2, be up to an 11.

Here is the thing....there isn't actually a job.  It is a blanket posting, and IF a job opens, they will pull from a pool of applicants that have already qualified.

Which brings me to our mortgage.  Let's just pretend he gets a job and we are going to move.  Currently, our mortgage is under water (again!).  I am guessing we would need 25k-30k at closing to be free and clear.  And that doesn't include any money for a down payment for a new house.

So now I am wondering if instead of concentrating on the "consumer" debt...if we should concentrate on the mortgage?  I already know that we won't pay off 30k anytime soon.  But if we HAD to go to the Bank of Mom and Dad...it would be that much less.

Most of the debt right now is on auto-pilot.  The retirement loan and car automatically come out of the account.  Student loan is paid once a month, and we could cut back to the minimum payments.  The rest...again, we can just make minimums. 

I looked into making a one time bulk payment, to see if that would allow us to "skip" payments for a time.  Nope.  It comes off the back end.

If I knew for sure this was going to happen, I would cut back on Christmas (I am still hoping that we will have left over money from what we are saving), camp, etc.  But to cut it all back and then not have it happen.....eh.

I am sort of in "hoard the cash" mode.  If we need it, then it will be there. If we don't, we have a nice chunk to put towards something.

I am not even thinking about a move right now.  Ok, I am a little.  But I am more concerned with our current house.  I have toyed with the idea of having a realtor come in and tell us what needs to be done, so we can work on it little by little.  I know part of me is putting the cart before the horse.  But I like to be prepared.  This could happen in a few months...a year....never.  Don't know.

Any advice????

27 comments:

  1. I would not worry about your underground mortgage. Get the consumer debt paid off and keep paying on your home. Things will get better, this job is a wish not a for sure. If it becomes a for sure then you will need to do something. But things change 6 monthes to a year can see a big difference in housing values. This is just what I would do. I know it is frustrating, but who told you you were under water again? I know of people who were told this and came out about $3000.00 under so remember if you go to sell your house it will sell and appraise for what the buyer agrees to, always!

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    1. I am basing the value of the house on recent sales in the neighborhood. Based on those, we are probably 20k underwater. Add in closing costs, realtor fees...and that is where I came up with 25-30k.

      You are right, things can change.

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  2. It would depend on the value of your house. If you are upside down, and are planning on selling in the near future, focus on the mortgage. If you are ok, then I would focus on the consumer debt. I would not want a consumer debt interest lingering around and paying more than I would like.

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    1. That's the problem...we are underwater, but don't know if we are selling soon (as in the next year).

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  3. Since I am unfamiliar with government employment, if you had to relocate, would the government offer assistance to selling your current home and buying a new one due to relocation purposes?

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    1. I don't believe so. I know we could get a "bridge" loan, but that won't help us to pay off the current mortgage.

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  4. I've noticed I'm entering what you described as "hoard the cash" mode myself. More like a mindset than a plan, but yeah.

    As far as the housing situation, it's a bit tough. I'm not familiar with mortgages, but if it comes down to dollar per dollar, whatever would save you more in the future in interest and side payments. If paying extra on the mortgage will minimize how much you'd have to pay overall whether you move or not, then I think that's a viable solution.

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    1. It isn't about the interest....we pay very little interest on our consumer debt. On our mortgage, the problem is the principal that would be due to sell the house.

      If our house sold for 160k, and we owe 180k on the mortgage, we would get 160 from the buyer, and have to come up with the difference in order to be rid of the mortgage.

      The mortgage has 28.5 yrs left on it...it isn't going anywhere anytime soon.

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  5. I think your worry is premature.
    Like you said, he's going for a job that doesn't exist.
    Who know when a job for that pay grade will open up?
    Who knows where it will open up?
    Changing the course of your ship on something that may not even materialize is not wise.
    It's like basing your direction on rumors and wishes.

    Maybe he won't even get into the qualified pool.
    There are just too many variables and nothing concrete yet.
    And like someone else said above, real estate values can and will change. Who knows what the market will bear in 6 mos., a year or two from now?
    If you are so far underwater....maybe you should think about him getting the 'blanket posting' but not worry about a new job yet?
    Maybe you will have to ride it out in your current home until the market improves? I don't know and nobody can predict when real estate will improve enough.

    Once you can put a more definite time frame on all this(like he gets the "promotion" and is put in the pool AND there are postings of actual real jobs he is qualified for), then you start formulating a plan.

    In my mind, it really doesn't matter if you throw your extra money at the mortgage principle or make extra payments on the consumer debt(You'll be saving interest on whichever you choose). One will help your debt ratio and may make getting the next mortgage easier, but beyond that, I don't see the dilemma.

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    1. Premature worry is what I do. ;)

      I think my basic concern is liquid asset available. If in a year this happened...all of these numbers will be lower just by the nature of things. But going to closing on a house requires liquid asset.

      This is where the "hoarding" cash comes in. We will pay minimal interest over the year, but we will have at least some cash in hand for closing, moving, whatever. And if it didn't work out, we would put that bulk cash toward a debt.

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  6. I'd talk to an actual real estate attorney and a realtor about what your best options are. Seriously, everything that has happened since 2006 in the housing market has so many variables and weird impacts, and also have regional variations in things that affect the market.

    I had the bank foreclose on my house in 2009, because I had tried to sell it for 9 months at a price less than what I paid for it in 2002. This was in Cleveland, so our housing crisis was different than the one in Phoenix, where I now live. The house's value was about $65K in 2009, down from the $99K I had pain in 2002, before the bubble. There was no question of getting that value back in the next 20-30 years.

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    1. Good point. I think that is why I mentioned talking to a realtor.

      I am sorry about your foreclosure. That must have been tough.

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    2. I mention it not because it was tough (although yes, there was emotions of failure and guilt) but because for me the situation was such that financially, best thing ever. I couldn't find a job there. I was miserable and as a 30 something woman without kids, completely out of step with my age group. My family wasn't close. And the idea of staying shacked to that place in the hopes of one day maybe breaking even on the sale was ridiculous. You're younger than I am--there's still time for us both to get right.

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  7. "If I knew for sure this was going to happen, I would cut back on Christmas (I am still hoping that we will have left over money from what we are saving), camp, etc. But to cut it all back and then not have it happen.....eh."

    You asked for advice, and after that comment I'm compelled to respond after reading your blog for months, so here it is: you should be cutting back now, regardless of this potential promotion that might happen someday maybe. You have a kid with special needs. You have 77k in debt. If you can't pay off $465 in credit card debt, or cover your son's known or already incurred medical costs, an underwater mortgage on a house you may or may not have to move from someday should be the least of your worries. If you say "but his camp/Christmas is important" I'd ask, is camp or Christmas as important as his feeding tube? I doubt it. There are plenty of free ways to make memories.

    The worst that can happen if you tackle the 77k is if someday your husband gets the promotion you'll have less debt to worry about juggling. Maybe by then you'll have 1, or 5, or even 10k saved and can cover a moving truck with cash, let alone a loss on the house.

    I highly recommend you figure out a plan and start sticking to it vs. changing spending priorities weekly. Personally, I used the Dave Ramsey plan and in three years paid off more than you currently owe. You mentioned (I think) you didn't like his books, but if you can get past any Christian references that bother you, I would highly recommend it from my experience. It is simple, but it isn't easy, and we had to give things up for a few years - we stumbled, but ultimately it works, because it's about focusing on one achievable goal at a time.

    If you don't like Dave, my advice is find another consistent plan - find an expert who motivates you - with a SIMPLE plan that you can commit to - then commit and don't let anything change your focus on a day to day (the twists and turns) basis. The twists, or Murphy, will always come up, but if you focus they are much easier to deal with.

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    1. Thanks for taking the time to respond. Maybe we should cut back on Christmas (which is about $1000 from soup to nuts), or Camp (which is also $1000, but serves as child care for the summer while we work). But those are two areas we CHOOSE to not touch unless we have to.

      There have been many things that have been cut back, or eliminated over time. As I have stated, we live in a very high cost of living area, so there are some things that we just can't do anything about.

      I have stated we aren't gazelle intense. And while you seem to feel that we change our priorities, the main priority is to do what we think is best for our family. We have lots of ideas...doesn't mean we act on all of them or even focus on them.

      Alot of the changes this year were eliminating the interest we were paying...which we almost completely did (with the exception of the student loan, at 3.375%). It was focusing where we can get the biggest bang for our buck.

      As for Dave...I respect his ideas in the global sense. I do have a problem with the Christianity part, but that doesn't mean he doesn't speak sense. But we aren't willing to eat rice and beans and beans and rice, or drive a beater car, or give up all entertainment.

      As for our son's needs....his needs are ALWAYS taken care of. I do take offense that you imply that we don't put his needs first. We have paid for 7 years of occupational therapy, surgeries, tests. We have worked with him every single day. We have paid thousands and thousands of dollars, and if we have to carry a balance for a little while because the company decided that only people who make under $23K a year deserve help....then so be it.

      I hope you continue to read, even if you feel that we lack focus.

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  8. I think I would look at the interest rates. We don't have any consumer debt, but we do have a massive mortgage, which we are paying off right now. In our case, our mortgage is also higher than the (estimated) value of our house and we're in a more expensive segment, which does not get sold at all at the moment, so every penny towards the mortgage, helps us even out the score. And every penny we save on interest, is one that also goes to paying off the mortgage, so we won't really notice it in our budget, but it does go faster every time.

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  9. That is all good & bad all in the same! (kind of the same boat we are currently in as well)

    Not sure if this is an option to you or not - but my personal thoughts (b/c we will be relocated, when? Where? No flipping idea) DH & I sat down and decided that we would go hard on our consumer debt first - snowball style. Then when we get our income tax return, we will step aside & see if there have been any developments and see where we should start to work again. I know it is wishy washy - but we figured that with our return, it would get us a nice little head start should we decide to start on our second mortgage (yep ~ second mort on this house, if we could get rid of that, our house would be fine... but with that, we too are underwater)

    you and DH have been working well in the financial department lately, how does he feel about it?

    maybe it is time to try to get a little more intense - try it month by month instead of saying "this is it, I am going to go hard core" see how it works for your family & adjust as needed! I know that our budget really needs adjusting as well - but like you, my little family comes first... we have some fun stuff on the calendar until back to school & I am going to do that FIRST - then adjust ;)

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    1. and when it comes to 'down payment' --- I would consider renting for a year to make sure you like the area & the schools before you even consider buying ;)

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  10. I think you should get a feel for what is available in the real estate world. There are MANY options for underwater home owners. From cooperative short sales to HARP, selling your home may be easier than you think...and the balance between what you owe and what you sell home for may be forgiven...especially if you have to move due to job change. Find an agent who is aware of the possible scenarios and is experienced in underwater homes.

    This is my experience with my 1st home...which we are hoping to get a short sale approval on...

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  11. I think you should get a feel for what is available in the real estate world. There are MANY options for underwater home owners. From cooperative short sales to HARP, selling your home may be easier than you think...and the balance between what you owe and what you sell home for may be forgiven...especially if you have to move due to job change. Find an agent who is aware of the possible scenarios and is experienced in underwater homes.

    This is my experience with my 1st home...which we are hoping to get a short sale approval on...

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  12. I think I would keep my main focus on the consumer debt if I were you. The move isn't a sure thing right now and when it does happen it could be months down the road. By then you will have paid a little more towards the mortgage and the housing market may have rebounded a little more... in the meantime, you will feel good about getting rid of that pesky consumer debt. Another thing to consider... if you move, rent out your house. Depending on the market you are in, you might come out ahead.

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  13. I wouldnt worry about the mortgage. I would focus on the consumer debt. The housing market ups and downs are out of your control, your debt it within your control.
    I too like to "pre-worry" about what might or might not happen. Again, so much that is not within your control. My dh and his impending job loss has been keeping ME awake. My friend said in a loving friend way "What the *%#% are you going to do about it?! Nothing!". So I'm concerned about it but I cant loose sleep over it or do anything to fix it.

    Back to your thoughts on the mortgage... It isnt a bad idea to have a realtor look at your home to give some thoughts. Just to get input on the house and if you do any fix up's, where you should give attention to.

    How is your job going lately? I know you had changes a while back. Hope that you are seeing a bigger payday!

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  14. Dave Ramsey would suggest you put everything on hold. Pay the bare minimums and stockpile money until you know what will happen with the job. If that means saving for a year, then so be it. When you know what the plan with the job is, then you can use the savings for either the house, or debt. Just a thought. :)

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  15. I agree with Jadell; if you stockpile the money until you know what will happen, you'll have it to either get out of your house or to pay down debt. I would encourage you to contact a realtor both to give you advice on how to prepare your house and to give you a good market analysis. You'll need an updated analysis as you approach putting your house on the market, but I doubt the market value will change drastically between now and then. Good luck. I hope everything turns out how you want it!

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  16. I'd focus on the debt snowball with highest interest rates first and the minimum on everything else, you'll be freeing up cash faster that way, whatever happens with the job

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  17. The simple answer is, no, you should not pay any extra to your mortgage. You need liquid cash reserves and to reduce debt. I would actually lean toward bumping your emergency fund up to $5,000 as the first priority so that you have a cushion for all of the issues that come up.

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  18. Ok here is my super late advice but super awesome because it's from me-- someone who knows nothing.

    First off: Stop worrying! Ok wait, no. I'm changing that. Ok, pick ONE thing to worry about and worry about THAT ONLY for six months.

    As I read this, you know what I HONESTLY thought? She's bored. Or something's going on and she is trying to distract herself from the real issue. I've noticed you do that a lot. You get stressed about something that has NOTHING to do with money and you freak about the money because it's tangible.

    Although I do honestly think you should bump up your emergency savings. I just don't think what you have is really enough of an emergency fund to help out a family of your size. I think that $1k starter emergency fund is fantastic for people who are aiming to eliminate all of the consumer debt in one to two years max. For someone like you and someone like me, $1k is just not going to really help out a lot if the poop goes anywhere NEAR the fan. I say aim for at least one month of all expenses without any change in lifestyle kind of thing-- what you are spending a month right now.

    Pile that up, then destroy that consumer debt that is dragging you down and down and down, and then think about your house.

    And honest question here: Why do people ask a realtor what should be done to the house to improve it to sell it? Why don't people do that stuff to live in it themselves? I have never understood that.

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