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Rakhi Vasavada
Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 3857
Experience:  Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
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Short story, we just closed a short sale 11/16/12. We have

Customer Question

Short story, we just closed a short sale 11/16/12. We have decent income, husband is 54, lost a significant amount of money in 401K, down to $300K, we still contribute of course. We're living @ my parents for 1 year to significantly pay down student loans, of which we'll most likely have roughly $50K left at the end of 2013 by paying an extra $3K per month. Question: We can get a hard $ loan (8-10% interest) and we're throwing around the idea that if we purchased a roughly $225K condo (10% down), put it on a 30 year mortgage for 3 years max til we paid off the $50K remaining student loans & could refi it, and put it on a 10 yr mortgage and pay it off even faster making 2 extra payments a year if:

1) because of my husbands age,
2) the real possibility of the mortgage interest rates going up soon due to inflation
3) getting into a mortgage @ 10% interest now is better to start now rather than waiting 2+ yrs to get back in the 'game' as far as having a paid for property to live in is a good idea?

Just thinking the sooner we get back in the game, the better it will be for us to have a paid for property to live in when my husband retires. If we wait 1 year he'll be 55 and getting a conventional loan we'll have to wait 3 years of which puts him @ 57! We can afford to pay the student loan regular payments and have a mortgage, we just don't WANT to have the student loans and want to pay them down. We could pay @ $500 extra per month on them if we bought something now-6 months- 1 year....and then just put whatever we could to pay them off quicker as we went.
Submitted: 1 year ago.
Category: Finance
Expert:  Rakhi Vasavada replied 1 year ago.

rakhivasavada :

Dear Friend, Hello and welcome..

rakhivasavada :

Kindly be online as I prepare your reply....

Customer:

I will be here

rakhivasavada :

To begin with, yes, it is possible to get hard money loans. But as you know this is very costly source of money and should be taken as the last option.

Customer:

Of course. Understood

Customer:

Last option considering our age?

Customer:

Inflation, etc?

Customer:

Timing?

rakhivasavada :

So, at the first place, if possible, I would suggest you to find out if deferment or cancellation of your student debt is possible.

rakhivasavada :

Yes... because of your age, it can lead to serious debt trap.

rakhivasavada :

So as said above,at the first place, if possible, I would suggest you to find out if deferment or cancellation of your student debt is possible.

rakhivasavada :

Let me address this one by one

Customer:

My husband will not want to defer them...they are our kids' loans but we promised to pay them. Paying them is not the issue, we can afford them.

rakhivasavada :

Oh ... I see

rakhivasavada :

OK... that's a different point then.

rakhivasavada :

Yes... you can ho for it then.

rakhivasavada :

So far as timing goes, rates can harden up later. So will be the housing market in the years to come.

Customer:

We can afford a mortgage. Husband still makes decent income despite the short sale. I'm asking if it makes better sense to get back in the game at this age and time of our lives NOW despite the high interest OR if we stick to our orig plan to significantly pay down the st.lns for the next year...literally til 1/2014, or as close as possible, and THEN get back in the game when he's 55?

rakhivasavada :

So, if you are getting a good modest condo, this can be the right time as housing as almost bottomed out and you may find good appreciation in next years to come

rakhivasavada :

Yes... if you can wait until he is 55, it would be more beneficial because, the hard money interest that you will pay would be more costly

Customer:

We just started thinking maybe it's worth looking at condo's now, even at the higher int rate hard money loan...we are paying just $600 / mo to live @ my parents, and jumpstart our getting a paid for property in time for retirement. Even if we paid 10% for 2-3 years we could re-fi when our credit is repaired and even if the interest rates are at 5% due to inflation in 3 years, we'll have paid down our mortgage during that time fram.

rakhivasavada :

I would suggest to pay down student debt in one year. Entering the game will be almost same even if you start late by a year, but still avoid hard loans

rakhivasavada :

I hope this helps...

Rate this answer POSITIVELY IF you are done with this and if this helps and satisfies you as this is the only way we get compensated for assisting you. You may use "CONTINUE CONVERSATION" to revert with additional queries if you have or if I have missed out on any aspect of your question.

Customer:

Ok, that's what I was wanting a 2nd opinion on. It's best to pay down student loans for 1 year (leaving us with roughly $50K owed), and THEN get back in the game. Thanks for your time. Any other thoughts?

rakhivasavada :

No... because, just one year will not have significant change in interest rates. But are loans can be avoided and interest saved.

Customer:

BUT...hey, if we wait a year we STILL can't get a conventional loan though...but are you thinking it would be a shorter amount of time having a hard money loan? (2 yrs vs 3 yrs til we can re-fi?)

rakhivasavada :

yes.... that's right.

Customer:

Alright then. Does it make any sense to rent the rest of our lives? We doubt it but just wondering.

Customer:

Our age is what's throwing this. Husband doesn't want to rent. BUT, does it make sense to rent til we can get a conventional loan or to get hard money for 2 years and at least getting a place paid for in 10 years?

rakhivasavada :

Yes.. I understand, that is the reason I was little averse with hard money. Yes, it would be worth as ultimately you are owing your condo.

rakhivasavada :

Before going for hard money, you have to absolutely sure that paying it back will not cause you hardship

Customer:

Hard to understand typed answers. SO, yes you say get hard money loan for 2 years after paying down student loans for one year, as it would then get us paying down on a property, beginning in 2014? We can afford the payments. Short sale doesn't always mean you don't have any money. :)

rakhivasavada :

Am I clear Madam?

Customer:

Did you get that last one?

rakhivasavada :

Yes...

Customer:

We'd only keep hard money loan til we could get a conventional loan in a re-fi, when our credit is good again. We have no other debt, never did.

rakhivasavada :

Your husband is correct ONLY IF paying down hard money loans should not cause hardship... only then you can take this option.

Customer:

Yep...we're all clear then. Thanks for your helps! Greatly appreciated.

Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 3857
Experience: Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
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