What to pay off first

[Doodadyoung]

I owe 99,000 and I am 60yrs old. I owe 45,000 on my house at 5.12% fixed 700.00/m. I owe 54,000 on a second mortgage at a varibale rate of 3% the mim. payment is around 230.00 m. I have 53,000 in a ESOP account that I will get in June of this yr. My question is How do I get out of debt in 5 yrs so I can maybe retire when I am 66?
Do I use the money to pay off the 2nd mortgage and then use the 230 and add it to my 700.00 house payment and pay it off in 5yrs?
Or do I pay the home mortgage off first and then pay the 2nd mortgage with the variable rate next with the risk of the rate going up?
My current income is now down to 50K and I will never be able to get out debt unless I use the ESOP money.
HELP and Thank You

[bjl584]

Can you post more information? A more detailed breakdown of your income and expenses? Any other debt or assets that you may have?

My initial thoughts would be to cut expenses and boost income to pay off your debt and to not touch your ESOP account.

[riverwed070707]

What's the house worth? Can you downsize to something smaller to help lessen the burden? How does your retirement savings look?

[Doodadyoung]

Thanks for your reply.
My house is worth 175K-190K, We built it 18yr ago and hope to sell it at retirment to down size at that time and build something samller. What retirment savings. I had to cash in what little I had to pay off other dept. Health issues, leagal fees, 3 daughters!!!, you name it. Downsizing,
Right now I only owe for the house and 2nd mortgage. No other debt. 50K income Weekly brakedown is 78.00 to savings for annual expences
474.00 for monthly exp.
218.00 weekly expences, gas,food,entertainment,medical,purchases,
My wife is disabled I have been the soul bread winner and have worked 55-60 hrs Wk construction for years. I can not increass income. I guess I am doomed to keep working and try to live off SS when ever I can retire. Maybe others will learn from this big mistake! My worst fear is that I will die in debt!

[riverwed070707]

The simple solution to me seems to be sell the house. If you get $175k for it, you can pay off your debt and buy a $76k house. Of course how good of an idea this is depends on where you live. In some areas of the country you can get a pretty nice house for $76k, in other areas you are lucky to get a 1BR, 1Bath home that is a handyman special.

Agreed. You can't afford to keep paying toward your house when you don't have any retirement savings in place. The little amount you are saving won't make a dent.

Why not sell the house, buy something just big enough for you and your wife with cash and start socking away what you were putting toward the house in retirement? If you wait until retirement to sell, you'll still need a place to live and you'll no longer have the cash flow to save. It sounds like you lived above your means and now its time to scale back so you can afford to retire.

[disneysteve]

My house is worth 175K-190K

I can not increass income.

There are only two ways to balance a budget: Increase income or decrease expenses.

If you feel there is some reason why you are not able to increase your income, then your only option is to decrease your expenses. You are 99K in debt and sitting on an asset worth close to twice that much. You've already said you anticipate selling it when you retire so why not sell it sooner and solve your problem?

[snshijuptr]

It is also my understanding that it is easier to purchase a house while you are still earning an income than after you retire. I would definitely consider moving ASAP. The easiest thing to do would be to figure out your retirement needs (other than the house) and your retirement income. From that you can probably figure out either how much of a mortgage you can afford or how much you need to have leftover after selling your house to live in retirement. If you can't get the numbers to match right now, you can work on figuring out how many more years you need to work to get the numbers to work.

[maat55]

I would not rule out selling now and buying a cheap mobile( in decent condition) home. You need to retain as much cash as possible for retirement.

Personally, whether I need to or not, I plan to work until 70. If your current job is difficult, you could always find a less strenuous job later. My uncle is still working at 75 and fighting cancer. He is happy just the same.

[Doodadyoung]

Thanks for all the good advice. It looks like eather the house goes or I go to work forever!!

[Doodadyoung]

What to pay off first?

You guys have convinced me to keep working and not touch my retirment money. We love our house and want to keep it until some day when if ever I do retire we well sell and move to another area to live. So we are going to go on a debt reduction campain to get out of debt ASAP. So do we load up on the house payment and pay the 5.12% mortgage off first or pay off the 3% var. Equity 2nd loan first?
I am guessing you will say the 2nd var. rate to be safe.
Thank You so much.

[flipyourdebt]

It's tough for anyone to answer this question but you. Either option has benefits and drawbacks. Just depends on your level of risk tolerance.