How am I doing? Help!

[jIM_Ohio]

You only lose money if you walk away from house or sell the house IMO.

I am underwater on my house as I type, but I am staying here for 10-20 more years.
I keep making payments and see the area around me improving (there are houses selling in my neighborhood approaching the prices we paid in 2005). I want to stress patience, selling house makes the paper loss permanent.

You will not be under if you pay off the second mortgage. Focus on that- pay it off- you owe the money anyway, and if you pay it off you are not underwater anymore. You have $900/mo extra, use it to aggressively pay off the 2nd mortgage.

I realize you don't want to fix the house, my suggestion is keep credit good (paying off second will raise or maintain score). When you sell, you should see a "check" come your way which can then be used as a down payment somewhere else.

If you are moving, do not repair house
But the move does not suggest you stop paying off debt on current house

[skydivingchic]

I have a few thoughts. DBF and I have a very similar arrangement - completely separate finances except for a joint mortgage. We split all common expenses 50/50, but our incomes are closer than yours and your partner's. Perhaps you could propose to your partner that common expenses be split based on % income. In your case that would result in a ~40/60 split and bring your part of the mortgage payment down to $1200/month. That brings it in line with the general recommendations of mortgage to income ratio for you.

You and your partner don't seem to be on the same page financially as is demonstrated by his auto loans. I think you two really need to have a heart to heart and get on the same page going forward. Whether your finances or separate or joint, you really need to be on the same page and have similar financial goals. Anything else spells trouble.

You don't have a real budget. There are a lot of line items missing, which is why "extra" money "goes to the wind" as you put it. Spend some time to figure out how much you actually spend on things including those expenses that are irregular. Items to consider - insurance not paid monthly, vehicle and house maintenance, gifts, subscriptions, medical expenses, vehicle registration, etc. Take the time to put together and track a real, complete budget for a while so that you can understand where your money goes.

Your overall savings rate is good at 22% of gross. However, in my opinion it should be weighted more toward retirement. I would suggest upping your retirement contributions to at least 15% of your gross. That amount can be split between your 403b and a Roth IRA or all to your 403b. The general recommendation is contribute to the work retirement plan up to the maximum employer match, then to a Roth IRA until that is maxxed out ($5,000 this year), then back to the work plan if there is still money left.

I do see value in paying off your car from cash savings and then redirecting that car payment. You are needlessly paying interest on the car loan right now and as has been pointed out, you have a good cash cushion. General recommendations for an emergency fund are 3-6 months expenses. If you pay off the car, you would still have more than 6 months expenses in cash. Unless you are in imminent danger of losing your job, this seems like a no brainer.

Make sure you guys have health insurance, wills, powers of attorney, advanced health care directives, and adequate life insurance in place. DBF and I just did these last March. In July he was in a serious accident. I was very thankful that the paperwork was in place. In your guys' case, I would recommend that you each have a life insurance policy (outside of work policies) which could cover the entire first and second mortgages as well as burial expenses. That way neither of you is "ruined" if something happens to the other. Double check the house title to make sure the "rights of survivorship" part is there. DBF's motorcycle accident also brings up my second point - make sure you both have adequate auto and health insurance, especially as long as you are riding motorcycles. We would be in a world of hurt and possibly facing bankruptcy were it not for good health insurance after his accident. Yes we both still ride.

As to the house. You will not find any fans of "strategic foreclosure" on this forum. The fact of the matter is, you guys can afford your house and the necessary repairs as Jim has outlined. It may well have been a bad decision that you both now regret, but you guys signed up for it and you owe the money. Keep paying the mortgage and wait it out until prices come back. Mark it down as a hard lesson learned and don't make the same mistake next time.

[ua_guy]

I have a few thoughts. [...]

Thanks for your response...helpful, and also chilling, as my s/o also rides a motorcycle. Knock on wood, both of us haven't had any accidents, but he was hit once on his bike before we met.
Our auto/bike insurance is quite good, but I think we would be well advised to look at life ins policies. We are beneficiaries of each other for all policies and accounts, though.

So, to summarize the above posts, here is what I'm hearing:

1. Pay off car loan from savings.
2. Redirect extra monthly income to 403b (total of 15-20% of gross)
3. Lay out a monthly budget to include those misc expenses and also the home repairs.
4. Consider redistributing expenses so that partner pays a percentage inline with his income (Note: in a way he already does, because he covers most of our entertainment and monthly utility expense like power, water, cable, going out on the weekends, etc. I'm not sure if it would end up being any more advantageous)
5. Keep the house. I'm not sure that's a good business decision just yet...I see it more as of a sinking ship, taking me with it. It's an issue of paper value, but of also spending the next 5-7 years of my life inside of it, and truly, it's not a nice place. Happiness does have a price.

[jIM_Ohio]

I have a few thoughts. DBF and I have a very similar arrangement - completely separate finances except for a joint mortgage. We split all common expenses 50/50, but our incomes are closer than yours and your partner's. Perhaps you could propose to your partner that common expenses be split based on % income. In your case that would result in a ~40/60 split and bring your part of the mortgage payment down to $1200/month. That brings it in line with the general recommendations of mortgage to income ratio for you.

You and your partner don't seem to be on the same page financially as is demonstrated by his auto loans. I think you two really need to have a heart to heart and get on the same page going forward. Whether your finances or separate or joint, you really need to be on the same page and have similar financial goals. Anything else spells trouble.

You don't have a real budget. There are a lot of line items missing, which is why "extra" money "goes to the wind" as you put it. Spend some time to figure out how much you actually spend on things including those expenses that are irregular. Items to consider - insurance not paid monthly, vehicle and house maintenance, gifts, subscriptions, medical expenses, vehicle registration, etc. Take the time to put together and track a real, complete budget for a while so that you can understand where your money goes.

Your overall savings rate is good at 22% of gross. However, in my opinion it should be weighted more toward retirement. I would suggest upping your retirement contributions to at least 15% of your gross. That amount can be split between your 403b and a Roth IRA or all to your 403b. The general recommendation is contribute to the work retirement plan up to the maximum employer match, then to a Roth IRA until that is maxxed out ($5,000 this year), then back to the work plan if there is still money left.

I do see value in paying off your car from cash savings and then redirecting that car payment. You are needlessly paying interest on the car loan right now and as has been pointed out, you have a good cash cushion. General recommendations for an emergency fund are 3-6 months expenses. If you pay off the car, you would still have more than 6 months expenses in cash. Unless you are in imminent danger of losing your job, this seems like a no brainer.

Make sure you guys have health insurance, wills, powers of attorney, advanced health care directives, and adequate life insurance in place. DBF and I just did these last March. In July he was in a serious accident. I was very thankful that the paperwork was in place. In your guys' case, I would recommend that you each have a life insurance policy (outside of work policies) which could cover the entire first and second mortgages as well as burial expenses. That way neither of you is "ruined" if something happens to the other. Double check the house title to make sure the "rights of survivorship" part is there. DBF's motorcycle accident also brings up my second point - make sure you both have adequate auto and health insurance, especially as long as you are riding motorcycles. We would be in a world of hurt and possibly facing bankruptcy were it not for good health insurance after his accident. Yes we both still ride.

As to the house. You will not find any fans of "strategic foreclosure" on this forum. The fact of the matter is, you guys can afford your house and the necessary repairs as Jim has outlined. It may well have been a bad decision that you both now regret, but you guys signed up for it and you owe the money. Keep paying the mortgage and wait it out until prices come back. Mark it down as a hard lesson learned and don't make the same mistake next time.

agreed on all points
good post

[jIM_Ohio]

Thanks for your response...helpful, and also chilling, as my s/o also rides a motorcycle. Knock on wood, both of us haven't had any accidents, but he was hit once on his bike before we met.
Our auto/bike insurance is quite good, but I think we would be well advised to look at life ins policies. We are beneficiaries of each other for all policies and accounts, though.

So, to summarize the above posts, here is what I'm hearing:

1. Pay off car loan from savings.
2. Redirect extra monthly income to 403b (total of 15-20% of gross)
3. Lay out a monthly budget to include those misc expenses and also the home repairs.
4. Consider redistributing expenses so that partner pays a percentage inline with his income (Note: in a way he already does, because he covers most of our entertainment and monthly utility expense like power, water, cable, going out on the weekends, etc. I'm not sure if it would end up being any more advantageous)
5. Keep the house. I'm not sure that's a good business decision just yet...I see it more as of a sinking ship, taking me with it. It's an issue of paper value, but of also spending the next 5-7 years of my life inside of it, and truly, it's not a nice place. Happiness does have a price.

LOL that is a summary of the thread
but do not assume all posters agree with all of the above