Pay off student loans vs save for mortgage

[I.T.Guy]

Hello, this is my first post here. I've been visiting the forum for a few weeks now and have learned a lot. Now I have a question.

First, here are the loans we currently have:

Graduate Loan: $11,220 at 6.8%
Undergrad 1: $18,988 at 6.0%
Undergrad 2: $6,162 at 1.75%
Car: $37,665 at 0.0%
Current home mortgage: $81,916 at 5.35%

Our current plan is to move in 2011. We are going to pay off the Graduate Loan by June of next year by using $500 to make extra payments each month. Originally, the plan was to snowball into the Undergrad 1 loan once the Graduate Loan was paid off. And then keep snowballing until all 3 student loans and the car were paid off early.

My question is, should we still follow that route or, instead of snowballing and paying off the other student loans, should we shift focus to stockpiling money for a down payment on a new home in order to avoid or almost avoid PMI on our next home? Or, is there some other direction we should take?

[disneysteve]

Welcome. I'm still trying to wrap my head around the fact that you owe nearly $38,000 on you car loan on top of the student loan debt. What the heck did you buy?

Anyway, how much equity do you have in your current home? What price range do you expect to be looking in for your next home?

In the long run, it probably makes more sense to keep paying off debt at 6.8% even if that means paying PMI, but you'd have to run the numbers and figure out what PMI will cost vs. what the interest on your loans will cost.

[I.T.Guy]

Welcome. I'm still trying to wrap my head around the fact that you owe nearly $38,000 on you car loan on top of the student loan debt. What the heck did you buy?

Anyway, how much equity do you have in your current home? What price range do you expect to be looking in for your next home?

We just bought the new car (more family friendly than my little pickup truck) a couple months ago. We wanted to take advantage of 0% financing before that went away. We now have it and another car (that's paid off) that we will drive into the ground before replacing.

As of right now, I'd estimate we have ~$30,000 equity in our current home (no PMI). Hopefully the housing market will start to rebound by 2011 and that will go up more than it would just by making our regular payments. We'll be looking at a bigger home than our current house. Something in the $200,000 range.