Home buyer tax credit. What would you do with it?

[hausfrau]

According to the IRS we might be getting our refund + the home buyer credit next month.
We should get about $8,543.

This month (March) is our first month on a budget and we will have $1,000 as a starter EF fund by the end of the month.
We have budgeted to put away at least $1,000 a month toward savings or debt. So, April we will be putting $1,000 toward our debt. We have $2k in CC debt and $4.5k in Car loan.

So, total debt: $6.5k

So that would take us roughly $6.5 months to pay off all debt with our current budget. (This doesn't include our $89k mortgage)


So, the question is. Do we use the $8.5k to completely wipe out the debt? Or should we put the $8.5k into savings as a decent cushion for a total of $9.5k. And then just take the next 6 months to be debt free?

Thoughts?

[hausfrau]

And to add, the car payment is $185 a month and our total CC minimums are $130 a month. So that is $315/month in debt payments. If we just paid off all debts outright we would be saving that $315 per month.

[creditcardfree]

I'd pay off the debt and add the rest to your EF. Then make the next FIVE months count towards beefing up the EF to the $9.5K.

[hausfrau]

I'd pay off the debt and add the rest to your EF. Then make the next FIVE months count towards beefing up the EF to the $9.5K.

Thanks for your reply. It would feel really good to own my car outright and be done with the CC. But at the same time It would feel really good to have something in the bank for peace of mind in case DH lost his job or something.

[disneysteve]

It would feel really good to have something in the bank for peace of mind in case DH lost his job or something.

It would be even better to not be saddled with the debt payments if he lost his job. Your monthly budget would be a lot leaner and you could get by much easier.

Pay off the debt.

[creditcardfree]

Thanks for your reply. It would feel really good to own my car outright and be done with the CC. But at the same time It would feel really good to have something in the bank for peace of mind in case DH lost his job or something.

You will have about $3K in the bank and zero debt payments besides your mortgage!! That is worth a lot. Trust me. It does feel very good not to have a car payment. Because you want that peace of mind you will likely be very motivated to save that cash up fast for the EF.

Good luck!

[hausfrau]

Thanks guys. Man, it's going to suck to see that money go "bye bye" so fast. But, that's what we get for buying things we can't afford.

It will be so nice to be done with it. No more borrowing money ever again for us!

[KaleighMaeA]

Just a heads up on the first time home buyer credit, I have heard of many people who have had little to no trouble with this....


...then I have heard of many people like myself who literally had to call the state IRS office at least once a week for 9 months after not receiving the payment. Hopefully yours will be paid out on time, but please do not bank on it. It took the government 14 months past my due date to pay out, and they only gave me less than $200 dollars in interest for being so late on payout.

Hopefully your experiance won't be like this, but if it is 8k is a lot of money and it IS worth calling (even if it's once a week for 9 months) to get it. Fight hard enough and I'm confident you will recieve it just do not get discourage if it's not on time and stay on top of it.

[hausfrau]

Just a heads up on the first time home buyer credit, I have heard of many people who have had little to no trouble with this....


...then I have heard of many people like myself who literally had to call the state IRS office at least once a week for 9 months after not receiving the payment. Hopefully yours will be paid out on time, but please do not bank on it. It took the government 14 months past my due date to pay out, and they only gave me less than $200 dollars in interest for being so late on payout.

Hopefully your experiance won't be like this, but if it is 8k is a lot of money and it IS worth calling (even if it's once a week for 9 months) to get it. Fight hard enough and I'm confident you will recieve it just do not get discourage if it's not on time and stay on top of it.

Thanks for the heads up. I am definately not holding my breath on it.. but it is fun to fantasize about being debt free next month using that money!!

I am curious, did you guys have a date they were suppose to pay you, and it went past it? The IRS actually gave us a date (April 19th), so if it goes past it then do they owe us interest?
Not sure how that works..

[maat55]

If you use it, keep in mind that you are obligated to keep your house for three years. If you loose your income, you could get in a pinch. This happened to my son-in-law, lucky for him his father helped him out.

[Frugal]

You are lucky, we also bought a house but did not get our home purchased in time to qualify. We closed on our house two months after the deadline, which we thought had been extended.

Personally, and a lot of people would be different, I would put it towards my mortgage. This is just my opinion. I would like to pay down the principal as soon as possible. For the average person, this will decrease the interest paid over the life of your loan, due to capitalization, etc.

Then, I would put the rest, or a portion of it, towards any existing debt, such as student loan debt, credit card or car debt, etc.

I never take out loans on cars, and only pay cash. Thus, I don't have this expense. Student loans would be the second choice for me to pay down.

Hope that helps, and good luck!

[cypher1]

It took me a couple of months get mine last year, after filing my taxes in Feb 2010. I could have amended my taxes the year before, and gotten the $8k after moving in. But I wasn't counting on that money, and I know if I did get right away, I'd probably waste on Wants for the house. Now its just a big chunk of my EF, with 1 year left from this May for 3 years. Once the money is truly mine, I'll either put into surprise repairs, send my parents on a cruise, or use on tuition if I go back to school.

[littleroc02us]

I would take the 8.5k and pay off the 6.5k and be debt free with 3k in the bank for an EF. Then build that baby up to 3-6 months of expenses. I think if you have a problem in the interim 3k would be enough to cover a car problem or another big problem.

[KaleighMaeA]

Thanks for the heads up. I am definately not holding my breath on it.. but it is fun to fantasize about being debt free next month using that money!!

I am curious, did you guys have a date they were suppose to pay you, and it went past it? The IRS actually gave us a date (April 19th), so if it goes past it then do they owe us interest?
Not sure how that works..

Yes, they gave me a date it would be paid by and mine went 14 or 16 months past that due date (don't remember exactly now, but it was a LONG time!) And yes, they did pay me interest, but I only got around an extra 200 in interest for them being 14-16 months late on 8k so it wasn't a very large percentage...

[biff]

I used 3300 of my credit to landscape the yard. HOA required it eventually as my lot was just dirt. I put the rest in EF.