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my wife and I plan to buy a new house this year or maybe early 2013 but first we have to touch up our current house and sell it we paid 102,000 for it and currently owe 92,000 we have a 4.875 apr i was wondering if i should put the money ive been saving currently around 5000 onto our current principal or just keep saving i currently get around $1 in interest a month where as if i put it on the principal of my current mortgage it would pay more then that by far im leaning towards puting my savings into the current mortgage then when i sell having that money for the new house down payment can someone tell me why thats a good or bad idea
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as long as you aren't underwater on your current house, I would put the money towards savings.Gunga galunga...gunga -- gunga galunga. -
I'd like to see you save up enough to live off of for several months (maybe even a year) before you concentrate on paying down the mortgage. Are you familiar with the idea of an emergency fund? That's what I'm thinking of."There is some ontological doubt as to whether it may even be possible in principle to nail down these things in the universe we're given to study." --text msg from my kid
"It is easier to build strong children than to repair broken men." --Frederick DouglassComment
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Make sure you follow Joan.of.the.Arch's comment first. If you have extra cash on top of that, i would save it for closing costs, the possibility that you will need to put it down when you sell the house due to being underwater, or any larger repairs that come up when trying to sell.Originally posted by Joan.of.the.Arch View PostComment
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I agree with Joan as well.
You need some cash on hand for emergencies. Primarily because once you pay down your mortgage, you'd have to go through a big hassle to reborrow it if needed. And if its the "company downsized and I lost my job" type of emergency, then you wouldn't have income to qualify for the loan to get your own money back.
Get a good EF in place 1st, then sure - pay extra on the mortgage.Comment
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I'll ask what I thought is an obvious question after reading the original post:
If you purchased your current house at $102,000 and still have $92,000 of mortgage left on it (which is barely not underwater, especially if you consider the costs of selling as well)why are you considering buying a new house?
Assuming the new house costs more, you'd probably want more of a downpayment AFTER you've saved the emergency fund that everyone here has suggested. In this scenario, you may be jumping from a mediocre situation to a tenuous one.
If your new home costs less, then my input doesn't count.Comment
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