debt to work on paying off 1st?

[rockrv22]

Me and my wife are in our low 30s. We have debt on our house that is about $53000 @ 3.25%. House is worth about $250000 or so in today's market. And we have about $25000 on a car @ 2.75%. Which would you try to hammer out 1st? The home has about 8 yrs left and car is actually a paid off truck borrowed against to build a pole barn.

[Nutria]

Probably the truck, since it's a depreciating asset.

[disneysteve]

I would also go for the truck. The mortgage interest is deductible so the effective rate is lower. The car also has a finite lifespan. What happens if it gets totaled tomorrow? Will your insurance pay enough to settle the loan? And then how would you replace the truck?

I'm curious about this whole arrangement. How much is the car worth that you were able to get a 25K loan using it as collateral? What was the pole barn for? Is it business-related? Your post raises lots of questions.

[rockrv22]

The pole barn is for a hobby and just for extra storage. Yes the truck is worth about $30000. Barn will cost about $18000. Took extra to pay off wife's car which was higher interest. I can't deduct anything from taxes either. Not enough to itemize.

[disneysteve]

The pole barn is for a hobby and just for extra storage. Yes the truck is worth about $30000. Barn will cost about $18000. Took extra to pay off wife's car which was higher interest. I can't deduct anything from taxes either. Not enough to itemize.

Paying off the higher interest car loan was a good move. Buying the pole barn probably not so much but that's beside the point.

Even if you can't itemize, I'd still get rid of the car loan first. The difference in interest rates isn't that significant and I think there's more risk owing 25K on your car than owing money on your home.

[Nutria]

and I think there's more risk owing 25K on your car than owing money on your home.

For example, it's easier to repossess or lose in bankruptcy a car than a house.

[disneysteve]

For example, it's easier to repossess or lose in bankruptcy a car than a house.

Plus, as I said earlier, the car could get totaled tomorrow. Then what?

[snafu]

Carlin's monologue on stuff https://www.youtube.com/watch?v=MvgN5gCuLac

I've always found it curious that people go to such lengths to keep 'sunk money' stuff in homes whose monthly payment is mostly interest, taxes, mortgage insurance and possibly HOA. Some take it one step further by paying to rent a unit, you are borrowing money to build a unit to store stuff you aren't using, merely storing. What am I missing, why retain no longer used possibly un-needed stuff?

I hope your hobby has potential to create a stream of income in the future.

[Nutria]

I hope your hobby has potential to create a stream of income in the future.

And if the barn is "just" for the enjoyment of people with no CC debt?

[rockrv22]

No cc debt here!!

[Jluke]

No cc debt here!!

How much are you saving and investing?

do you have a retirement account at work?

Roth/Traditional IRA?

Taxable savings or taxable investments?

I wouldn't put extra to either debt, unless you are doing some of the above already.

[rockrv22]

I am putting in 5% in my 401k and my wife puts in 6 %. I also max out a Roth Ira every year.

[Jluke]

I am putting in 5% in my 401k and my wife puts in 6 %. I also max out a Roth Ira every year.

Does your wife max out the Roth too? If not then consider increasing that.

If she does the roth then I'd increase the 401k to 10% each.

You are in your 30's. Your debt is manageable and low rate.