|
Posted by on April 5, 2008, 9:45 pm
I decided to start saving up for a down payment for a house, which I
plan to purchase in 6-8 months. Before making this decision, I put a
chunk of my savings into my two auto loans, in addition to my regular
payments. For the two auto loans, they list my next payments due
sometime in 2009.
I was considering not making my regular monthly payments for a few
months so that I can save that money towards the down payment of the
house. I am concerned, however, that this may negatively impact my
credit score because the payments will appear to be erratic and then
stop suddenly (even though no payments are technically due).
So, should I continue making the monthly payments to appear less
erratic or save the money for the down payment, so that I can
hopefully avoid PMI? :)
Thanks for any advice!
--------------------------------------
Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.
|
|
Posted by John A. Weeks III on April 6, 2008, 1:28 am
In article
mikki@mikki.com wrote:
> I decided to start saving up for a down payment for a house, which I
> plan to purchase in 6-8 months. Before making this decision, I put a
> chunk of my savings into my two auto loans, in addition to my regular
> payments. For the two auto loans, they list my next payments due
> sometime in 2009.
>
> I was considering not making my regular monthly payments for a few
> months so that I can save that money towards the down payment of the
> house. I am concerned, however, that this may negatively impact my
> credit score because the payments will appear to be erratic and then
> stop suddenly (even though no payments are technically due).
>
> So, should I continue making the monthly payments to appear less
> erratic or save the money for the down payment, so that I can
> hopefully avoid PMI? :)
First, call your car loan company and ask if there is any problem
or negative reporting if you stop making payments for a few months.
It should be OK if you are in fact paid forward.
Beyond that, I'd need to know what your car loans look like. That
would be the original purchase prices, the original loan values,
when that was, the rates of interest, and current balances. I would
suspect that if you had the cars for a while, and you have now paid
a year in advance, that there shouldn't be too much left to pay.
It might make more financial sense to pay off these loans and
avoid some of the interest. That might set your house deal back
a few months, but it will help you in the net worth column over
the long run.
-john-
--
======================================================================
John A. Weeks III 612-720-2854 john@johnweeks.com
Newave Communications http://www.johnweeks.com
======================================================================
--------------------------------------
Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.
|
|
Posted by Mikki on April 6, 2008, 7:22 pm
Thanks for the info, John! I will call my loan companies on Monday to
see if skipping some regular payments will be okay.
> Beyond that, I'd need to know what your car loans look like. That
> would be the original purchase prices, the original loan values,
> when that was, the rates of interest, and current balances.
Both cars were purchased in June 2007:
Car 1 -
Purchase price $24,000
Original loan value $24,000 (no money down)
Interest rate - 1.9%, 60 month loan
Current balance - $17,000
Car 2 -
Purchase price $16,000
Original loan value $11,200
Interest rate - 11.64%, 72 month loan
Current balance - $3,500
The only other debt that we carry is about $4000 on a no-interest
credit card, which we pay $250 a month towards.
As for scraping up money for the down payment, I would qualify to pull
$10,000 from my traditional IRA and we also have about $9,000 in
contributions in our Roth IRAs, but I would rather not touch those if
I don't have to. I do, however, really want to avoid PMI in the first
place...
Thanks again for any advice! :)
--------------------------------------
Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.
|
|
Posted by John A. Weeks III on April 6, 2008, 8:09 pm
In article
> Thanks for the info, John! I will call my loan companies on Monday to
> see if skipping some regular payments will be okay.
>
> > Beyond that, I'd need to know what your car loans look like. That
> > would be the original purchase prices, the original loan values,
> > when that was, the rates of interest, and current balances.
>
> Both cars were purchased in June 2007:
>
> Car 1 -
> Purchase price $24,000
> Original loan value $24,000 (no money down)
> Interest rate - 1.9%, 60 month loan
> Current balance - $17,000
>
> Car 2 -
> Purchase price $16,000
> Original loan value $11,200
> Interest rate - 11.64%, 72 month loan
> Current balance - $3,500
You have way too much invested in cars. A normal car loan is
3 years. Any longer means that you are buying a car that is
more expensive than what you can afford. And going out 72
months is pure and simple financial foolishness.
You had a chance to save money for a house, but you invested
in cars. In 5 years, these cars will be wore out and ready
for the junk heap, yet you will still have payments to make.
Had you bought reasonable cars and put this car money towards
your house fund, you would be ready to buy a house today, and
be on your way to owning an asset that actually goes up in value
over time, and you would have caught it at a time when interest
rates are near their historical lows and prices are very low.
Those two cars may have cost you $200K in additional house
purchase price and interest fees over the next 30 years.
Since what is is what is, I'd do unnatural acts (ie, beans and
rice for food) to scrape up the $3500 and get car #2 paid off.
That gets rid of mafia-rate loan shark interest that you are
paying.
I'd consider selling car #1, and replace it with a 5 year old
Toyota Corolla with 125,000 miles on it. You can pick them up
very reasonable, and they will run another 125,000 with little
trouble. That will clear up $17K in debt.
> The only other debt that we carry is about $4000 on a no-interest
> credit card, which we pay $250 a month towards.
Yet another sign that you are spending more than you earn, mostly
due to the huge car payments compared to your incomes. Again, do
whatever you have to in order to get this paid off. Sell the dog,
deliver pizzas, do some E-bay, or whatever it takes. You should be
able to put $1000 a month towards this and get it wiped out in 4
months. Then don't ever do that again.
This credit card debt is a real red light. It tells me that you
cannot afford to live on what you earn today. It also tells me
that you have absolutely no chance to live on what you earn after
you add a house payment to your budget. You have to get these
bills taken care of before you even begin to think about a house.
Getting a house when you have a ton of credit card debt and two
car loans would be like getting in the express lane for financial
disaster. What happens if one of you gets sick and cannot work,
or you get downsized and cannot find a job for 6 months. Do you
want to lose everything just because a normal life event happens?
> As for scraping up money for the down payment, I would qualify to pull
> $10,000 from my traditional IRA and we also have about $9,000 in
> contributions in our Roth IRAs, but I would rather not touch those if
No, no, no. Never, ever pull money out of retirement to buy "things".
You will need that money when you turn 65. If you spend it now, you
will end up having to fight the stray cats and dogs for the leftover
food in the dumpsters. Not only that, but there are huge fees and
penalties for pulling money out of an IRA (in most cases). If you
pull out $10K, you may have $5K in fees, taxes, and penalties.
-john-
--
======================================================================
John A. Weeks III 612-720-2854 john@johnweeks.com
Newave Communications http://www.johnweeks.com
======================================================================
--------------------------------------
Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.
|
|
Posted by Mark Bole on April 6, 2008, 10:13 pm
John A. Weeks III wrote:
[...]
> You have way too much invested in cars. A normal car loan is
> 3 years. Any longer means that you are buying a car that is
> more expensive than what you can afford. And going out 72
> months is pure and simple financial foolishness.
Hmm, the family I grew up in was pretty frugal, and I distinctly
remember my dad having a five-year loan back in the 1970's. Seems
pretty normal to me from everything I've heard.
> In 5 years, these cars will be wore out and ready
> for the junk heap, yet you will still have payments to make.
You contradict yourself later. Any well-made car purchased today can be
quite serviceable for eight to ten years or more. Whether you buy a car
with loan proceeds or savings does not have any impact on its useful life.
> Do you
> want to lose everything just because a normal life event happens?
One doesn't lose "everything" as a result of a normal life event, only a
catastrophic one.
[...]
> You will need that money when you turn 65. If you spend it now, you
> will end up having to fight the stray cats and dogs for the leftover
> food in the dumpsters. Not only that, but there are huge fees and
> penalties for pulling money out of an IRA (in most cases). If you
> pull out $10K, you may have $5K in fees, taxes, and penalties.
Let's see, even if I was in the 25% federal tax bracket, 8% state
bracket, and 12.5% combined federal and state penalty, that would still
be significantly less than 50% of a withdrawal. Plus, up to $10,000 can
be taken from an IRA penalty-free to make a down payment on a first
home, that is something that was written into the tax law precisely to
encourage this use of an IRA -- which is what the OP was referring to, I
surmise.
Frankly, the stray dogs and cats don't stand a chance... ;-)
-Mark Bole
--------------------------------------
Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.
|
| Similar Threads | Posted | | Questions about hard credit inquiries and your credit score. | October 18, 2006, 2:39 pm |
| Credit report and FICO score | November 27, 2006, 5:10 am |
| How Much Is A Credit Score (FICO) Worth? | May 16, 2008, 3:22 pm |
| Rental Car Collections & Credit Score | July 9, 2008, 8:14 pm |
| Joint account with son affects credit score? | December 9, 2007, 3:45 pm |
| Credit Card vs Plus Loan for College... | June 14, 2008, 6:26 am |
| Higher income = higher credit score? | October 4, 2006, 5:13 pm |
| Naked Shorting Lawsuits and Impact on | April 16, 2007, 5:03 am |
| Vehicle Loan vs Home Equity Loan | April 23, 2007, 1:35 pm |
| Net worth: How to value Soc Sec and state retirement payments | March 2, 2007, 2:09 pm |
|
|
Yahoo! 
Google 
Windows Live 
del.icio.us 
digg 
Netscape 
XML Sitemap