My Debt Blog

Normally I’m a very patient person and don’t mind waiting for good things to happen. We have some credit card debt on each of us which has gone way down this year, but the momentum was short lived. While I am currently in a payment plan on my student loans, my wife has her loans in a grace or forbearance. At least we are not paying off a car on top of it all. The mortgage is still there and it would be great to pay it down, but everything has to happen in a particular order.

I’ve made several snowball type of spreadsheets to determine what I would need to pay on each card to get rid of it by a certain time. Sadly this payment process is over a 2 year span and it’s frustrating that it will take that long to get rid of credit cards. We’re not using them but it doesn’t feel like we’re paying them down and off quickly enough because each has a balance in the 4 figure range. I considered some of those 0% transfer cards but the savings on the interest is very minimal to surf balances all the time. When a challenging month comes up where there are increased expenses, we can’t make the payment on the spreadsheet. This just makes the plan stretch out longer and that just makes the debt even more depressing.

We have got to get these credit cards gone in order to tackle the crap out of the student loans. My wife is getting these statements from her student loans and it shows how much was borrowed, how much interest will be paid over the payment time frame, and the grand total of the two. In most cases the number is more than double what was originally borrowed. She has a 283 month payment plan which is 23 years and 7 months if we just keep paying what they ask for every month. My loans are on a 120 month or 10 year plan, which is also a long time to pay off a loan. It seems to me the larger the loan the longer you can pay on it to keep making them more money. When the credit cards are paid off, I plan to double the payments on all the loans to at least cut the time down to less than half, and pile up on the weaker smaller balances. The frustration right now is the credit cards are not paid and we’re not even making payments to her loans. The interest on her loans is only going up every month we have to drag this out, and I don’t make enough money to make payments on them. All of our debt is too much for me to completely service on my income alone.

On a positive note my house value is starting to finally come back up from the bottom. It is almost to a break even point where it is worth what I owe. In a few more months it may even start to be worth more than what I owe and my equity in it can actually increase. The market is still soft but there are houses in the community that are starting to sell. If my wife gets a job that requires us to relocate, I think we might be able to sell for enough to clear what we owe on it. Paying the realtors and other fees is another story.

Comments(11)

There is so much scare out there about the sub prime mortgage lending damaging the economy. What confuses me is why so much blame is being put on the sub prime loans when it should also be shared by the consumer who signed up for that loan. For anyone who has ever bought a house, there is so much paperwork involved and it is a process to get the financing in order. At closing it can be exciting to just get through that paperwork so you can get the house. Did you have a real estate attorney at closing explaining and showing you exactly what you were signing? I did and know exactly what I am dealing with regarding my loans.

If someone buys a house they simply cannot afford, should it become a problem for the government to bale out people using taxpayer dollars? Our government will bale out corporations due to limited liability, sends money overseas as aide for other countries, but can’t help the average Joe save their home? The government is not going to make a person more responsible by helping them save their home. Regulation isn’t going to fix the existing problems of people trying to borrow 500k and pay 1k a month. It all seems fine until the payments adjust out of control and there is no way to handle the new payment.

When I got my house a year and a half ago, my credit was good and the time seemed right because I was getting married. Instead of doing one lump loan for 30 years, I did 100% financing through 2 separate loans. My first is a 80% 7 year ARM at a much lower rate than the fixed loan, lower payment, and no PMI. The second is a 20% HELOC which made up for the difference and structured the loans so I would not have to pay closing costs. This seems stupid to me now to have done it this way when I had 10k sitting in the bank. I did end up paying off my car and going on a completely paid for honeymoon, so what’s done is done.
(Read the article)

Comments(2)

I can’t put it simple than that. The realtor sent me a PDF with a projected sales price and a breakdown of all the fees, which there are over 10k in fees alone, of what it will cost me. One thing I forgot to consider was the property taxes in the state of Illinois are paid in the rear. So this year I am paying 2006 taxes and my escrow is building up for 2007 taxes. That part hit me off guard a little bit.

Even if the house were to sell for more than what the realtor suggested, it still doesn’t reduce it a whole lot. Either way I have to come up with some money to get rid of the house, or just hold out on it until things change. There’s a reason for why the area I am in is losing value: renters. Every other house in my neighborhood is rented! Having so many in this area lowers the value of the units that are lived in by the owners. The renters have really made themselves known over the past few months. Lots of noise, increased parking on the streets, dogs (and what they do), and worst of all is spray paint on the sidewalks. It is beyond me how so much can change in an area within a year. At the same time I am concerned it may cost me more if I were to sell next year. There have also been two foreclosures in the neighborhood that push things way under market value.

So why would it cost me 8k to sell the house? The equity in the house isn’t very high because I had very little down payment and have an 80/20 mortgage setup to avoid PMI. After everything is settled with the first mortgage, the difference between the balance on my HELOC and what is left is 8k. If I don’t use a realtor I could save half of the 5% commission and do for sale by owner. That would probably reduce the amount I would need to come up with at close.

Just so everyone knows, I can afford my house. I am not in any way in the position of facing foreclosure if it were not to sell. Everything is current and I can hang onto the house just fine. The area has just changed to something my wife and I are not happy with and moving closer to the city is more appealing. We’re going to improve some areas the realtor pointed out to us and do a real extensive cleaning this weekend.

Comments(3)

It was pretty rough this past week trying to get our bank account to survive until payday. I don’t like all the money going out so quickly either, but the time frame for some of these things put us in a bottleneck. With the money coming back in again it eases the pressure to get things done. I would just like us to have more long term goals beyond the end of this month. At least I am considering December already because car insurance and Christmas always feels like a one-two punch.

This weekend we’re going to have a garage sale to try to hopefully get rid of a bunch of stuff we have taking up space in storage. My wife thinks we should also sell our dining table and the 4 chairs out there with the stuff we wouldn’t miss. I asked her what the intentions are for the money from the garage sale, and sure as I already knew the answer, we would need to go out and buy us a new table and chairs to go with our furniture. The only real positive side to this is we would have the money to pay cash for this new purchase. On the flipside though, why replace the dining table and chairs if we don’t need to? I don’t get it.

My wife is excited for some reason to get rid of our house and go rent an apartment near the city. I’m not sure what timeframe she has in mind that we should move, but the realtor we bought our house with does not want to work with us to sell it. She says that because it has only been a year, the market is soft, and there is not a ton of equity involved, it might be difficult to sell and we wouldn’t make money off it, or even cost us money to sell it. We don’t have the money available at this time if it does cost us to sell. The answer of course is to find a realtor who is willing to sell our house, not considering the cost of course. The house is financed under me alone because I bought it just before we were married, so I could refinance the loans and possibly turn it into a rental that would pay for itself granted I find the right people.

So why is she excited about selling the house even if it costs us money to do it? She has been browsing these rental websites finding various apartments or condos for rent with really nice stuff. Stainless steel appliances, granite countertops, vaulted ceilings, nice view overlooking the Lake Michigan and/or Chicago, and of course these places are near stores, parks, bars, etc. Details of course that I look at are the cost per month, which is lower than what we pay now but only by a few hundred, is that even worth moving?. The other part is most of the time apartments require a security deposit of about one month’s rent. So we would need to have the amount of the rent available just so we can rent the apartment. The money does not have much of a plan so nothing is earmarked to be saved each month. I’m trying to explain to her that we need a budget so the money has a purpose and isn’t spent before we even have it (currently the biggest problem). It is taking time but nothing has clicked yet.

Comments(4)

Along with the accomplishments I have made in my life, graduating college, getting married, buying a house, one of them may have been a mistake. Last year we made the choice to get out of renting an apartment and buy a house. This decision was proposed by my wife at the time and I was reluctant to make such a major move because of the cost increase. I think a warning flag should have gone off here.

We went to the bank to get pre-qualified so we could figure out what we could afford. I knew nothing about mortgages or how the process worked and basically learned as much as I could so I knew what was going on. Somewhere I heard that you should buy the most house for the money, so we used the upper limit of what the bank said we could afford. Being first time home buyers, what we wanted and what was available did not always match. Eventually we found the right house, got a pre-approval for a loan, and went into contract on it.

From that point there were issues with getting all the details together and problems with the underwriting process. I had to make some moves, like paying down the loan of my car so the bank no longer considered it as a monthly payment. Eventually all the financing was cleared and we closed April last year.

We are debating selling the house because it is costing us around the 40-45% mark of our current monthly take home income. That is all the cost for our two mortgages, property taxes, and insurance. Everything is current and that is not the issue, but the payment is about twice what our rent used to be. The idea was this might be high right now but would balance out once she has an actual salary job starting her career once she’s done with school. A majority of the money is going to interest anyways because the mortgages are so fresh, so very little progress is being made to actually afford the house. This is where selling the house and renting in the downtown Chicago area comes in.

The other side of this question is my wife is not happy with where we live because she feels lonely, no social life or friends. Simply put, she refuses to live where we currently live because she is unhappy where we live. I think she feels that if we sold the house and moved into the city, she’ll be happy, have friends, and plenty of stuff to do. I’m very bittersweet about selling the house and moving downtown because it feels like we’re starting over. The benefits of being downtown though would be lower house payment (just rent and insurance) would save money to put towards debt, I could sell my car (which I love but would not be necessary) and we would save on insurance and gas cost, and that extra money could go towards debt.

I think we’re viewing the extra money that would come into play with selling the house and renting again in different directions. The way I see it is we could really make some progress in paying off our debt while my wife would feel the extra money is no longer dedicated to something and can improve our lifestyle. The house does not have much equity in it so after all the fees and such are said and done, I don’t think we would make anything off it which sucks. We have moved every single year since 2001 and I thought we were done moving for awhile. At the time we bought the house, I never intended to just turn around and sell it a year later, but it looks like it has come to that.

Comments(6)

Every now and then I see ads about getting a loan from a local credit union. I have always used banks for my loans from the beginning. Car loans, student loans, mortgage, line of credit, you name it. What is the big deal with a credit union?

I of course did a Google on credit unions versus banks. The two are very similar in the sense that they deal with the same thing, money. Credit unions are member based and privately owned while banks anyone can use and they are federally insured. First you would have to become a member of the credit union in order to use its services based on if you’re eligible for membership. Banks don’t care who you are and it is usually easy to open up an account. They both offer similar types of accounts, checking, debit card, even online access for most. With the two being so similar, what is the advantage?

The big difference I found is that a credit union is non profit while banks charge fees and make money for the shareholders. What does a credit union do with money it makes? Members see the benefits in interest and better loan rates. I suppose if I needed a loan of sorts I might consider joining one of these credit unions to see if I could get a better deal.

Question to readers: What do you use, a credit union or bank and why?

Comments(4)

I was listening to a show on the radio today, a caller with about 30 grand in credit card debt rolled that debt into his mortgage through an equity line. Sure this is just shifting that debt into another form, but maybe there is a benifit to doing this. This guy did not have the best credit before, because he carried a lot of credit card debt, but he had equity value in his house. By refinancing his house, he was able to pull that credit card debt into the equity line, which paid off his credit card companies, and his credit improved. He pays more on that equity line now because he no longer has to pay those credit card companies. In turn, come tax time he can take any interest he has paid and use that as a deduction on his income taxes. You cannot deduct the interest you paid on a credit card because they’re unsecured. The catch is you have to have a reasonable amount of equity in your home first in order to use it to pay your debt. I recently got my house and my loan to value is probably too high to consider this yet.

The show also said to avoid credit card consolidation companies like the plague. I guess when you consolidate all your credit card debt and make settlement payments to your creditors, it is as bad as bankrupsy because those creditors are not being paid on a regular basis while you build your big payoff payment for them. Granted it is best to not get into that bind where you have to resort to thinking about doing settlements or consider bankrupsy.

Comments(0)