I think i'm losing my mind!

[JamieB]

Having a hard time dong the math on this and making the decision. Is it better to owe money towards a mortgage or other debt?

Right now, we live in a 1200 square foot home with a tiny, fenced, completely opposite of private yard. I think I can sell it for enough to pay off my school loan, my van and a small credit line and still have a down payment for the new house plus my closing costs. We would still have a large credit line that we owe.

The new house is smaller (1016 sq ft) but worth more because of the yard and location. I grew up out there and loved it, plus it is only three houses away from my sister. It will cost us $30000 more than we owe here.

So in the end I would owe a little more but it would all be on my mortgage. And I would be in a house that is worth more because of the area it's in. I think I can get a better interest rate on my mortgage too.

Sorry if this in confusing!

[velochic]

Well, the answer to your main question is that it's better to owe toward a mortgage than unsecured debt because the mortgage is almost always a better interest rate.

I'm not sure what you're asking with the other information, though. Ultimately, it is best to have no unsecured debt when you are contemplating a new home purchase. I would pay off any lines of credit before paying off a school loan. JMO.

I hope you get what you want from your home sale. Good luck!

[choli]

Originally Posted by JamieB

I think I can sell it for enough to pay off my school loan, my van and a small credit line and still have a down payment for the new house plus my closing costs. We would still have a large credit line that we owe.

Is the large credit line a home equity line of credit? If so, you legally have to pay it off when you sell the house you currently own.

[JamieB]

Originally Posted by velochic

Well, the answer to your main question is that it's better to owe toward a mortgage than unsecured debt because the mortgage is almost always a better interest rate.

I'm not sure what you're asking with the other information, though. Ultimately, it is best to have no unsecured debt when you are contemplating a new home purchase. I would pay off any lines of credit before paying off a school loan. JMO.

I hope you get what you want from your home sale. Good luck!

Thanks or your reply. I don't really know what i'm asking. I guess i'm kinda nervous about getting a bigger mortgage. Right now we owe about $40000 less than our house it worth.

About the bolded part, wouldn't it be better to owe my money all to one place? Not being snarky, i'm just totally clueless. My interest rate on my OSAP is 8.75% and i'm not sure about the credit line but I believe it's less.

[pbjmama]

In the complex world of debt school loans are often considered 'better' debt than lines of credit.

[yeahwhat]

I would think paying off the loc would be better than the student loan. OSAP interest is at least a tax deduction for you.

If the loc is tied to your house, you'll have to pay it off anyway.

Other things to consider: minimum payments, total monthly payments, interest rates, whether the interest rates are fixed or variable, amounts owed. OSAP can qualify for payment reductions if you have a low income or sudden loss of income. No one's going to take your house if you miss credit card or student loans payments.

I can't say for sure what I'd do in your situation without seeing all the details.

Our mortgage is up for renewal this spring, and we're rolling our line of credit into it without increasing the amortization. Our payments will go up, but only by the amount of interest we'd otherwise be paying on the loc, and we'll be paying interest and capital with the same $75. Plus our mortgage is fixed for 5 years, and our loc (which is already 3% higher interest) will be going up whenever the prime rate starts to move again.

[JamieB]

Yes my credit line is attached to my house, but it wasn't before so I was just going to switch it back to a regular credit line. The smaller credit line, the OSAP and the van added together is the same amount that we owe in the larger credit line, but then it would be just one paymeny. My OSAP loan is $400, my van is $214 and I think my credit line is $75 or so. Not sure what the payment would be on the lager credit line when it isn't attached to the house.

[yeahwhat]

I thought of a couple of other things to consider. How long will the payoff be on the OSAP and van if you don't roll it into the mortgage? Are you taking debt that would be gone in 2-3 years and spreading it out over 25 (or whatever you amortization) instead? Are you comfortable with that?

For us, we've already owed on the loc for 5 years and managed to pay off about half of it (it's all from major house renovations 5 years ago). When it's rolled into our mortgage, we're upping our payments above what they already are (we're already overpaying what we need to) to give us 15 more years on the mortgage rather than the 20 we "should" have left. The loc portion of the loan will be paid off in about 25 months, so we decided that we're comfortable with the pay off time. Our mortgage allows us to pay up to double the required payments, plus 15% per year.

I wouldn't roll my student loans into it because they'll be paid off in just over 2 years if I keep making my current payment.