Mortgage advise…extra income, should it be our priority?

Deal Score0

I am going back to work after several years off raising kids. This move will see our (modest) family income rise to more than double its current rate. We currently have a home loan of $ 85000. I want to match the repayments my husband has been making so we are effectively paying 200% our repayment requirements. Is this a good plan or would the additional income be better spent on a second mortgage for an investment (rental) property? Any advise would be greatly appreciated.
The bank says they would lend us $ 300000 based on our predicted combined incomes, is this too good to be true? I feel very wary about paying 50% of our income in loan repayments! Is that the norm?
Payments of 200% our required monthly repayment would be much less of an impact but will it make a big difference in our loan term?

My mother hasn’t been paying her rent and we may be getting evicted in the next week. I will have to move in with my sister but she only has 2 rooms and she already has a daughter so if this move is permanent I will have to stay in the living room with my mother. If this is the case I figure I could just get a place of my own but I work at borders and I do not make enough to rent an apartment regularly. So does anybody know which apartment buildings do the low income housing thing. I mean like I’d only have to pay like 200 a month for rent. Does anybody know how to get this. BTW I don’t want to live in the projects, they are horrible.

  1. Reply
    February 22, 2011 at 8:37 pm

    I don`t give you advice to morgage any thing for extra income–you will be trapped in a loan-cycle. Try to manage -reducing your extra expenses–Deferment of consumption is the best process.

  2. Reply
    February 22, 2011 at 9:11 pm

    Making paying down your home mortgage a priority can be a good thing, IF you have the rest of your financial house in order:

    – all other non-mortgage debt (including cars) paid off; credit cards paid in full monthly
    – an emergency fund of 6 months of expenses in a savings account, money market account or CDs
    – maxing out all retirement plans available at work
    – contributing to a traditional or Roth IRA, if eligible
    – college savings for the kids, if you are doing this

    Paying down your mortgage, but not paying it off completely, ‘traps’ equity in your home, where you can’t easily get your investment if you need it. Even if you have a HELOC in place, if a disaster occurs or a job is lost, the bank can stop you from taking draws on the loan.

  3. Reply
    February 22, 2011 at 9:19 pm

    I really don’t understand why banks approve people to finance SOOOO MUCH of their income. You must have good credit. And then they have the nerve to think you are underspending when you don’t allow yourself to borrow it all. We bought our house years ago and refused to spend any more than an amount that was $ 40,000 less than they approved for us. They thought we were soo cheap, but I dont care, because I wanted to be COMFORTABLE with our payments not stretching. 50% of your income seems like a BIG STRETCH! ANd your starting a new job…what if the job is not right for you. Double payments on your existing mortgage will drive your existing debt down FAST!!! The impact of interest is soooo huge on a large loan. You know if you pay on just the scheduled dates and amounts you will pay that 85000 at least 3 times to cover the interest and principal. Remember the truth in lending disclosures that show how much you would pay in interest by the end of the loan….it is SOOOO HUGE!!!

    Leave a reply

    Register New Account
    Reset Password