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Contributor

I recently inherited $90k and a condo worth $110k. I live with a roommate and I have no debt. I bring in about $2700/month and my bills total around $500/month. I also recently started online classes for a graduate degree for a position that will bring in about 50% more than I currently earn. The degree will cost approximately $60k, but the increase I will obtain in salary will pay for itself within 3-4 years. I took at student loans to fund the classes as of now. I really want a house and was hoping to get help/advice/opinions as to the route to take. Here's how I see it: 

 

Option 1) Use about $50k for a down payment and take out a mortage for $135k. When the condo sells, put the majority of that towards the mortgage and have the house paid off in a year or two. Save my salary and put away enough to pay off the student loans when the time comes.

 

Option 2) Wait until the condo sells and use $185k to buy a house straight up. Put away a chunk of my salary to pay off the student loans when the time comes. 

 

Option 3) Use about $50k for a down payment and take out a mortgage for $135k. When the condo sells, use the money to pay off the degree and put the rest towards the house and pay the house off over a period of about 5 years.

 

Any input would be greatly appreciated!

5 REPLIES

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One of the things I consider when deciding what debt to pay off first is the interest rate being charged. Which debt will cost me more to keep?
Also, for your particular situation, how mobile does your career (including the upgrade) require/expect of you? If being saddled with a mortgage means you will turn down some lucrative and career-furthering opportunity in the next 2-5 years... Well, that could be something to keep in the back of your mind.
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I agree. Good points. I believe the mortgage rate is 4% and the student loan rate is 6% but will not begin earning interest until I graduate (3-5 years from now). I WILL have to take into consideration the mobility of my next career. Currently, I am a teacher and will be teaching in this area until I graduate and switch careers. My new career will be in the consultive psychology field, which may require me to move. Most mortgages require one to stay in the home for 5 years, but I believe I can pay off the mortgage in that amount of time, so it won't affect me. Thank you for the input!

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When I mentioned mobility and saddled with a mortgage, I guess I was thinking of the difference between ending a rental contract to move away, and leaving behind a house you own (whether paid in full or with current mortgage) and moving away.   For the latter, either you move away and have an asset that you rent out (and maintain) from a distance or you have an asset that you sell while you are moving away.  They're all doable, may involve assigning a local POA to handle inspections/closing, or outsourcing a rental management firm/person.

 

Whatever you decide, at least you'll know you didn't jump into it without some serious consideration!

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Buy a rental property with your money. Let that income fund and payoff your student loan. Then once it is paid, use cash flow to buy more real estate and have your money earn more money than you could make working full time. Then look t buying commercial real estate.
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Hi Matt,

I encourage you to contact our team of Financial Advisors here at USAA who can give you advice based on your specific situation and needs! They can be reached at 800-771-9960. Best of luck completing your graduate degree!!