The Great “Debt-ate”

Mortgage vs. Debt payoff: The Great DEBTate

My goal is to save about $60k for a down payment on a condo in FLL. I also have about the same amount, $60k, left to pay on my student loan. I’ve been going back and forth with which goal I should attack first. On one hand, I want to make the purchase in Florida before home prices rise too much higher, and before interest rates rise too much higher as well. Moving to Florida will also save me a large chunk of cash monthly because of FL not having a state income tax. On the other hand, my student loan’s interest rate is variable and thus tied to the actions of the FED, so I don’t want to wait too much longer to get that principle down lower so that rising interest rates don’t have as much of an effect on the payments.

Do you have an opinion about which goal I should attack first? I’m currently saving for the house AND making minimum payments on the student loan, but doing both at the same time is going to put both goals further out as far as time is concerned.

This is a good question. I would pay off the student loan first.
The fed rate controls your student loan payment. As the rate increases the variable rate will increase as well, making your payment skyrocket. The fed rate does not directly control mortgage rates. Mortgage rates are tied to the thirty year US Treasury Bond. I would bet that given current circumstances that mortgage rates will stay below 4.25% for a while. I’m not sure which part of FL you are looking in, but there are pockets of real estate prices moving up across the US. I see this as your biggest risk, but you could also qualify for more house with less debt. You will also have better cash flow not making the student loan payment and you will be eliminating the risk of a mortgage payment and a rising student loan payment. As far as taxes go, you can still move to FL and rent. This would make you a FL resident and eliminate the state tax.
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By Published On: April 14, 2016

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