What debt to pay when/what categories to save for first?
i am slowly starting to make my way around YNAB and budgeting. I am really, really bad at it and have spent thousands of dollars I wish I had back.
I am trying to figure out how best to pay down my debts.
I have put together a monthly budget with as many true expenses as I can think of (eye opener!) that cost a lot (things like children in school). I understand that I should be funding those first but also have some upcoming debt payments I have to make.
For personal spending I owe:
Individual $2000 (no interest need to make some kind of payment in January 2021)
Visa $4775 (24% interest - about $115/mo min payment right now)
Line of Credit $10,000 (7.2% interest - about $60/mo interest payment)
Individual $13,000 (no interest - I currently pay $200/mo)
Individual $30,000 (no interest) due August 2021
For a house mortgage, weird story won't go into the details but for that debt i have:
Personal loan $5000 (no interest due February 2021)
Line of credit $45,000 (4.6% interest) - currently paying $60/week, just over the minimum payment
Personal loan of $90,000 (no interest due August 2021)
Total: $80,000 (currently pay $240/mo on the line of credit )
For assets (not including salary):
I will be receiving about $65,000.00 cash sometime in the first half of 2021.
I will be receiving about another $50,000 in a year (but after the $90,000 loan has to be paid)
I have other somewhat small chunk in an RRSP and a healthy RESP for the kids.
I own a rental property that pays for its own mortgage and expenses and profits about $10,000/year. Right now the profits are about $5000 sitting in a chequeing account that I think I should leave for a rainy day)
I think this is what I should do but looking for feedback:
1) continue the minimum payments I am currently paying on my personal visa, personal line of credit, the $13,000 personal loan, mortgage line of credit
2) make a min payment ($500) on the $2000 individual loan in January 2021
3) save like crazy for the $5000 I have to pay on a personal loan in February 2021
4) continuously fund my true expenses with whatever is left
these next ones are my real questions:
5) how can I best use the $65,000? fund true expenses? pay debt? savings?
6) get a mortgage with an interest rate that is lower than 4.6% (my lowest debt interest rate) and pay off all the debt or as much debt as i can afford in monthly mortgage payments in which case what is the best use of my $65,000 - a lower mortgage/savings/directly on debt?
7) leave the rental property alone except when it has accumulated some profits put it toward personal debt or use it to invest in the property/another property?
8) do what in what order?
I'm sure I'm being clear as mud. Thanks so, so much!
Hi! Newbie here too. I strongly suggest you go to a website called undebt.it. You enter what got can afford each month and what your minimum repayment amounts are. It will show you every repayment method there is and which one will have you debt free first.
I should add that the monthly $200 payments for the $13,000 I owe comes out of the rental property revenue, not my personal revenue. That feels fine t me right now as it doesn't affect the rental property that much but $200 means a lot to my personal budget. I was inclined to keep that going but now i am reconsidering and could pay it off with a mortgage.
Alice Blue Sander said:
What are lender credits? Also, can you explain what you mean by 'whetheryou increase the time . . . ."? Do you mean increase the amortization of a mortgage?
Lender credits reduce the up-front costs in exchange for a slightly higher rate. It's entirely possible to refinance (or finance, for that matter) without any out-of-pocket expenses.
As far as "increasing the time", I was under the impression you already had a mortgage and therefore a payment and a remaining (amortization) term. (What was originally 30 years may only be 25 years remaining today.) If you refinance for 25 years at a lower rate, you will have lower payments and pay less interest overall. If, however, you refinance with a 30 year term at a lower rate, payments will be even lower but you'll pay more in interest overall. Additionally, the rates are higher for longer terms.
Since you don't currently have a mortgage, the "term increase" isn't really a consideration.