We are blessed to have our home paid for but do have note on Mtr.hme which is affordable. However, with gas so high our expendable fun money is not what it used to be. We are retired and have been thinking of full timing. We could take savings and pay of mtr.hme and then rent our home...Since you all seem to be pretty savy I would like to pose question..Would you pay off mtr.home and have little left in savings or leave savings and not be able to travel so much? Of course the rent on house would probably help defer cost of living but also would be needed to keep for up-keep on home. Confused...Advice
Good for you on the stick house. That's a wonderful feeling to have it paid off.
My thoughts would be to hold onto your cash for now. There is no hurry and we need to wait until after the elections to see when things will settle down and rebound. Since you are lucky enough to be retired, maybe you could find a part time/flex time position that you could enjoy to increase your "fun money." With my small business, retirees make up 90% of my company. Most of them are part time/flex time staffers and love it, and I love having them and their knowledge.
I have studied Dave Ramsey, and have really learned to manage what little money I have much better.
Count your blessings!
’07 Coachmen Mirada 310DS
Counting my blessings with my high school sweetheart.
3 kids, 39 foster kids(not all at once) 2 boys currently
Do you have room for a child? Consider fostering/adopting a child. Thousands of children are in need of a loving family.
Seems wrong to take savings out to place on a depreciating asset that may depreciate even faster given the current fuel issue (assuming you have limited $$ resources.) Remember if you need fast cash for an unseen reason, you just can't turn around and sell an RV for what you have into it.
If you need more logic, figure out 4% return on a CD, less the interest you'd pay on a loan, then don't forget to add in the tax deduction for a second home. The loss may not be that great on a monthly basis for the option of holding onto a large dollar amount for a possible emergency.
Remember that if you have a $50,000 loan on the RV at 7% interest then you will be paying $7 a year to have a $100 loan on the RV. WHile $7 does not sound like much, a $50,000 loan is 500 of those $7 payments in interest each year. So you are paying about $3,500 in interest (depending on your loan value and interest rates).
A second home interest is tax deductable (because it has a kitchen, bedroom and toilet facilities) however if you are in a tax bracket where you no longer itemize, then the interest is not really tax deductable because if you use the minimum deductable instead of itemizing. And if the $75,000 that you have sitting in the bank earning interest will be taxed as you earn it (unless you are buying very low paying tax free bonds). Lets say that you have $75,000 earning 4% or $3,000 a year, then is taxed 18% by the feds and 5% by your state. So $690 will be paid in tax, leaving you 2,310 ahead. But are you really ahead? You are paying $3,500 in RV interest, so paying off the $50,000 loan would leave $25,000 in the bank earning 4% earning $1,000 a year less 23% tax or $230, leaving you with $770 in interest and no $3,500 RV loan costs.
I would say pay it off and then you will have an extra $700 (or whatever your payment is) each month that you can spend on the RV for fuel, or whatever you want to do with the money. Remember that you don't have 50 years to spend it all!
If you feel like it, try full timing. However if you have no experiance with renting out your house, and don't have close friends to rent to (that will still pay the rent and keep the place up) you might want to contact a property management company, they will get the credit checks done, call the plumber for you and clean or replace the carpets between renters, as well as follow all the laws in your states.
I full timed for about 3 years and love it. I have found many free places like the North Rim of the Grand Canyon where you can camp in many of the meadows. I just make a reservation at the North Rim campground about once a month to dump the holding tanks and refill with water, then back to my "Private Meadow".
Golden has it. If you are paying more in interest on the loan than you are gaining in interest on the savings acct, you are, in fact, losing money. It will come down to just what the figures are in your particular case but, if I were you, I would ask my CPA or banker to help you look at your figures and then decide.
You don't say what the interest % is but assuming it's around 7% it would be a big mistake to pay it off. Especially in retirement cash is very important in case of many different type of emergencies. You can always let the MH go if you have to but once you have used up much of your cash, you are sunk if you need the money for an emergency. Besides if you have the cash reasonably invested you should be making at least 3% to 4%, and hopefully more over the long run, so the interest in the MH is really only 3% or 4%.
Once the economy improves and you can, I'd sell your home. I've had rentals and they have done very well for me but I'd never have one when I'm not there to oversee it. If you go full time, the sale will provide you with plenty of cash to enjoy the MH.
Personally, you may need to see a competent accountant because we don't have pieces of the puzzle we really need: how much cash? What's the house worth? What tax bracket are you in? How well do you do in investing money? How's your health?
2008 Keystone Springdale 252
2004 Chevy Silverado, 5.3 L V8
Prodigy brake control and Equal-i-zer
Retired and traveling all we can!
Whenever we tap into savings it is reluctantly and then we ask ourselves, What did we save the money for? To enjoy our selves in our retirement years or a nursing home? I would probably pay it off if it meant I could be traveling more. There may come a time when you can't travel and will have plenty of time to sit around the house.
I do think as others suggested it might be wise to wait a few months to pay it off to see what the economy does. If gas increases significantly more than it is now that may have a large influence on your decision to travel more frequently.
Paul and Karen
New to us 93 Pace Arrow
01 Tracker Toad
Would have to basically agree with John & Joey. Remember, your motorhome is a depreciating item. How would you replace your savings and how fast could you do it? Even at todays low dividends on savings accounts, its important to have them there. (Is it any wonder Americans don't save more, when we get a big fat 1% dividend on them? I'm talking about savings that we want to be able to get to quickly in case of emergency, not money tied up for longer periods of time.)
You mentioned about renting your house out. You could use that to help offset the cost of fuel or other expenses. We have 2 rentals and leased our house out and have great luck and success doing that. Our daughter-in-law handles all the rental issues for us, so that is a big help.
You can manipulate your travel and lengths of stays so that your not taking a big hit every month on fuel costs as well. We have modified and changed our frequency to travel with longer stops and stays.
Good luck
Ron & Carolyn
Sadie the Irish Terrier
Happy the Lakeland Terrier
From sailing yacht to land yacht
KE7BZC
M/V Lothlorien GO HUSKIES
Depreciation has nothing to do with the loan. It will depreciate the same regardless of the loan balance.
I would not use more than half the savings to pay down the loan. If half pays it off then fine do it. If not then take a bit more time. Get the house rented and see where your cash flow is really at. Better to keep some in reserve for a possible eviction or repairs needed for the house. Tenants can be expensive at times and I suggest 6 to 12 months rent in the bank minimum. Once the rent is piling up in your savings then start doubling or quadrupling the payment to have the loan gone in a year or two max.
2001 F150 SuperCrew 5.4 Lariat Offroad 4x4 Tow Package 4.10 Truetrac
2006 Keystone Springdale 249FWBHLS
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