Our choice was based on interest. Will the money in savings (or in our case investments) pay more interest than the interest on the motorhome loan? We chose to pay off the motorhome and not owe anyone anything.
We had the same dilemma when we hit the road. Our advisor advised us to hit the road debt free. So we paid everything off. Our interest was higher than we earned in savings. BUT....we took the $$$ we would pay on a loan and faithfully banked it...and more. Soon the savings were built back and more.
Debt free is really important when you are on the road and on a fixed income. Save, save, save and then save some more. It is a wonderful feeling
Dianne
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Thank you all so very much. I am going to analyze the interest as suggested. We had discussed the route of paying it off and then putting money back into savings but think we will give that a second thought as well. We will not make a definite decision until after the elections.
You have been helpful and appreciated.
I agree withe DianneOK. Pay off the debt and poke that money into the bank every month. Interest is pathetic right now, but getting it is still better than paying it.
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I am debating close to the same thing, just not concidering full timing. My decision was to set up a home equity loan against the house just incase I need one in an emergency. I was able to get one at a full point below prime. It did not cost anything, and does not cost anything unless I use it. Meanwhile, every day I don't use it I save money, and if I do need it the interest is less, and the amount is still tax deductable. Just a thought...
I would agree with smkettner, don't rush into anything on the payoff.
Do as he says, add to the principal each month.
Try renting the house and put it in the bank.
I have my house rented too, it helps a lot, why let it sit empty as you travel?
If you have any desire to sell your house, then go with a lease-option. Ask a realtor for help if you are not familiar with the rental business.
If you go to just about any bank, you can get a cd, then put the cd up for collateral for a loan. They will charge you from 1 1/2 to 2 % interest ABOVE what you are getting on your cd.
So if you put 50,000 in a cd, regardless of your interest rate, it would cost you from 750.00 to 1000.00 A YEAR or approx 70-80 bucks a month to keep that money available. At the same time, when you take the interest check and add that 80 bucks a month, EACH month you build up cash. cash. cash. cash.
When the green flag drops, the bs stops and the cash takes over.
Now the question is........what is it worth to you to be liquid?
DianneOK wrote: We had the same dilemma when we hit the road. Our advisor advised us to hit the road debt free. So we paid everything off. Our interest was higher than we earned in savings. BUT....we took the $$$ we would pay on a loan and faithfully banked it...and more. Soon the savings were built back and more.
Debt free is really important when you are on the road and on a fixed income. Save, save, save and then save some more. It is a wonderful feeling
Right there (Dianne)is some very sound advice. let me tell ya a story and it ian't about a man named Jed.
I began full-timing debt free and had a pretty good nest egg set aside. pretty young at 55 I suddenly was faced with a tumor in my neck and unknown if it was malignant. I had to wait nearly 2 months for the surgery to find out if cancer or not. A 5 hour surgery later I was elated that it was in fact benign. 2 months later my wife was diagnosed with cancer. 2 major surgeries and treatments later I had racked up just about $250K in medical bills, but fortunately a full cure. Not my share of course. I have great medical coverage through my retirement with a Blue Cross PPO that pays 80%. Now I'm not finished yet. Both hearing aids have quit and I am having a terrible time with my left shoulder and most likely will require surgery. Not including the upcoming shoulder surgery I have doled out about $25K out of pocket toward all this. New hearing aid? $6K (darn sirens and air horns anyway lol) Shoulder surgery? Most likely around $1500, so ad it all up and you're looking at $32,500 or so out of pocket in 15 months time. I retired at 50 from the fire service in pretty good shape.
Now ya have to ask yourself, IF something were to happen, of course it won't it's always the other person, but IF it did. ...do you want to have to borrow against that home you paid off and have payments on a 2nd or try and finance the medical bills and pay interest on that? Just my way of thinking of course, but I'd keep building the nest egg and not let an RV get in the way. Manage your budget and still travel of course and even full-time. Just like Dianne says above Renting the house and continuing to build that nest egg! I only wished I had saved more. Don't let the I want too's cloud the judgment. Just a humble personal opinion from someone who's been there done that.
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When we bought our RV, we had the money and paid cash from savings.
Then, we put back into savings, the payments we would have had to pay.
Result, we made a profit by paying ourselves, the interest on the RV.
If in a savings account, interest does not keep up with inflation.
I would not be in a hurry to minimize my liquidity position. In a down market, cash is king.
I would sell the house rather than rent it out. Having been a landlord for many years, I will never walk down that pathway again. The hassle of whiney tenants, failed credit checks, and repairs having to be done on short notice (when you live there, you fix it on your schedule, with tenants, it has to be fixed ASAP) is more stress that I could take.
Proceeds from the sale of the house go into 2 accounts, one for travel expenses, and one in a managed investment portfolio with a horizon that matches your anticipated time on the road.
Once you cost adjust the house value against repairs, taxes, improvements, utilities, services, interest, and loss of value on furnishings, it is a very poor return on investment.
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