Closed on 2 Mortgages this Week!

[CreditInspired]

Wow. Thanks for sharing this amazing story. 

[OmarR]

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@Anonymous wrote:

Also, once Chase found out that I was under contract for a new house, the underwriter started asking for all of the info pertaining to that loan as if he was underwriting that one too.er them. It's my way of paying it fwd for all of the help that I've received from (mostly) stalking this site for the past 9 or 10 months.

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With the "cash-out" portion of the re-fi, it makes sense that they want to make sure everything lines up considering you are picking up another mortgage. If they are going to hand you $XX,XXX, even if it's against the mortgage, they should have explained that to you.

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@Anonymous wrote:

I already have 2 years of public service loan forgiveness that has been certified. I left public service for more money but I will go back for another 8 years and (hopefully) get loan forgiveness before I pay such an outrageous monthly payment

Out of curiousity, how much loss of 8 years of private pay would you incur versus 8 years of public service + loan forgiveness? I am assuming you have done the math and it's still in your favor doing it this way? I do realize that law and medical school debt are entirely different monsters than other school debts, but a decade (counting your previous 2 years) of loss of private pay can be a lot of money depending on what you are doing.

[Anonymous]

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@OmarR wrote:With the "cash-out" portion of the re-fi, it makes sense that they want to make sure everything lines up considering you are picking up another mortgage. If they are going to hand you $XX,XXX, even if it's against the mortgage, they should have explained that to you.

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The "cashout" went directly to paying off a $500/month car note and a $463/month home equity loan. That's almost 1k of expenses that I was no longer on the hook for. The primary mortgage was underwritten taking those expenses into account and I still had no problem being approved because they calculated my loan payments based on the actual amount that I pay. I understand Chase being cautious, but I don't think it's any of their business where money from a loan that's being underwritten and funded by another bank and that has been properly seasoned in my account for 4-5 months is coming from. They didn't need to source the funds because they were seasoned and were not needed at all for the refi. I had more than enough money in reserves in 401k and savings because I chose the 0-down VA loan. In my opinion, they were doing the most. 

[Anonymous]

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@OmarR wrote:

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Out of curiousity, how much loss of 8 years of private pay would you incur versus 8 years of public service + loan forgiveness? I am assuming you have done the math and it's still in your favor doing it this way? I do realize that law and medical school debt are entirely different monsters than other school debts, but a decade (counting your previous 2 years) of loss of private pay can be a lot of money depending on what you are doing.

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As for the 8 years lower public pay + loan forgiveness vs. higher private pay+ 20 year loan forgiveness, I did put a lot of thought into it. I took into account my current age (37) and the need to maximize earning potential now rather than later. I went to law school later than most, so I’m on a shorter investment horizon than my classmates were. I also have a growing family. I would rather make more now and take a govt job later if need be. My monthly student loan payments are considerably lower under the REPAYE plan because of my tax write-offs and household size. They only consider AGI.

But to give you an idea of the numbers and my rationale—

1. I make about 100k MORE (base pay) in the private sector than I was making in the public sector. This means that I not only make a higher salary, but I have more residual income to invest and grow. I also purchase employee stock at a 15% discount, receive yearly performance bonuses that are targeted at 20% of my base salary, as well as restricted stock shares. You won't get this in the public sector. The growth rate of that money invested in stock, index funds and real estate will likely exceed the interest rate of the student loan payments by a long shot. Plus, I have the benefit of compounding that interest earlier, as opposed to working in the public sector now and hoping that I can get a job in the private sector making a comparable salary 8 years down the road and trying to play catch up. It is also much easier to transition from private to public than the other way around. Sometimes being in the public sector for too long can pigeonhole you there.
2. My earning potential will be much higher after 8 years in private vs. public, which puts me in a better negotiating position if I did go back to the public sector. Although I went to law school, I also have a background and currently work in the cybersecurity/data privacy/compliance area and can easily transition to govt because I already had a lot of experience working with military/fed govt before law school.
3. Considering all of that and the fact that I am currently paying around $250/month on almost 280k of student loan debt (thanks to interest capitalization during and after school), I'm better off in the private sector vs. earning significantly lower just to get loan forgiveness. The loan balance is definitely high (I try not to think about it lol), but I have no intention of fully paying it off. My loan payments will definitely increase next year based on the AGI increase, but based on the REPAYE calculator, the most it will go up to is about $900/month vs. paying $3200/month without REPAYE vs. paying $250/month at govt job. The difference in monthly payment with REPAYE v. govt = $650/month or $7800 a year. That's well below the significant difference in pay over an 8 year period and will negatively impact me well beyond those 8 years (lost income, earning potential, compounding interest, etc.). Loan forgiveness just can't make up for it. I'll be better served to invest the money now that would be used for the tax bill 20-25 years after the remaining balance is forgiven.

[OmarR]

Unless I am mis-reading your numbers, it seems like playing around with any type of forgiveness scenario has you losing money.

Why not stay private, pay your loans off fully in 3-5 years, and put it all behind you?

[Anonymous]

Why would I pay off a 300k student loan that will just continue to balloon? I borrowed 180k at most for both undergrad and law school. I've already been on income-based repayment for 3 years so all of that interest would just be capitalized again right on top of the principal that already includes capitalized interest from in-school deferment. These are the things they don't tell students when they make student loans so readily available. As I said before, I'd rather invest that money. I'm not even guaranteed to be living in the next 3-5 years so I would rather work on building assets for my future and my family, than sink all of my money into loan payments just to "put it all behind (me)". I would probably feel differently if I were younger and did not have a child. If I died tomorrow, the loans would die right with me but the assets would pass to my heirs.

It would actually make more sense to stay in the private sector for the next 10-12 years to maximize income and assets. Go public for the next 8 after that and get loans forgiven with no tax implications. Same loan forgiveness timeline minus the tax debt. Whatever payments I make during that time will likely satisfy most, if not all of my original debt and some interest without having to pay for all of the unnecessary capitalized interest that the student loan industry uses to cripple those who are trying to make a better life for themselves. I'm totally at peace with having the loans lingering over my head forever as long as they are not hindering me from enjoying life and building wealth. 

[OmarR]

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@Anonymous wrote:

Why would I pay off a 300k student loan that will just continue to balloon? 

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Um...that's the point. You pay them off before they balloon out of control.

But hey, if you want to keep them around like a pet and hope the game (or your situation) doesn't change in the next 10-20 years, you do you.

[Anonymous]

I think u missed the point. They ballooned out of control the day I graduated and the interest capitalized. Interest accrued daily while you’re in school and u don’t go into repayment until 6 months after graduation so interest is accruing then too. Once u come out of repayment it is capitalized. Fall on hard times (or have a difficult pregnancy + bed rest ) and need forbearance? Cool, we’ll do that. But capitalize all the interest again. Next thing u know, that 150k that u borrowed is 300k 2 years out of school. That’s how the system is designed. No point in throwing good money at bad money just to have a false sense of security because I paid it off early. Then, with my luck, the day after it’s paid I fall ill and have no savings to sustain me (but at least I paid off 500k in student debt instead of putting equity into a house). Nah. I’d rather take my chances the other way around.

I currently have 3 pets. One more won’t hurt me as long it stays in its place. If the “game” changes it won’t be retroactive (because due process and all that good stuff), and if my situation changes my payments will adjust accordingly (hence the name income-based repayment).

[OmarR]

I apologize if I suggested you pay off your debts before they got more out of control. I was clearly out of line.

[Anonymous]

Save your fake apology. I created a post detailing my mortgage journey for the benefit of others, as this site has benefitted me. The student loan mention was only to note that in hindsight I wish I had known more about interest capitalization (which might be helpful to someone moving fwd) and that despite the huge loans, I was still able to buy a house (which may be encouraging to those in similar positions).

You asked me to explain MY logic for making certain life decisions concerning MY student loan debt and MY finances so that you could offer your unsolicited opinion on an issue that was very tangential to the point of my post in the first place. Then, when I disagree with your suggestion, you make a weak attempt to debt shame me in the form of a sarcastic apology. I thoroughly evaluated my alternatives and made a decision based on what I felt was the best course of action for MY situation. Next time, try to appear less judgmental when offering unsolicited advice or don't comment at all. You don't know my full story.