The needed context: I inherited money and used it to buy a paid off house several years ago for $335k. It's now worth maybe $380k. The house is a bit of a fixer upper and may need some work to be appealing to the average buyer. I live in a HCOL area where rent on a 1 bedroom is often ~$1,500.
I went to law school, work as a public interest lawyer and not interested in changing that. I have close to $100k in debt, I make $75k a year and expect that to go up to $85k-100k in the next two-ish years. I do not have savings. I'm in my mid 30s.
When I bought my house I was in a relationship and expecting to have kids. I'm now single and not expecting to have kids. I love my house but it's a 4 bedroom in an area I wouldn't have chosen if not for cost (far from stuff, not walkable). I don't need nearly that much house. I like owning my house but I don't actually feel it's a necessity for me.
My current monthly loan payments are close to $900, which is almost a quarter of my income. I have one loan that's still in forbearance so I assume it's going to go up at some point. Even without a mortgage payment it's tight (car payment, insurance, bills, food, etc). I've been trying to get onto an income based repayment plan for about six months and mohela hasn't processed it. Even if I do that I'm just dooming myself to a lifetime of payments forever.
Is it so stupid to sell my house, pay off my student loans and car and go back to renting? I don't think I'd have enough to buy another house where I live. I feel like giving up a paid for house is dumb but also these huge payments and ballooning interest are stressing me out. It sort of feels like I used the money for one purpose and now I would free it up and use it for another. But I'm wondering if ten years from now when I'm paying rent I'll be kicking myself.
Editing to add: I have been renting out the three rooms the last few years. I currently only have one roommate and am super super hesitant to live with three people again. I would consider moving and renting the whole house out but to do that I'd probably need to take out a mortgage to do repairs and then I'm just upping my debt and having to rent somewhere.. that's probably the answer its just super daunting.
Second edit: I don't just want to sell the house because of student loans. I also want to sell the house because it's too big for what I need due to a change in life circumstances, it needs repairs I can't afford, it's far from my job and most stuff I do in the city and just generally doesn't make sense for me in any way except that it's paid for (which obviously is huge).
Should I sell my house and pay off my loans
byu/Capable_Pipe5629 inStudentLoans
Posted by Capable_Pipe5629
19 Comments
Can we go a few steps back? Are you working for a PSLF-qualifying employer? And if so, which repayment plan are you on currently?
Fundamentally with federal loans your options are 1) aggressive repayment, 2) PSLF or similar employer based forgiveness programs, or 3) IDR plan based forgiveness. You should be letting how much you owe and how much you make dictate your strategy here
Also my understanding is that, if you don’t roll the profits from a home sale in to another house purchase? You’ll owe mega taxes on the profit from the sale. It seems incredibly short-sighted to sell a house and throw the money at the loans just to go back to renting without taking in to account taxes and your overall loan strategy, especially if PSLF is an option
lol this is insane. Debt is debt. You could always have $0 income and do forbearance or leave the country and forget about it or maybe even a Democrat in 2028 will forgive it. But pay off your home? To get rid of unsecured debt?
Why not do law that will let you bank a bunch of cash and go back to the kind of law you like once you’re secure?
Two paragraphs in and I can tell you that selling the house is an awful decision. You have a paid off house (only expenses should be taxes, insurance, and maintenance). You make $75k and have $100k in loans but don’t want to change jobs. Just keep the house, make extra payments and be done with the loan in 3 years. You’ll never get a paid off home making $75k staying in public interest. In my opinion, just do the monthly payments on your loans and live life
Are you going to be able to find a 900$ mortgage ever again in your life?
So you’re living alone in a 4 bedroom house in a HOCL area that you own free and clear?
My guy… Use the assets you have. Rent out 3 of those rooms and bring in an extra $3k per month or more.
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NO – you have a paid off house, rent rooms or rent the whole house as income. Take on a second job. I think you could rapidly pay down the student loan debt if PLSF is not an option. Do not sell the house.
If you lived in it during law school with other law students, is it near the law school? Can you rent it out 4 law students (& you rent a nicer 1 br in a better area). At my PT school, apartments were frequently “passed down” to the incoming class.
Focus on the loan, not selling the house 🙂
Check out roommates for income.
Also, you may be able to negotiate loan payments based on income. Edit, noticed you mentioned that. Keep at it!
Hello OP,
It looks like the house was purchased at a really good pricing and then you realized it’s not location oriented to your workplace.
While your career just started and could use a little buff. I say sell the house and use the funds to help you and your partner get it together financially.
Please considered options and think it through before selling:
*I personally think you’re going to kick rocks that you sold the house later down the road. Why? Many of your peers don’t have houses. It’s now a luxury and dream to even own property. With kids on the way. Do you really want them to grow up in a stuffy and noisy apartment?
*If you do sell right now. Where do you or where will you plan to live bruh?
*Company that pays over the average American wages are usually for-profit. So it very likely you won’t or don’t qualify for pslf.
*When you gotten your inheritance. You should’ve paid off your loans and balance between checking, high yield savings, and aggressively put into retirement accounts and personal brokerages. Apply for an apartment first and see how it is.
A house will also stress you out over maintenance cost, emergency repairs like you mentioned, and property taxes. many millionaires I know also live in apartments. Its just their comfort lane and they don’t have kids.
*So let me ask you this. Do you know where your money is going into? If you don’t have savings in your 30s it’s absolutely worrisome.
If you’re struggling paying a $900 in student loans payment. I recommend go over this with your partner and see what can you guys pull back on first. Go over the budget. Can your partner work? Do they work at all before? If you’re the main breadwinner then its going to be difficult. This isn’t the 1990s anymore.
Time will fix pretty much everything while your salary increases over time. You’re just going to be mentally drained and struggle more until you get it together. The fruits of your labor will reward you. It’s just going to… take quite some time.
Find a side hustle if needed. Even lawyers do uber on the side nowadays. Find a way to increase your income would be a good start while also pull back on subscriptions you no longer use and grocery items thats just wasteful like energy drinks and chips uneaten. Stop buying overpriced coffee… learn to make it at home are all good examples. Limit your eat-outs and stop doing deliveries if able.
If you do sell… pay off your loans first!
I would put the loans on some forever plan and just pay the minimum and forget about them. They will get wiped out at some point to free up consumer spending…
If you were starting a business, I would recommend to sell, but just to pay some dumb loan, I would never do that. I won 2 lawsuits in federal court without ever going to law school and it was clearly a scam. Hey you need it for your job, but I’d just write it off as a scam in your mind and pay the bare minimum.
Bro – do not sell that house. Rent it and go live somewhere for less than what you make in rental income. Then use the profit to pay towards your loans. There’s tens of thousands of dollars wasted every time you buy and sell a house. Just hold.
I would not sell the house, especially since rent would most likely be more than your loans. See about reapplying for an income plan or reach out about your application
The burden of heavy
student debt + that of
A paid – for house too big
for your present needs.
What’s the average cost of a 1 – 2 bedroom condo / coop in your area? Could you sell the house, purchase a condo/coop, afford the monthly hoa & free up any real money towards your SL debt?These days home ownership is unattainable for many. Check average rent in your HCOL area -it may be higher than you think.
Unless apt is rent controlled,
your monthly rent could double or more when your lease is up.
Since these are government loans they shouldn’t be treated like other borrowings (e.g., credit cards). It’s all cash flow game – get on income driven repayment asap and maximize your retirement savings. This will reduce your AGI, further reduce your loan payment and generally grow at a faster rate than the debt. My debt is basically the same size it was when I graduated 15 years ago only now I have two houses (about 10-15 years of payments left) and almost enough retirement savings to retire. Wouldn’t be in this situation if I would have been paying $1200/month for a decade.
😂🤣😴
id sell/move just to avoid a long commute, renting keeps you flexible, important when single, and you can live much closer to work.
people really exaggerate the “paying rent forever” thing, first you dont know where life will take you in 5-10 years and… **homeowners pay rent forever too**, in the form of taxes, insurance, HOA, repairs and renovations.
Being a landlord sucks too, double so with tenants under the same roof.
Take that money and pay off all debt, set aside a healthy $50k emergency fund, then use the rest to allow yourself to max out roth ira, hsa and 401k for a decade or more. enjoy not worrying about a tenant, or repair/renovation.
I would definitely sell the house and rent. It’s a big anchor at this point. Renting means more flexibility and free time as your life develops.