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So what percent is that anyway?

September 6th, 2008 at 09:16 am

The recent post stating 36% total debt and 28% for house go me thinking of our percents.

The only debt we have is the house and car, (though I aught to go pay the car off.)

The total salary is easier so I will use that:

house = 26%
car = 9%

total debt = 35%

Guess my debt is 'OK' according to financial planners.

Though since our salary has increased dramatically that was not true when we bought the house.

total debt = 2.5 times his salary, wonder if that is too high.

And my number one question, how to get rid of the house debt faster than the 30 years? Sure we can pay off the car and then in a few years have the EF back up, but.....we will need a bigger car, so we need to use the car payment amount to save up for a bigger one, can't use it to the house.

I could cut a few bills, but I really don't want to.

Guess I should join the house debt is fine group.

5 Responses to “So what percent is that anyway?”

  1. fern Says:

    Extra prepayments toward the house, even relatively small ones, can make a big difference in the total interst you pay over the life of the loan, IF you're prepaying in the earlier years of y6our 30-year loan.

    Prepayments count for a lot less as you move beyond the halfway point (15 years) cus you're monthly payments contain less interest than they did in the early years, when the payments are mostly interests, not as much principal.

    So i guess it depends how far into your mortgage you are. But it doesn't sound like it's really important to you, so i wouldn't worry about it too much if you're happy with the current state of affairs.

  2. gamecock43 Says:

    house is the biggie...cars are also big debts. You should be proud you also dont have boat debt, second house debt and such like so many others.

  3. disneysteve Says:

    PP, it isn't that your debt shouldn't exceed 36% of income. It is that the payments on your debt shouldn't exceed 36% of income. Big difference there.

  4. nanamom Says:

    Do you pay monthly or every other week. It can cut the payment down to pay every other week instead of monthly.

  5. jIM_Ohio Says:

    The amount of extra payment as a % of the mortgage payment makes a huge difference.

    For example if you had $25 extra to pay towards a $250 payment vs a $2500 payment, logic would tell you that the $250 payment would disappear from budget faster.

    If you can aggressively pay down the mortgage it is a really good deal- increased liquidity (more money in budget) and less debt.

    If you would only make little extra payments, consider other ways to get out of mortgage debt- like investing money aggressively, then when the investment has enough to pay down the mortgage, cash that out and pay it down.

    I have a $390 second mortgage payment. I have $700 available to pay it down in about 23 months. That will wipe debt from 30 year repayment plan to a 8 year total repayment and only 5 years of applying the $700 extra towards it. If I round the payment from $390 up to $400 that wipes 6 years off the 30 year repayment schedule.

    Paying down debt is compounding in reverse.

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