Land/mortgage question...

[LittleRedWren]

Hello, everyone! I'm new here, but feeling inspired by these forums! Hope I can join in!

I have a question about prioritizing debts other than the mortgage. Through various "grand plans" we've, ahem, *I've* had over the years, my husband and I make payments on two houses and two pieces of land (what?!? How did we get here?). I'm resisting the urge to explain it all. Basically, should I count everything but the house we live in as part of the debt snowball? The house in town (71,000 owed) is currently being rented by relatives (almost, they're working their way up to paying the full rent), and we owe 15,900 on the house we're in. The amounts owed on the two other lots are 13,319 and 24,300(ugh, but this one is next to our house, and they were going to clear the woods, and it doubled the acreage with the house, and...and...and...)

Should I combine the total owed on the three lots and call THAT the mortgage? Assuming the house in town will have rent paid this year? Or roll them into the snowball? Oh, and the lots are on 15-year loans; not much longer to go on the 13k.

Thanks for any input. And yes, we are tossing around the idea of selling one lot to pay off the other two. We just have trouble letting go...

I've got other glitches in the plan, but I'll start there! We really need to knock out the debt - I have more grand plans for this year!

[Greebo]

Your private residence (and the adjacent land) would be BS6, definitely.

The property you almost have rented to relatives - if you're losing money on it, stop the bleeding and sell it. If you're actually PRESENTLY making money on it, even if they're not paying the full rent, you can move it to BS6 AFTER your personal residence (YOUR shelter comes first).

What is this other lot? This third lot? Why did you buy it?

[khaski]

Greebo said it well, as always- where YOU live is your 'mortgage', all others count as 'other debts' for bs2. I would start a -selling and whittle those property #s right down, even consider the adjacent land too.

[LittleRedWren]

Thanks for the responses.

That's where my thinking has gone - the house we are in would be the mortgage.

The third lot was actually the first we bought, with intentions to eventually build a house on it. This house came up for sale (old and cheap) a couple of lots away, and it saved us money on rent and travel to work on the property while we paid extra money toward the first loan. But this place was/is a fixer-upper, and the focus eventually shifted to making it liveable. It's also our fallback. If DH lost his job, we could still stay here on a McDonald's paycheck. Which is just ironic thinking, since a lot of the money we have wasted went there, instead of into real financial security.

That first lot is still probably the best one we have, even with nothing on it. I think it would sell for enough to pay off the other two, plus a major chunk of debt, but DH wants to feel the satisfaction of owning it free and clear, and thinks we will still build on it someday. I'm personally thinking about whether and why we want to keep any of it, and I'm usually the one who holds on to things.

The bleeding on the house in town has been a drawn-out issue, but they have now gotten to within $100 of covering the mortgage, insurance, taxes, etc. We had to start by getting to the point where they were paying the utilities. Of course, this week we picked up the mail there, and there was a letter about escrow owed + a raise in insurance due to renters. We argued against this a year ago, because we weren't receiving any rent, but, oh well, I guess it applies now. The payment includes everything, and will be going up possibly to $800, because we don't have the $1400 difference up front.
DH and I are at a crossroads about the whole thing. The relatives that live there have worked hard to get to this point, so it feels crappy to consider pulling it out from under them.

So, we feel stuck. Mostly from emotional attachment, even to bad decisions. I was the driving force behind getting us into most of these plans, and feel responsible for getting us unstuck, or at least getting the things paid off quickly. DH is very stressed about all of it, and tends to shut down, to keep from killing me, I suppose. He'd rather pay things off, but wants the debt gone, too.

Sorry, I'm long-winded, this stuff is always wrapped up in other aspects of our life, and I'm trying to pull out the threads that are relevant.

Will sit down and discuss with DH, and make a decision about the renting situation. I'm not so sure it wouldn't be a relief to everyone involved to get out of it, somehow. We like to give, not lend, and it's uncomfortable because we can't do that anymore. We're all very close, but it's awkward, and I'm sure they'd rather have family than landlords.

Wow, putting it out there where others can see it sheds some glaring light on things.

Thanks again!

[mombottoo]

If it were me, I'd dump the house you don't live in and the lot that isn't attached to the property you are living on. Then I would consider both the mortgage & the property payment to be one bill. We purchased the 3 lots next to our home when they came up for sale...same principle as you, didn't want anyone building or clearing the lots. We consider those lots to be part of our residence even though they have separate tax bills.

Is there any way your relatives could qualify for a loan to take over your mortgage? The payment on $71,000 would probably be less than the payment you are making assuming you spent more than $71,000 on the house when you started buying it.

[Greebo]

The bleeding on the house in town has been a drawn-out issue, but they have now gotten to within $100 of covering the mortgage, insurance, taxes, etc. We had to start by getting to the point where they were paying the utilities. Of course, this week we picked up the mail there, and there was a letter about escrow owed + a raise in insurance due to renters. We argued against this a year ago, because we weren't receiving any rent, but, oh well, I guess it applies now. The payment includes everything, and will be going up possibly to $800, because we don't have the $1400 difference up front.
DH and I are at a crossroads about the whole thing. The relatives that live there have worked hard to get to this point, so it feels crappy to consider pulling it out from under them.

Can they get financing to buy it from you? If you've been paying down the mortgage, then with the super low rates today they might be able to get a more affordable payment AND assume responsibility for their own shelter (and stop being dependent upon your charity)

[LittleRedWren]

Thanks for the suggestion. I don't think their taking over the mortgage is an option at this point, although in the beginning that's something we had all talked about as a future possibility. But DH is going to call about possibly refinancing; a lower payment would help the current situation, for sure. We've had that house for four years, so, not much paid down. I think the original loan amount was 76,000, but we could get a lower interest rate. And they are very close to covering it. (I made it sound so one-sided; their moving here has been a wonderful thing for my family after losing my dad three years ago. We all pulled together to be here for my mother. Just need to get our money back on track.)

DH does not want to sell anything right now, thinks we need to first try to get the income up and see if we can pay things off. We will go with that, and see how we feel once some of these credit cards are gone. I'm guessing things will look a lot different to both of us at that point.

So: medical bills, credit cards, land, truck, then this house and land, with the other house hopefully being paid by rent. Sounds like a plan!

[Greebo]

Here's the last question that really matters.

Are you in a position to continue to support your family members while making headway on your own immediate family's financial situation?

In other words - does supporting them make it impossible for you to get out of debt?

If you can get out of debt and support them and you want to keep helping them, and you're NOT simply enabling their bad behavior, you can afford to do it, it's family, go ahead.

On the other hand, if they were behaving like chumps, taking advantage of you, or most importantly, if continuing to help them meant you were putting yourself on your own road to bankruptcy, then you would have a moral obligation to your OWN family to stop the madness.

Based on all you've said, I get the impression that you can afford to keep this up - so by all means do so.

WRT the list you gave:

So: medical bills, credit cards, land, truck, then this house and land, with the other house hopefully being paid by rent. Sounds like a plan!

Just to be 100% clear:
Baby Step 1: Mini Emergency Fund of $1,000
Baby Step 2: All non real estate debt that as an individual debt is less than half your income.
- medical bills
- credit cards
- truck
- the non attached lot if its < half your income
All above in order of smallest to largest.
Baby Step 3: Fully funded emergency fund of 3-6 months of expenses
Baby Step 4: Retirement investing in place
Baby Step 5: Educational planning for children in place
Baby Step 6:
- this house and land FIRST
- the other house and the other lot if it wasn't in BS2 in smallest to largest order

Don't forget the other steps.

[mateosbaby]

This doesn't have a ton to do with exactly what you should do, order to pay stuff off, etc, but when you said you got yourselves into this mess - I must ask, who is in charge of finances? If you, I would say to dh, "It is now your job. I obviously cannot handle it." If he's been in charge and allowing you to make these big decisions, again I would say to him, "I obviously do not have the logic and big-picture thinking to handle making these decisions. I will give you input, but from now on, you make the final decision." In either case, you're taking the responsibility of future problems off your hands, while still accepting responsibility for the current problems.

My $.02.

[Greebo]

This doesn't have a ton to do with exactly what you should do, order to pay stuff off, etc, but when you said you got yourselves into this mess - I must ask, who is in charge of finances? If you, I would say to dh, "It is now your job. I obviously cannot handle it." If he's been in charge and allowing you to make these big decisions, again I would say to him, "I obviously do not have the logic and big-picture thinking to handle making these decisions. I will give you input, but from now on, you make the final decision." In either case, you're taking the responsibility of future problems off your hands, while still accepting responsibility for the current problems.

My $.02.

Disagree.

Final decisions should be joint decisions.

I never dictate to Ceashels how we'll spend X, or how much we'll spend on Y, and neither does she to me. We discuss, we agree or discuss more until we do, and then we commit.

[Nishu]

Disagree.

Final decisions should be joint decisions.

I never dictate to Ceashels how we'll spend X, or how much we'll spend on Y, and neither does she to me. We discuss, we agree or discuss more until we do, and then we commit.

I disagree. Telling someone they're no longer allowed to make decisions is what's wrong. Making a joint decision to leave one person to handle the money is just fine. Different strokes...

[LittleRedWren]

Here's the last question that really matters.

Are you in a position to continue to support your family members while making headway on your own immediate family's financial situation?
)

That is a HUGE question. One reason I was still working and reworking the numbers. I didn't like the answer, and I wasn't sure how realistic it was to expect them to make the payment. Talked to them this weekend about it, and they gave us enough (they've been paying weekly as their income has gradually increased) to cover a fourth of the payment, including the increase! We're still going to find out about refinancing, but this is a relief, and talking about it helped.

Still rearranging that snowball - I know the debts should go from smallest to largest, but there is one large credit card that keeps wanting to jump in line...it's really obnoxious that way.

[LittleRedWren]

This doesn't have a ton to do with exactly what you should do, order to pay stuff off, etc, but when you said you got yourselves into this mess - I must ask, who is in charge of finances? If you, I would say to dh, "It is now your job. I obviously cannot handle it." If he's been in charge and allowing you to make these big decisions, again I would say to him, "I obviously do not have the logic and big-picture thinking to handle making these decisions. I will give you input, but from now on, you make the final decision." In either case, you're taking the responsibility of future problems off your hands, while still accepting responsibility for the current problems.

My $.02.

Thanks, mateosbaby, it's a valid point. Currently, he makes the income, I pay the bills. The control freak in me would like to argue that I'm actually the big picture, logical one, but that control freak has gotten so used to winning that argument, she's gotten a little blind to her own bad habits.

Honestly, I'm afraid to hand it over. I almost did it yesterday, during a "discussion", where he suggested this very thing, but I worry - then again, that's me wanting to still run things.

Don't know if it will happen. I had typed up a super-long post about the issues DH and have with working on our finances together, but realized that I was typing it for myself, and that it was stuff I needed to take a harder look at.

I guess it boils down to us both wanting our way, but I do want us to work together. I don't think he really wants to be responsible for the bills, but if I could be brave and hand him the reins, it might help in other areas, too. Accountability would be great for both of us. And I'm sure there would still be plenty of discussion... though I would have to keep my mouth shut for a while, to give him a fair chance!

[LittleRedWren]

WRT the list you gave:

Just to be 100% clear:
Baby Step 1: Mini Emergency Fund of $1,000
Baby Step 2: All non real estate debt that as an individual debt is less than half your income.
- medical bills
- credit cards
- truck
- the non attached lot if its < half your income
All above in order of smallest to largest.

Okay, I'm putting this out here. Again, it's helping me to look at this where other people can see it.

We are now current or making payment arrangements on everything.

BS1: - We don't have our baby emergency fund yet, but as soon as I finish our taxes, we will have it in place. We did have $100 available, which we decided to add to a credit card payment, just to feel like we were making a dent in things, and because I was so focused on paying them off that I forgot to include the medical bills in the snowball!

BS2:
Medical #1 32.00 - Will be paid this month
Medical #2 83.80 - Will be paid this month
Medical #3 317.98 - $50/mo. arrangement
Medical #4 444.25 - $50/mo
Medical #5 735.00 - $50/mo - this balance should decrease, it wasn't sent to insurance
Medical #6 829 + - $100/mo - this balance will increase a bit when the final statement comes in
CC#1 - Discover 1853.83 $43/mo 12.99%
CC#2 - Dell 1759.98 $53/mo 22.24% I know it should be first. Another compromise, I'll explain.
CC#3 - Amazon 2729.23 $59/mo
>Corner lot could go here, at 13,319 456.37/mo<
Truck 18,785.24 381.53/mo 7.44%
CC#4 Citibank 24,324.35 571.50/mo 16.24%

Even if I don't include it in the snowball, the corner lot will be paid off within 34 months.

I'd REALLY like to move CC#4 up, it is our oldest debt, and involves combined leftovers from when we were ALMOST debt-free all those years ago. It's a monster that kept growing, because I had around a 4% rate on it, and we thought it was smarter to pay everything else, first (but we were still using it!!!). Super-smart, huh?

On that note, the compromise is that I've agreed to "play with snakes" until we get a truck emergency fund built in addition to the BEF. DH occasionally travels for work, and it's somewhat unpredictable, but it looks like he will be making a few trips in the near future. The agreement is that we will let him use the Discover card for travel and emergency repairs. All expense checks would be used to pay off the card (which wouldn't take long with no repairs). Then we would replace it with a cash account funded in the same way. I'm hoping this won't be an issue for long. We agree that we need a fund; the kids and I are hoping to travel with him this year, and we'd feel more secure. I hope we're not being super-smart again, but the limit is $2000, and I don't think it can be increased. DH was planning to open another card, so the compromise was this - one snake, and it goes first in the snowball.

Okay, take-home pay averages around $5000, which we can definitely increase, and we'll have to if we really want to do this. Every dime goes somewhere. We squeaked by on $500 for groceries/food last month, including very few stops at fast food places. But we stayed home most days, and used up the food I had stocked.

I've cut subscriptions, other than one that is homeschool-related.
I will probably cut one of the direct sales businesses I'm in, because I'm not earning, and won't without more time invested. The other business does bring in a bit.
Once we get to next month's check, and through some medical bills, we should really be rolling!

[Greebo]

I disagree. Telling someone they're no longer allowed to make decisions is what's wrong. Making a joint decision to leave one person to handle the money is just fine. Different strokes...

No, I can't agree, and I can't agree, VERY strongly.

Met too many people who agreed to "let the spouse handle all the money matters", who later in life found themselves destitute because spouse put up a great front right up until they died or left the spouse who wasn't involved in the decision making.

Then there's the spouse who wants nothing to do with the money as an excuse to be reckless/childish while laying all the responsibility of making it work anyway on the responsible spouse (mommy/daddy syndrome)

I handle most of the fine details of the money like making sure payments are made, etc., but HOW the money will be spent - determining how much each category gets, etc, as well as current balances and cash flow - cea is made aware of all of that and voices her opinion on any changes.