Going into short term debt as a means to a long term goal of debt free life?
Results 1 to 12 of 12
  1. #1
    Registered User Jamauk's Avatar
    Join Date
    Nov 2007
    Location
    Poulsbo, WA
    Posts
    2,116
    Post Thanks / WTG / Hug
    Rep Power
    22

    Default Going into short term debt as a means to a long term goal of debt free life?

    How's that for the longest title ever?!

    Ok - right now we have a small amount of debt. We have two mortgages, one on our primary house & one on our rental house (the rent we collect covers the mortgage payment). We just bought a piece of raw land and we'll start making payments on that June 1. We have two car loans and a Home Equity Line of Credit (we used that for a downpayment on the land).

    Our house is on the market and once it sells we'll pay off this mortgage and the HELOC and have about $5K left over. We currently have about $11K in savings.

    We are planning to buy a used mobile home to put on the property while we build (we're going to look at one at the end of this month, the asking price is $8500, we think we can get it for around $7000). We'll pay cash for that.

    We need to get the mobile home moved, water hooked up, electric hook up, septic tank installed, county fees & permits which all total around $20,000. We also need to clear the land (we plan to do this ourselves) and we'll purchase a used tractor/backhoe to do that (we're guessing around $10,000).

    Obviously all of these numbers don't add up and we come up quite short on cash! So, we're thinking of getting a cash advance on our credit card and using that money. Once we get moved in our monthly expenses decrease signifigantly and we figure we could pay the debt off in less than six months.

    Then on to building our house. Our land loan will roll over into a construction loan - which is like a line of credit, we'll draw on it as needed and once the house is completed it'll roll into a mortgage. We plan to build as much as possible out of pocket, but we'll obviously need to use some of the borrowed money. When its all said and done, we think (hope?) we'll have a mortgage of about $150,000 (land + house). We plan to live in it for about five - seven years and get it completely paid off. Then we'll sell it (in today's market, the house will sell for about $425,000). We'll take that profit and start all over again, this time on our dream property of about 20-50 acres and build our dream home - similiar to one the we're building, but on a slightly larger scale.

    So, in the end we've reached our debt free goal - its just making me nervous right now as we seem to be collecting more debt than we're used to. We've worked (and reworked and reworked again) the numbers and I know we'll be fine. I keep telling myself, "but its not "consumer debt", its not stuff"...but still.

    Has anyone here used temporary/short term debt as a means to an end? What was your experience?
    Thanks in advance & thanks for sticking with me during this llllooooonnnggg post!

  2. #2
    Registered User IntlMom's Avatar
    Join Date
    Jan 2007
    Location
    I.O.W.A.!!!!!
    Age
    50
    Posts
    3,714
    Post Thanks / WTG / Hug
    Blog Entries
    3
    Rep Power
    31

    Default

    ok, my head hurts reading your post! lol
    It sounds like you have it all figured out....my hubby is a number cruncher, he'd have a heyday working and reworking those number.
    Still, yea, I'd be stressed and holding my breath too! ('specially with the cash advance on the credit card)

    jessica, you are going to get some ppl say "yes to do this", and others that will say "no way". You just have to do what is comfortable. Me? I'd be freaking out, but my hubby would do it and I'd be stressed out the whole time.

  3. #3
    Registered User Jamauk's Avatar
    Join Date
    Nov 2007
    Location
    Poulsbo, WA
    Posts
    2,116
    Post Thanks / WTG / Hug
    Rep Power
    22

    Default

    Quote Originally Posted by IntlMom View Post
    ok, my head hurts reading your post! lol
    It sounds like you have it all figured out....my hubby is a number cruncher, he'd have a heyday working and reworking those number.
    Still, yea, I'd be stressed and holding my breath too! ('specially with the cash advance on the credit card)

    jessica, you are going to get some ppl say "yes to do this", and others that will say "no way". You just have to do what is comfortable. Me? I'd be freaking out, but my hubby would do it and I'd be stressed out the whole time.
    I've said it before and I'll say it again - I think our hubby's would get along quite well!!! I think we may be married to twins!!

    I realize I'll get a lot of different opinions I just wanted to get everything out there - I'm still freaking out, but seeing everything spelled out like that has made me feel a little bit better.
    Thanks!

  4. Remove Advertisements
    FrugalVillage.com
    Advertisements
     

  5. #4
    Registered User forHISglory's Avatar
    Join Date
    Nov 2007
    Location
    Right Here
    Age
    71
    Posts
    3,849
    Post Thanks / WTG / Hug
    Blog Entries
    11
    Rep Power
    43

    Default

    Hi
    We incurred debt when we built our house. We had a goal: to have the entire house debt paid in 5 years. We made it, but it was sure lean for a while! So I guess you would call that a short term debt.

    Using the credit card makes me nervous. I know that the debt is inevitable, but I am cautious about the interest rate on that debt. We went back to the bank and asked them to boost up our amount of the construction loan and home equity loan. The rate was lower than credit card rates. I know that the home equity loan could be used on taxes; don't remember if the construction loan was or not.

    Here's hoping that you all and your bank make decisions that work well for you! You have an exciting journey ahead of you. Just treat it like the adventure it is, and enjoy the ride!
    Spiritual:
    "You are fearfully and wonderfully made." Please... respect life.

    Financial:
    Debt free, hoping to stay that way!


    MY BLOG: glorybug.wordpress.com


    1. Keep on writing.
    2. Get some balance in my life.
    3. Lose weight. Hopefully 20# this year.
    4. Continue to be looking for how God wants to use me this year.


  6. #5
    Registered User FrugalMomof3's Avatar
    Join Date
    Jan 2006
    Location
    Northern NJ - PBurg
    Age
    48
    Posts
    9,379
    Post Thanks / WTG / Hug
    Rep Power
    29

    Default

    Wow my heads is hurting from reading this post, lol but it sounds like you have a plan. You will be saving alot of finance charges in the long run so it's well worth the added expenses. Best of luck

  7. #6
    Registered User dianne9106's Avatar
    Join Date
    Sep 2007
    Location
    NoVa
    Age
    49
    Posts
    568
    Post Thanks / WTG / Hug
    Rep Power
    15

    Default

    You really need to check into the interest rate on a cash advance on a credit card. My husband about keeled over dead when I accidentally took one out. We put it back right then, so no big harm done.
    I know the reason you are planning to buy a trailer and put on the land is to be close for the work. But how about renting somewhere while you build. That way you avoid all of the hook ups and money juggling. I know you do have to have put a septic tank in and get the permits, but I think long term you may be better off to rent.
    I think maybe you should go back over these numbers and look for any little surprises. You will also still have two car loans through all of this, plus your regular expenses. I admire your plan for building your dream home - but I def get a financial adviser to take a look at your plan for a second opinion. Good luck!

  8. #7
    Registered User
    Join Date
    Sep 2005
    Location
    Massachusetts
    Posts
    893
    Post Thanks / WTG / Hug
    Rep Power
    17

    Default

    A couple things to think about ...

    Could you take out a home equity loan on the rental place instead of a credit card advance?

    As far as whether renting or living in the mobile home is a better idea, how much are rents in your area and how many years are you planning on taking to build the house? Who is doing the actual building - you or a contractor?

    You are talking about spending $20,000 on a temporary item. The question is for how long? How long in an apartment equals the $20,000? What are you going to do with the mobile home afterwards?

    The mobile home is something that is sellable afterwards, but with rent there is no mega outlay of cash in advance.

    What happens if it takes 6 months or so to sell the current house? How does that affect your plans? Where does all the stuff in the current house get stored in the meantime?

  9. #8
    Registered User Jamauk's Avatar
    Join Date
    Nov 2007
    Location
    Poulsbo, WA
    Posts
    2,116
    Post Thanks / WTG / Hug
    Rep Power
    22

    Default

    Quote Originally Posted by ironmaiden View Post
    A couple things to think about ...

    Could you take out a home equity loan on the rental place instead of a credit card advance?
    That's a great idea - I've talked to DH this morning and we've decided we need to do some more research to find the lowest interest rate possible for the loan - be it a HELOC, signature loan, etc....

    Quote Originally Posted by ironmaiden View Post
    As far as whether renting or living in the mobile home is a better idea, how much are rents in your area and how many years are you planning on taking to build the house? Who is doing the actual building - you or a contractor?
    Rents run about $1500/mo in our area. We are building the house ourselves and we're shooting for 18 months to build (we live in a mild climate so we can build year round)

    Quote Originally Posted by ironmaiden View Post
    You are talking about spending $20,000 on a temporary item. The question is for how long? How long in an apartment equals the $20,000? What are you going to do with the mobile home afterwards?
    I'm sorry, I should have been more clear - having the hookups, septic, land cleared, etc...is all stuff we will have to pay in the next six months regardless of whether we move into a mobile or rent. All of these items have to be in place before we can start building. The only money that is associated with the mobile home is the cost of it ($7000) and moving it (about $7500). To live in a rental for 18 months would be about $27,5000.

    Quote Originally Posted by ironmaiden View Post
    What happens if it takes 6 months or so to sell the current house? How does that affect your plans? Where does all the stuff in the current house get stored in the meantime?
    We already have storage unit that we put a lot of our stuff in when we put the house on the market. We anticipate keeping that until we move into the new home.

    Also, I found a free mobile home on freecycle this morning that we are going to go look at early next week.....don't know what shape its in right now - but free is better than $7000, right?!

    Thanks everyone for your input! You are raising a lot of good points that we may or may not have thought of otherwise! You guys are so smart!!!

  10. #9
     is offline

    Join Date
    Dec 1969
    Posts
    0
    Post Thanks / WTG / Hug
    Rep Power
    0

    Default

    I didn't crunch all of the numbers, but I don't see a problem with it. As long as you pay the credit card back in the time frame you plan on - and it sounds like you're going to! - I'd go for it. I would just double check the rates and such on a cash advance. I know that our credit cards send us "convenience checks" to use all the time - the last one carried a 0% APR for 12 months, but had a 3% transaction fee. Still, it's probably worth it - just make sure to check out the terms and conditions.

    On a more philosophical level, yes, I do believe in using short-term debt as a means to a long term goal of debt-free.

  11. #10
    Registered User FrugalWitch's Avatar
    Join Date
    Sep 2005
    Location
    Alabama
    Age
    56
    Posts
    1,184
    Post Thanks / WTG / Hug
    Rep Power
    19

    Default

    I agree it is a headache inducing number-crunching post.

    You're braver than me. Any plan that requires that many "ifs" to fall so perfectly scares me. (ie If this happens and if that happens then if this happens we're on the gravy train)

    Given the current housing market I'd be leery and no, I personally wouldn't take on credit card debt for something that sounds so convoluted, but that's just me.

    Best of luck whatever you decide to do.

  12. #11
    Registered User stinkbug's Avatar
    Join Date
    Nov 2007
    Location
    Home of the Blue Turf
    Posts
    1,435
    Post Thanks / WTG / Hug
    Rep Power
    22

    Default

    I'm a chicken too. Perhaps you've had better past experiences, but I've been down the road of everything having to fall into place perfectly, and it rarely goes as planned. Just too many variables in the next year or so for me to feel comfortable with that. But again....I'm not much of a risk taker. I spent most of my adult life struggling and hoping things fell where they were *supposed* to....that's how I ended up homeless, and then a single parent. Now that my life is back on track, I won't take those risks again. JMO

  13. #12

    Join Date
    Apr 2008
    Posts
    307
    Post Thanks / WTG / Hug
    Rep Power
    0

    Default

    Dealing with property, especially building, is such a huge investment it's very difficult not to go into into at least a little bit of debt. Not many of us have that kind of upfront loot just layin' around. As long as you're comfortable with your plans, I'd say full steam ahead, but I'm not so sure you seem so comfortable.

    For me, personally, using a cash advance on the cc would worry me too much. Is there anyway you could get another small loan, or somehow add to the loans you have currently for your properties?

    I wish you lots of good luck and smooth sailing, I know building can be incredibly stressful.

Similar Threads

  1. new short term goal - used car
    By Momto5RN in forum General Chat
    Replies: 15
    Last Post: 04-18-2012, 01:44 PM
  2. Long term goals vs short term goals
    By dwnloom in forum General Chat
    Replies: 7
    Last Post: 08-18-2011, 05:33 PM
  3. Replies: 3
    Last Post: 01-14-2011, 07:14 AM
  4. My long, mid, and short term goals
    By Sari in forum Goals and Dreams
    Replies: 6
    Last Post: 09-21-2006, 10:16 PM

Tags for this Thread

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •