Pay extra on student loans or save for house?

Pay extra on student loans or save for house?

Postby C_F » Mon Oct 04, 2010 9:00 am

I'm currently renting and paying $450 a month. With the house price range and location I am looking ($50,000 or less in the Cleveland, Ohio area. Very possible to find a nice starter house in that range), I would pay not too much more a month (say $550 total) for a house including mortgage, insurance, PMI, and taxes (The bank did the math, not me). I have found a program for the city I want to buy where they give you an $10,000 no payment interest free loan for as long as you live in the house you buy. That is used to cover the down payment. I've done all the leg work and I know I qualify, but now I have to save for closing costs and stuff.

Here's my problem. I have about $30,000 in student loans. Most of them are around 6.5% interest (kinda averaging them) but I have two Private loans with 9%+ and 11%+ interest. Those two total to about 5 grand of my debt. I had been sending about $400-$500 a month EXTRA to the highest rate loan trying to pay off my loans asap.

My loans just went into repayment in August so I haven't done this for too long. My goal was to pay off my loans in 5 years THEN start saving for a house (Thinking by the time I'm 30 I would buy a house). But now I'm feeling like renting for that long is not a wise option since I really am happy with my job and don't plan to leave the area.

So I am thinking of saving that $400+ a month for buying a house. I know the interest rates on my private loans are high and I'm wondering if it would be unwise to stop paying that extra. I guess my thinking was the $450 a month I spend on rent over the years is much worse than the interest I would rack up saving for a house, even if it took a year or so. I've been renting for about 3.5 years now so I've lived on my own for some time and I feel ready for the next step.

What would you do or tell me if I were your daughter? I'm wondering is it at least ok to save the money just so I can have options? I mean, let's say I saved 5 grand in a year. I could always decide not to buy and just throw that into student loans. But if I don't save anything and pay extra on the loans, I'll never be in a position to buy.
BTW, student loans are my ONLY debt. I don't use my credit card (athough I charged $3 to it the other day because I heard they might close it for inactivity) and I bought my car with cash.
BTW, student loans are my ONLY debt. I don't use my credit card (athough I charged $3 to it the other day because I heard they might close it for inactivity) and I bought my car with cash.
Please don't tell me to stick with my plan. I've thrown three different plans out there so I have no idea which one you are talking about.
C_F
 
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