4/10/2006

Advice from Nashville's leading Financial Aid Advisor Dave Ramsey

 
Dave Says
By Dave Ramsey
Author of:
Financial Peace and
The Total Money Makeover

"15- or 30-year … which one?"

Dear Dave,

We financed our home on a 30-year mortgage because we couldn’t afford the payments on a 15-year note. Even with this, we’re having trouble saving any money, paying our other debts and keeping up the house payment. Should we move and sell the house?

Larry

Dear Larry,

First of all, if you couldn’t afford the house on a 15-year mortgage, then you couldn’t afford the house. Period. 

If you’re rolling along and you can’t get out of debt because you’re house payment is so big it’s strangling you, you’re what we call “house poor.” This usually happens when your house payment is more than 30-35 percent of your take-home pay. That’s why I recommend you make sure your mortgage payment is no more than about 25 percent of this figure.

But of all the things I tell me people to sell or get rid of, the house is almost always the last. Having to give up your home is very draining – financially, spiritually and emotionally. Hold onto your home as long as you can.

Let’s try living on really tight budget for the next six months. Give every dollar a name and spend everything on paper before the start of the month. You may have to cut out cable television and put vacations on hold for a while, too. Then, take a really close look and see if you’re getting out of debt and into savings. If not, then you may have to look at putting that house on the market.
- Dave

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