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Home > Cash, debts, sale, refi, etc.: various calculations

Cash, debts, sale, refi, etc.: various calculations

March 11th, 2015 at 04:50 pm

snafu asked a good question about the interest rates on the debts I'm considering taking on in order to pay off other debt. At this point it's hard to keep everything straight, so I thought I'd lay it out in an entry.

So the two main things I want to do are close on the sale of the condo, which I estimate will cost me $28,300, and pay off the promissory note to the duplex seller, which is $26,500. So $54,800 total.

I have $33,857 in available funds in our checking account. Of that $10,818 is cash we've saved up. The rest was accumulated by either taking on debts or delaying retirement and other contributions:
Owed to a friend $80
Owed to SL & AA Pax funds ($40 each) $80
Owed to AS retirement funds $2,723
Owed to Roth IRAs $5150
Slate credit card balance $10,540
NT extra student loan $4,466

I need $20,943 more to get rid of both the condo and the promissory note. I have a $15,000 line of credit and a $5,500 reserve line with my bank, which leaves just $443 to come up with. AS is expecting a few freelance checks in the next week or two that will easily cover that.

Interest rates/payments of the existing & proposed debts:
Promissory note (what I want to pay off):
5.375% until 08/2016, then 5.875% until 08/2019
Current min. payment (interest only): $118.70
Goes up to $285.96 (interest + principal) 09/2016

Slate credit card:
0% until 12/2015; 12.99% after
Current min. payment: $105

NT extra student loan:
6.365%
Current min. payment: $25
(interest may be variable, and payment may go up at some point since right now it basically just covers interest. The site is terrible -- I'd have to go find the original application or call them to find out.)

Bank line of credit (not borrowed on yet):
9.25%
Min. payment: Dunno...$275? according to online calculator

Bank reserve line (not borrowed on yet):
21.9%
Min. payment: Dunno...$156? according to online calculator

None of the interest rates are as favorable as the promissory note, but everything else about that loan is UNfavorable, so I don't mind paying extra to get rid of it.

***

I haven't really laid out the landscape of what bills will look like if both deals go through, partly because I'm still waiting to hear how the refi would affect the main duplex mortgage payment. But here's how it will look after the condo sale:

Before:
Condo mortgage $1030.32
Condo dues $696.03
Income: parking spot rental $85
Duplex mortgage $3149.72
Income: lower unit rent $1074
Promissory note $118.70
total: $3835.77

After with just condo sale:
Duplex mortgage $3149.72
Income: lower unit rent $1074
Promissory note $118.70
Slate card: $105
Extra student loan: $25
total: $2324.42

And, assuming a refi would take $300 off the payment (don't think I'd consider it worthwhile to do it for less of a benefit than that), here's what it would be:

After with both condo sale and refi/promissory payoff:
Duplex mortgage $2849.72
Income: lower unit rent $1074
Slate card: $105
Extra student loan: $25
Bank LOC $275
Bank reserve line $156
total: $2336.72

So if my estimates of the LOC and reserve line payments are correct, it looks like the refi would only be beneficial to the monthly budget if it took more than $300 off the main duplex mortgage. This is good to keep in mind!

7 Responses to “Cash, debts, sale, refi, etc.: various calculations”

  1. snafu Says:
    1426132860

    I nearly chocked on my coffee at the interest rates for LOC & RL. There are 3 professionals securing income for your mortgage, 4 if you include your tenant. Hope you're checking on-line for more acceptable rates. I've an unsecured LOC at 2 points over prime. I'm not home to check documents for LOC secured by our Condo. With savings garnering ridiculously low interest, your financial institution seems greedy.

    nust my unedited opinion

  2. ThriftoRama Says:
    1426163037

    Okay, all of that made my head spin for a minute. You are juggling a lot.
    I guess I'm confused about what the promissory note is and why you have it, and what the terms are.
    I would take snafu's advice and shop around for the best possible rate. You'll be stuck with that rate for a while, so every percentage point matters.

  3. klarose Says:
    1426171483

    Agree with Snafu. Why is it over 20%?

    I could walk into my bank today and get a loan for 6% for anything I wanted, and I'm young and have barely any credit history.

  4. klarose Says:
    1426171653

    You are trying to juggle alot. I can't even imagine, I was bugging when I had just one loan. lol.

    If it was me, I'd do what I had to to get out from under the Condo. Then with the extra cash flow you will have, I would quickly pay down the promissory note.

  5. ceejay74 Says:
    1426174659

    I know, that reserve line interest is ridiculous; it's just the one they gave me automatically with my checking account, and I've barely used it for the past 8 years. Luckily, I think I could shift stuff around pretty quickly so I wouldn't be paying it for long. For instance, my Amex card has only a 3.9% interest rate, so I could carry a balance there instead of paying it off, and use that money to pay down the reserve line. And AS is expecting more freelance checks that aren't factored into the budget.

    I could try and take out a better interest loan after closing too. The only reason I don't want to shop around for a new loan right now is I don't want any activity to screw up my credit report while my broker is working on refi approval.

    I know it sounds complicated, but it makes perfect sense to me! As long as the refi will do better than $300 on lowering our mortgage payment.

  6. cptacek Says:
    1426195006

    How about this:
    Sell condo. Pay it off using the $33,857. That leaves $5557. Refinance the house. Selling the condo gives you back $1511 (rounded) and refinancing the house gives you back $300.

    $26,500 (promisary note) - $5557 = $20,943. $20,943 / $1811 = about 11 1/2 months. Continue making payments as they are for a year and then pay it all off then. Of course, with your tenacity, you'll probably get it done in 6 months, and my figures didn't take into account the payments you will be making along the way.

    However, I would pay $80 back to the friend before starting to save.

  7. ceejay74 Says:
    1426200174

    That would be the ideal solution, cptacek. Unfortunately, sounds like the refi won't happen unless I get rid of the promissory note, which is essentially a second mortgage on the property.

    If I could roll that debt into the new mortgage, that would be great. But it would require another assessment, and comps are not promising that mortgage + promissory would qualify as less than 80% of home value.

    My lawyer friend/tenant/neighbor is going to help me wrap my head around stuff tonight. Smile

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