Use The Cash To Ditch The Insurance?
Scott came into some money and wants to use it to drop his private mortgage insurance. Does Dave know a better use?
QUESTION: Scott came into $20,000 and he has $16,000 in debt left. However, their home has mortgage insurance and with the change in the market, he can refinance the house and get rid of the private mortgage insurance. What they would save there plus the lower payment would save them more per month than what they pay on the debt. They make $120,000 a year. Which should they do?
ANSWER: No, it’s not. Get out of debt and be done with it, then work on the house later. With your income you can do both; it’s not going to take you long to pay that house down. By this time next year, both of these things will be done. All we’re arguing about is which would you rather have for 6 months. Stick with the Baby Steps and be done with the debt snowball.
You get a sense of freedom when you become debt free except the house, then when you pay off the PMI, then again when you pay the house off.