I am building a modular. I have a fair amount of savings to pay in cash, but I also have a lot of credit card debt with high interest rates.
Should I use savings to pay off majority of credit cards after which I will no longer have cash and would need to take a loan to pay for the modular?
Answers | 2
Your question has elements of both mortgage financing and financial advisement. I can help a bit with the former.
What you would need to consider are really the sides of the same coin. You will need to have a certain amount of cash for the modular home whether that's for down payment, closing, or both. At the same time however, if it comes down to you qualifying for a loan, you will need to have the debt-to-income ratios to qualify which is directly affected by the credit card debt you have. Consider that mortgage rates are significantly low right now and probably a lot lower than your credit card rates. You also have the opportunity to "fix" that mortgage rate, unlike the credit card interest rate which is variable.
It may serve you well to talk to a financial adviser here on MoneyTips in regards to this dilemma. You may find that he/she will advise to pay off high interest credit card debt...or at least some of it, leaving you with some cash reserves (which will also be needed for a mortgage loan)...since the money to purchase a home these days continues to be relatively cheap and the home will likely appreciate over time.