Living on a Budget, Saving Money/Mortgage/car

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Question
Hi Kindred
Next year our mortgage comes up for renewal. There is only about 60K left to pay off, and we are hoping to get that done before we retire in 5 years. The plan was to consolidate all the loans, and get a newer vehicle.
I am now wondering if it might be better to get a new or close to new vehicle at 15-20 K, and pay for that with a separate loan, either from the bank or a dealer? My thinking is that a newer car would get us past and well into retirement, and with less principle on the mortgage we could still pay it off faster. What do you think? Thanks!

Answer
Dear Susan,

I never recommend adding debt to a mortgage.  Consolidating all debt on low interest cards or even a low interest bank loan, sometimes; but not the home.  If the goal is to be debt free in 5 years, and it's realistically doable, then keep the loans separate and pay them both.  

The reality of refinancing the home mortgage to consolidate is not viable for most folks.  Most people end up with all their debt spread out for the length of the new mortgage.  The only advantage to consolidating debt is to obtain a possibly lower interest rate, therefore a quicker pay-off.  If you have a chance to get a lower interest rate on your mortgage renewal, you could actually pay extra toward the principle without increasing your payment.

Homes and vehicles, in my opinion, should be kept separately as debt.  No need to put all your "eggs" in one banker's basket.  

I wish you well and much happiness.

Kind Regards,
KD Liz
www.thelandofgoshen.com  

Living on a Budget, Saving Money

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Kindred Beisinger penname K D Elizabeth Beisinger

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I can answer questions pertaining to budgeting, savings, debt reduction, and total freedom from debt. I can assist in prioritizing expenses and obligations. I am willing to share and offer guidance in realistic money management, modest investments, and financial freedom. I am not an investment counselor, broker or accountant, I am a missionary that does not do fund raisers or ask for donations.

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I live comfortably and have been debt free since I was 40.

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