Posted on: 26th May, 2012 11:02 am
I have an idea that will hurt my credit, but make me financially sound at the same time.
At work we all know that layoffs are around the corner. I’m 50, live in a Chicago suburb, and have been looking for a new job making the same salary for 6 months now. I still have 25 years to pay on my mortgage - $835 per month, which includes taxes & homeowners insurance. My house needs many repairs that I can never seem to afford.
There are a few short sales by me for under $50K. The homes are similar to mine - fixer uppers, but not complete rehabs. When I am laid off I’m thinking of cashing in my 401K, purchasing one of these homes outright and allowing my house to be foreclosed on.
My credit will be ruined, of course, however, it’s already bad so I’m not really concerned about that.
The pros are plentiful:
1. The early 401K withdrawal penalties (about $15K) would be manageable without a mortgage payment.
2. If you consider that over the life span of my mortgage I will pay about $150K in interest payments – paying $15K in early withdrawal penalties to own a home outright seems like a bargain.
3. Having no mortgage means a take home pay of just $400 per week would cover all my living expenses, car payments, food, all utilities, car gas, property taxes & home owners insurance. I will be able to manage things while on unemployment and I’m positive I will eventually find a job making much more than just $400 per week. Or – if needed - I know I can settle for a lessor paying job that will pay the bills.
4. Once I’m back working and making a decent salary, no mortgage payment means I have extra money to rebuild my 401K and can afford home repairs.
I’m very intrigued by this idea and am wondering what others think.
At work we all know that layoffs are around the corner. I’m 50, live in a Chicago suburb, and have been looking for a new job making the same salary for 6 months now. I still have 25 years to pay on my mortgage - $835 per month, which includes taxes & homeowners insurance. My house needs many repairs that I can never seem to afford.
There are a few short sales by me for under $50K. The homes are similar to mine - fixer uppers, but not complete rehabs. When I am laid off I’m thinking of cashing in my 401K, purchasing one of these homes outright and allowing my house to be foreclosed on.
My credit will be ruined, of course, however, it’s already bad so I’m not really concerned about that.
The pros are plentiful:
1. The early 401K withdrawal penalties (about $15K) would be manageable without a mortgage payment.
2. If you consider that over the life span of my mortgage I will pay about $150K in interest payments – paying $15K in early withdrawal penalties to own a home outright seems like a bargain.
3. Having no mortgage means a take home pay of just $400 per week would cover all my living expenses, car payments, food, all utilities, car gas, property taxes & home owners insurance. I will be able to manage things while on unemployment and I’m positive I will eventually find a job making much more than just $400 per week. Or – if needed - I know I can settle for a lessor paying job that will pay the bills.
4. Once I’m back working and making a decent salary, no mortgage payment means I have extra money to rebuild my 401K and can afford home repairs.
I’m very intrigued by this idea and am wondering what others think.
Hi Sunshine,
Your plan is good enough. However, the 401k is your retirement savings. Jeopardizing that savings will actually jeopardize your retirement. Moreover, there is no surety that you will be able to get a job. So, you should take the final decision keeping all these factors in mind.
Thanks
Your plan is good enough. However, the 401k is your retirement savings. Jeopardizing that savings will actually jeopardize your retirement. Moreover, there is no surety that you will be able to get a job. So, you should take the final decision keeping all these factors in mind.
Thanks