Selling home, making a profit – better to pay off credit card debt or put money into new home?
Cookie On My Mind asked:
I have some credit debt left and I’m wondering if I should put the extra money I make from selling my home into the new house I’m purchasing or if I should go ahead and pay off the credit card debt. What is a smarter decision?
Just wanted to say I’m not late on my credit card bills, just wondering if I should go ahead and pay them off in full right away
I have some credit debt left and I’m wondering if I should put the extra money I make from selling my home into the new house I’m purchasing or if I should go ahead and pay off the credit card debt. What is a smarter decision?
Just wanted to say I’m not late on my credit card bills, just wondering if I should go ahead and pay them off in full right away
This is really a personal decision- but I would suggest paying them off, and being debt free. This will help you live within your monthly means. You can always put more money and effort into your new home as you go. Being debt free will help relieve any additional stress, and set forth short term and long term goals for the house. It will then all fall into place, without the extra burden of credit card debt!
Truly the wiser decison would be to pay off the credit cards for two reasons. First of all, if your mortgage is fixed, like most mortgages, it is never subject to change on you. Whereas, credit cards interest is always subject to change, even if you are current and have never missed a payment. If your mortgage is not fixed, paying off the credit card debt will help your debt to income ratio and credit to help your chances of qualifying for a better rate when you refinance. The other main reason is the interest rate itself. The average mortgage rate is typically around 6% versus the average credit card rate of 19%. Financially it would make the most sense to pay off the higher rates first to save the most money in the long run.