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How much is the house worth now? Where do you live? Are you able to refinance the house? If so, you could still get a much lower rate than you currently have. 5.75% is on the high side, so this is one way to cut back hundreds every month. What is the property taxes and insurance like on the house?
I'm looking at your budget and see a lot of opportunities for improvement.
1) $1500 in groceries for a family of four is extremely high. That can be cut in half. A family of four can shop at a "nice" place like Trader Joes for less than half that.
2) I know it sucks, but $400/month for kids sports memberships is ridiculously high. I could never justify spending that on my kids vs. putting in toward college or just meeting the monthly budget.
3) $138/month for an alarm is very high. What kind of alarm is that? Is the crime that bad there? Mine is $17/month, but I don't know what is offered in your area.
4) Get rid of cable until out of debt. I know it sucks, but it'll get you closer to your goals. Replace it with Netflix and/or Amazon Prime. Will save you hundreds every month.
Is it possible for your wife to work full-time, or if daycare is too $$$ for what she could earn, is it possible that either of you could take on additional part-time work until all the extra debt is paid off?
My gut instinct says we need to downsize, sell the house and get into a more manageable mortgage. Here is the bio and info. 40yr old, married, 2 kids ages 4 & 8 and wife stays at home. My income varies but has never dropped below 170K and typically is between 180-205K. We've got a ton of debt, big mortgage and apparently live way beyond our means.
Background. Bought this house 4 years ago for 892K.
Mortgage: $5350 (625K balance 30 yr fixed at 5.75%)
HELOC: $400 (120K balance 3.9%)
Auto: $533 (28K balance 5yr 1.9%)
Utilities: $470 (average)
Water $125
Sewer: $70
HOA: $120
Alarm: $138
Home phone/internet/cable: $243
Auto insurance: $102
cell phones: $195
Kids sports membership:$400
Gas for cars: $400
Groceries: $1500
Going out to eat: $250
Credit card: $15,500 (0% till May 2014) typically pay $1200/month
Credit card: $15,000 (0% apr)
Credit card: $25,000 (13.25%) pay $150/month
401K loan: $11,000 (paid back $400/mo at 2%)
Income: 170K-200K
401K: 158K
Cash in savings:25K
Emergency fund: 0
College savings: 0
I feel like the this home is killing us. The mortgage, HELOC, the 15K/yr taxes is just too much for a single income family.
Found a smaller less expensive (very dated) 3100sq/ft home for sale. Could probably buy for 520K and immediately reduce the mortgage and overall debt burden. Not to mention 1/2 the taxes and a significantly lower APR on the mortgage.
I probably don't even need to ask this but I will....should I consider selling this home and buying a less expensive one? Seems pretty obvious to me that we are living above our means.
Is the $180-205k income take-home or before taxes? If take home, with a little discipline and possibly a refinance (see my above post) and laying off the credit cards, you should be perfectly fine - you make a TON of money. If before taxes, what is take-home?
Also look at the $400 a month you spend on cable/alarm bill and the $400 kids sports membership. Call the alarm/cable company and tell them you are switching services to save money (I suspect they will cut the rates to retain you, ADT did that for me a couple years ago).
I had a similar conversation with my wife regarding her car. Payment was $800 a month (0% GMAC), fuel was $500/insurance $200......so $1500 a month for a GMC Yukon that SHE HATED! I thought she liked it though I was less enthusiastic about the $1500 commitment and she flipped out when I told her it was $1500 a month to drive it.......it got traded in less than a month. Sometimes an open communication will allow a married couple to make better decisions together.
you need to grow up.
you're spending all of that money when you have a credit card debt 25k at 13%
if I were in your situation I would move heaven and earth to retire all of that debt.
u are leading the typical American over extended lifestyle.
I had a client with an 11K sq ft home, 6mm build/4.5mm mtg plus 120K a year in taxes/insurance. This was a dream home, 6 car garage with all the bells and whistles (they spent 10 years dreaming about it/2 years building it). Finances blew apart, guy had to declare bankruptcy and tossed the house in the BK since it wasn't currently worth the payoff. Because of the BK he got to live there about 18 more months. His words: "living in a mansion and being broke is just about the worst thing ever!"
He bought a replacement home that is about 2K sq ft (just a bit bigger than his former 6 car garage) and he said it is the best feeling in the world! A house that is 100% usable, easier to maintain and affordable to the point you can actually do other things with your time and your money.
Note: I have had 2 clients do this (the other was a divorce/downsize) and he said the same thing (big house is nice but smaller house is just less headache).
Sure sell the house if you want but get RID of the credit card debt and the 401K loan and you will feel a lot better. I also agree that your grocery budget is WAY WAY too high. I don't spend that much with 3 teenagers in the house and I'm not that much of a bargain shopper or coupon clipper. Where in the heck do you shop and are you eating lobster every night???
Refinance your mortgage at least, pay off your credit card debt. Stop going out to eat. Your 4 and 8 year old can skip their $400/month camps for a year or two, I'm assuming there is some pretty hefty spending on clothing and other fun given your breakdown and no real savings. Why are you putting $150/month into your high interest card and $1200/month into your zero interest card? Take those credit cards, put them in a bucket of water, FREEZE the water and don't touch those cards until they are 100% paid off.
Just shopping more reasonably for food and not going out along with paying off your credit card debt will free up over $2000/month that can be put into savings. I'd be tempted to tell you to take your $25,000 out of savings and pay off that big card and then be very aggressive with the other two and have them GONE by this time next year--probably even sooner.
Your issue isn't your income and your mortgage, it's your spending habits.
I agree with the others. Also, your children are only 4&8 what is the deal with having to stay in the same school district, is it the only good district in the area? If there are no other options, ok, but if their are, why not explore them. You may be able to get a bigger home for less money in a different district.
House is a big nut and both spouses aren't thrilled about it anymore.....5750 a month and 15K in taxes is 84K a year!
I'm not saying it's not expensive, but even if they downsize, with their spending habits that house is going to be just as 'costly" for them...because it appears they just spend everything they have.
$15k taxes on a $900k house is super low, less than half the Texas tax rate! I would assume the $5750 is PITI.
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