Kidding about the body parts, of course. But dead serious that your advice is appreciated to solve a complex personal financial crisis!
Context:
My partner and I are starting IVF without insurance coverage. Covid travel restrictions are making it impractical to do this outside of the US and we can't wait much longer (explanation to follow). We've researched extensively and it's fair to say that each IVF cycle is going to cost us about 25k when all is said and done. Our doctors anticipate it will take 3-6 rounds, but we are mentally planning to do 4 rounds max (cost of 100k) and to turn in the towel if it doesn't work. We don't qualify for any of the fancy IVF refund programs or multi-cycle discounts for medical reasons, fyi. Unfortunately, we need money for more than just IVF.... we're aiming to borrow/find 130-200k to get our lives back in order. Yikes!
Financial situation:
My partner recently became credit card debt free but still has crippling student loan debt (close to 200k) and a very lackluster credit score. He's a public servant making about 35k/year and is eligible for loan forgiveness in 8 years; through this program, at least currently, he has very low monthly payments (under $50/month). He has an almost zero balance in his retirement account and very little savings. Like none. Sigh.
I owe the house that we live in, a rental property in another state, have about 250k in my 401k, and about 20k in savings, and my salary ranges from 115-140k, depending on how much time I devote to my second job, and I have excellent credit. I'm getting deployed overseas to a county with almost no medical infrastructure for 2 years. I will lose about 25k in annual income from the loss of my second job, but will have free housing there coupled with an overall lower cost of living (exchange rate, some utilities paid for us, shorter commute, etc). We leave in May 2021 and my partner may or may not be able to work while we are there. (If he can work, his salary will probably still hover under 40k, but, luckily, he will keep building time towards loan forgiveness).
Our primary residence is in a great location that we love, but has turned into a nightmare. First the flood that took out the finished basement, structural damage that was purposefully hidden by the now deceased owner until said flood occurred, then the electrical fire, the roof replacement gone wrong, failed plumbing, etc. The list is long and sad. If we weren't moving away, we would just live with the broken windows, HVAC from 1975, and crummy makeshift counter-top kitchen. If we are renting it out, we have to fix things before we leave. Period. How much will this cost you ask? We don't really know. Our best guess is it would take an absolute minimum of 30k and a heck of a lot of sweat to get the house to the lowest point where it could pass city requirements for us to receive a certificate of occupancy. If we want to make it go from barely habitable to almost pleasant (like turning our mystery basement toilet that sits alone in a cavernous space with no walls into an ACTUAL 2nd bathroom) it is going to take more money. So... now we're looking for 130k minimum or preferably 175k+, to get our life in order.
Isn't this sort of like a sick version of those choose-your-own-adventure stories? Which path to financial despair do YOU choose???
Financial decision time:
1) Refinance primary residence? Rent it out? Sell it?
Purchased 10/2017 for 430k, zillow promises it could be worth 440-460k if the appraiser is completely blind and corrupt. It's a 3bd/1ba with 0.3 acre lot in a suburban location backing to a conservation area. We currently owe 320k from the 344k original 30 year loan, interest rate is 3.75 (paid points), P&I 1593/mo and taxes 555/mo. My personal estimate is that the house has barely held value and would probably still appraise at about 430k but would sell much lower. Our loan officer has give us 3 refinance options:
a) Cash out of 37k with a new 30 year loan and interest rate of 3.45%. This is based on a super high appraisal of 456k. Monthly payment goes up by $58/mo. Closing costs are $3450. My calculations show the lifetime additional interest is over 60k. But, eventually, could we work hard and aggressively pay down the principal to shave this amount down?
b) Cash out of 25k with a new 30 year at 3.45%. Payment stays the same as what it is now and closing costs are $3450. Still based on the super high appraisal of 456k.
c) Traditional refinance - Lower monthly payment by $238/mo with a new 30 year loan at 2.75%. Closing costs drop to $3493. If we weren't looking for a lump sum of money, this would be a nice option. Is there any value in doing this AND pursuing a second mortgage (something I have not looked into at all....)
d) "Find" 30-100k to fix it up and rent it out while we're gone for two years? If we put 30k in, I think we could rent it for about 1.8-2k/mo (less than our "all in" current monthly mortgage of 2.2k/mo). If we put 50k in and were lucky that the repairs went well, we could probably get 2.1-2.4k. If we had about 75-100k, we'd be able to get 2.5-2.8k with a little luck and return to a home (possibly with a toddler) with far fewer headaches. The rental market is hot in our area, but renters at this price point will demand that the second bath be finished, the kitchen looks crisp and that there aren't random plumbing explosions or fires. It's the little things in life.. To be totally forthcoming - 75-100k is not going to get this monster of a 1930's house to mint condition, but we could fix broken windows, replace some utilities, fix some structural, electrical and plumbing issues. And maybe get a modest screened in deck. Ah, the stuff of dreams.
e) Sell it and move on? We wouldn't take a huge visible loss per say, but I've already dumped a lot of cash to fix/maintain the house that we won't get back. We'd probably be able to sell for 400-410k but we aren't going to get any higher given its current condition. If we are not able to do the repairs in (d) then we'd be stuck paying the mortgage for 2 years while we are overseas and the house sits empty. Walk away from our home to avoid throwing good money after bad? This one feels like some serious heartbreak and then what... return and rent farther from our support network of friends/family, hopefully as a family of 3?
2) Refinance or sell rental property?
Purchased 2/2019 for 315k and currently owe 307k with a 30 year not-your-primary-residence rate of 4.75%. Zillow says it is worth 425k, but when I purchased last year the appraisal came in at 415k. It's a 6bd/4ba in a suburb on 0.5 acre backing to a lake in a nearby state that has a relatively even rental market due to its proximity to a commuting corridor and nearby military installation. Currently, P&I $1639/mo and taxes 469/mo and HOA ~100/mo. I've had it rented out for more years (5 total) than I've technically owned it (long story) for $2550/mo. It's 7 years old and so far no vacancies at all. It nets about 350/mo after HOA.
a) Since a cash out isn't possible with a rental property, our loan officer says we can drop the rate to 3.375% and owe $246 less/mo if we refi into a new 30 year loan. Closing costs are $3470. 12 months to break even. Seems like a no brainer, BUT we can legally claim it as our primary residence starting in May 2021 when we go overseas. It's a weird loophole but if we refinanced next year (presuming rates are low) we might be able to get an ever lower rate or take cash out to repay other financial obligations we've taken on beforehand to pursue IVF. Also, just to note, our taxable income may increase if our payment decreases, right? Either way, this option doesn't do much to solve the big picture money crunch but we would still like to figure it out!
b) Kick our lovely tenants to the curb and sell, sell, sell. The market has stayed warm in this particular area and we could probably sell for 420k. After taxes, real estate expenses, etc. we'd have a nice chunk of change. This option has been a big mental roadblock for me - in the medium term this property is very likely to increase in value and I love the idea of keeping it rented out, getting the passive equity, building wealth and having something to fall back on in the future. If we go with this option, I'm going to feel 100% defeated. Our tenants require 90 days notice, so there is also a timing issue... we want to start IVF now and we might be forced to sell in the Fall/Winter.
3) Take a loan from 401k?
With the new COVID rules, I can withdraw up to 100k (payback period is 6 years) at an interest rate of 0.75. The interest goes back directly to my 401k account and there are no penalties, no tax implications, but I will be missing out on having this huge chunk of change benefiting from the market while I work to repay it as quickly as possible. My account has been making about 13% on average (yes, yes, I know I should have rebalanced and generally paid more attention).
4) Finance through an IVF clinic that owns its own lender?
It seems like a brutal conflict of interest that an IVF clinic can be for-profit AND have its own in house lending organization. The max you can borrow seems to be 50k and the APR is 7.99 (lowest possible rate, goes up to 24.99) with a max 6 year repayment period. If we borrowed 50k, we would be paying back a little over 60k based on my estimates.
5) Put the first IVF cycle of 25k on a credit card. Drink a lot of wine. Think about selling body parts. All while impatiently hoping that YOU are far, far, far smarter than we are and have a brilliant idea to save us....
With sincere thanks.
Submitted June 18, 2020 at 09:41PM by capaeb https://ift.tt/2CmfCuE
