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We owe about $140,000 left on our mortgage. The company I work for is going through bankruptcy and I expect the company to dissolve in the next few months. As one of the key employees I have been offered about $50,000 to stick around and help wind the company down.
I have no new job lined up yet and expect it could take several months to find employment.
Option A: take that money and put it all towards the mortgage in one lump sum. Thus getting closer to paying off the house which is a goal we have. That would get our mortgage down to $90,000.
Option B: put the money in the bank and “live” off it while I find a new job.
My wife has a small job, I have a little bit of savings, and with unemployment benefits I feel we could get by for a period of time if I go with option A.
If I go with option B, I feel like I would just slowly bleed through that money and at the end of the day not have much to show for it.
Little bit more risk with option A as I don’t have a new job lined up yet. More security with option B but could burn through the money with nothing to show for it.
What does the Vital brain trust think?
I have no new job lined up yet and expect it could take several months to find employment.
Option A: take that money and put it all towards the mortgage in one lump sum. Thus getting closer to paying off the house which is a goal we have. That would get our mortgage down to $90,000.
Option B: put the money in the bank and “live” off it while I find a new job.
My wife has a small job, I have a little bit of savings, and with unemployment benefits I feel we could get by for a period of time if I go with option A.
If I go with option B, I feel like I would just slowly bleed through that money and at the end of the day not have much to show for it.
Little bit more risk with option A as I don’t have a new job lined up yet. More security with option B but could burn through the money with nothing to show for it.
What does the Vital brain trust think?
If you can get another job pronto...then throw what's left of the $50k at the mortgage. That wad of money is your lifeline...don't give it to the bank.
And if you’re not already, I’d be investing before paying extra on a mortgage.
The Shop
You can always throw it at your mortgage at that point but if it takes longer than expected to get the new gig then that $50k is gonna do you more good in your bank account (or maybe cash on hand given the state of the world) than it will by saving you a little interest on your mortgage.
I don't like the idea of living off the money because it will go to zero with nothing to show for it.
You might consider option C. Buy a new dirt bike.
I think you can find a job pretty easy. Its an employees market. Good luck.
And I would add wait 2-3 months at the new job before throwing any extra $$ at the mortgage just to be safe.
Once you feel comfortable ask the mortgage company what's your true PRINCIPLE payment is each month.
Don't know if you have a 30 year mortgage or what (I had a 15 yr originally) but see if you can condense to a 10 year (low interest) mortgage and by paying the WHOLE principal payment I paid it off in 8 years and saved about $78K!
Like I said in the other thread. "Interest is $$ down the toilet".
I'm not rich enough to be able to light cigars with C notes...
It's nice to have a safety net, just in case. You shouldn't have too much trouble finding work these days, but you never know how that will change.
You didn't mention whether you will still be earning wages from the company or if the $50,000 is your pay for "X" number of weeks while the company goes out. That changes the equation quite dramatically. If you'll still be earning wages, then by all means, put a large sum on your mortgage. You'll basically be moving your retirement date a little closer to today.
@Falcon, I will be paid my normal wages for the next few months. There is also a chance I may collect severance on top of this “retention” bonus. But that’s not quite clear yet.
@plowboy, I’ve been with current company for 12 years. First as Director of IT and for the last five years as CIO/CISO.
It’s been a good paying job. Tons and tons of stress though.
I think it will be quite difficult to replace my current income. Good paying jobs are filled by people who don’t want to leave them. I’ll be over qualified for a lot of mid-level jobs.
There's a reason big business have cash on hand AND running debt.
(I saw your comment about this job already being stressful)
I’d maybe consider a nice week-to-week fee for helping “wind things down” & start job surfing immediately.
I won’t be surprised when you nail down something that’s better than you’d expected.
Good luck!
casino.
Grape...you ever heard, "Choctaw Bingo" by Ray Wylie Hubbard? Give it a listen... it'll make ya smile. (All the places he mentions are real...very familiar to us Okies, Arkies, Kansas people).
Pit Row
In this situation the last thing I would do is put it towards a low interest rate house loan..
Keep it as a cushion..maybe you’ll get a new job right away and can then put it towards your house later on.
With this current job market, no reason you wouldn’t have a new job before your current one ends..
As a mortgage lender my advice is to not put money on mortgage unless you really don't need it. Mortgage debt interest is(usually) tax deductible. It's easier to put money into the mortgage than it is to get it back out. Of course this all depends on your personal goals & financial situation.........
Good points!
Stick it out and get that lump sum money. If worse comes to worse, you could bridge your income with a part time or min wage job for a few/weeks or months just to cover the bills. Go work at Lowe's garden center or something stress free like that until you get your ideal job.
I wouldn't use the lump sum on your mortgage. You would be better off paying off credit cards, auto loans, etc. first. If you have none of those, take the lump sum and invest it into something relatively conservative & let it grow. Whatever you do, don't just park it in the bank and let it sit there.
Not having a house payment to worry about feels like it would lift a big weight off my shoulders should I not be able to find employment for awhile.
Maybe I’m too fixated on paying off my house.
take the 50 k, put it into an account and use it to fund more retirement , Roth IRA, etc. Some you can use, if you need it to make mortgage payments. , keep it in reserve. You can always do the pay off your mortgage thing if everything goes south. be essentially bankrupt with no debt.
Ideally, you want to have your savings make you money tax free or deferred, and interest on your debt as a write off on your income if possible.
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