“I am afraid of not having enough cash for a house down payment”: Should I pay off my credit card debt or save for a down payment on a house?

Hi Money Minder,

Hey there, I’m in a bit of a pickle. My credit score is pretty good, I have a pre-approved mortgage loan, and some money in investments waiting to be used as a down payment on a house. But here’s the kicker – I also have some credit card debt hanging over my head thanks to moving around a few times. My savings account isn’t earning much interest, and I’m torn between paying off the credit card debt and saving for the house.

I really don’t want to get a second job because it would take a toll on my mental health. Any suggestions on how I should move forward?

Thanks,
Financially Confused

Response from THE MONEY MINDER:

Hello There,

Hello there, based on your situation, I can see that you are juggling a few financial responsibilities at the moment. Firstly, congratulations on having a strong credit score and being pre-approved for a mortgage loan. That’s a significant milestone!

Given that you have a pre-approved mortgage and a considerable amount in both savings and investments, it seems like you are well on your way to achieving your goal of owning a home. However, the credit card debt is a concerning factor due to its high-interest rate.

To address your concern about using your savings to pay off the credit card debt, here’s a practical approach. Evaluate your cash flow and create a budget that allows you to pay off the credit card debt gradually while still saving for your down payment. Consider allocating a portion of your savings to reduce the credit card balance and continue to save aggressively to replenish it.

In terms of interest rates, it might be more beneficial in the long run to pay off your credit card debt with a 16.99% APR using your savings, as opposed to earning a lower APR in your savings account. This will save you money in interest payments over time.

Lastly, I understand that taking on a second job might not be feasible for you due to mental health concerns. It’s essential to prioritize your well-being while managing your finances. Consider exploring other income-generating opportunities that align with your mental health needs or finding ways to cut expenses to accelerate your debt repayment.

Remember, striking a balance between paying off debt and saving for your future goals is key. By taking a strategic and realistic approach, you can work towards both financial stability and homeownership. Best of luck on your financial journey!

Farewell from THE MONEY MINDER.