‘Pay off all debts to buy more house or leave money invested and opt for smaller place?’: I have to decide between upgrading my living situation for my son or keeping my investments intact. What should I do?

Hi Money Minder,

Hey there! I’ve got a bit of a housing dilemma that I could really use your advice on. So, here’s the lowdown: the cheapest house in my son’s school district is a 2 bedroom for $460k, but the next best option is a 1 bedroom condo for $260k. I’m a single parent with 50/50 custody of my 5-year-old. Right now, we’re sharing a room even though he has his own. There are some 2-3 bedroom condos a few blocks away that are in a good district, though not in his school district for elementary school but still in the same middle and high school district. They are going for mid $300s.

I make $80k a year and have awesome credit (800+). I have about $20k in debt for my car and student loans, all with sub 5% interest. The car debt is at 0% interest with $15k remaining. I’m pre-approved for a $400k VA loan, which can go up to $500k if I pay off all my debts. I have the cash to do that, but it’s currently my emergency fund earning a sweet 5% interest. I also have enough in my investment account to clear my debts, separate from my retirement savings.

So, here’s the big question: should I cash out my investments to pay off my debts and get a standalone house in my son’s school district? Or should I opt for a small condo in the same area, keep my investments, and just go full-on Ikea with the storage solutions? Alternatively, should I consider a place a few blocks away that’s more budget-friendly but not in his school district?

Looking forward to your advice!

Farewell from Seeking Help.

Response from THE MONEY MINDER:

Hello There,

Congratulations on being proactive and seeking advice to make the best decision for you and your son’s living situation. It’s commendable that you are considering your options carefully and weighing the financial aspects along with your son’s needs.

Given your situation, it seems like clearing your debt to increase your loan approval amount for a standalone house in your son’s school district may not be the most practical choice at the moment. You mentioned having a good budget standpoint for a 2-3 bedroom condo a few blocks away, which could be a more feasible option. While it may not be in his elementary school district, being in a good school district for middle and high school could also offer excellent educational opportunities for your son.

Keeping your investments intact and opting for the more affordable condo while maximizing space with clever storage solutions sounds like a wise decision. Maintaining your emergency fund is crucial, especially with your financial commitments and uncertain co-parenting dynamics.

It’s essential to prioritize stability and financial security for both you and your son in making this decision. By choosing a practical option that aligns with your budget, you can ensure a comfortable living situation while also safeguarding your financial health. Remember, you can always reassess your housing situation as your circumstances evolve in the future.

Take your time weighing the pros and cons of each option, considering what matters most for you and your son’s well-being. You’re on the right track in seeking out the best path forward. Best of luck with your decision-making process and finding the perfect home for you and your son.

Farewell from THE MONEY MINDER.