The Ramsey Show - App - 7 Tips for First-Time Home Buyers (Hour 1)

Episode Date: March 6, 2023

Dave Ramsey & Jade Warshaw answer your questions and discuss: "Should I claim all my kids on my taxes?"  How much you need in savings, 7 tips for first-time home buyers, from the blog: Tips for First-Time Home Buyers, "Should we do an interest rate buy down?" from the blog: What Are Mortgage Points and How Do They Work? "How much of my inheritance do I owe my sister?" AKA why you should always have a will! Have a question for the show? Call 888-825-5225 Weekdays from 2-5pm ET Want a plan for your money? Take our FREE 3 minute assessment: https://bit.ly/3nInETX Listen to all The Ramsey Network podcasts: https://bit.ly/3GxiXm6 Learn more about your ad choices. https://www.megaphone.fm/adchoices Ramsey Solutions Privacy Policy

Live from the headquarters of Ramsey Solutions, broadcasting from the pods moving and storage studios, it's the Ramsey Show, where we help people build wealth, do work that they love, and create actual amazing relationships. Jade Warshaw, Ramsey Personality, is my co-host today as we answer your questions about your life and your money. It's a free call at 888-825-5225. It is free, and some say the advice is worth exactly what you pay for it.

So jump in here. We'll hang out together and solve all of life's problems. You can call and ask our opinion. We are an expert on our opinion. We know what's happening with that. So jump in here. Let's talk. 888-825-5225.

Melissa is going to start this hour in Indianapolis. Hi, Melissa. Welcome to the Ramsey Show. Hi, Dave. I'm really excited to talk to you guys. Hi, Jade. How are you? Good.

Thank you. So my husband and I have five kids and we're on baby step seven. Woo. And yeah, but I share my four oldest kids with an ex-husband and we have a current court order that says we would each claim two kids on our taxes. And, but my ex's income has gone up significantly over the past several years and continues to go up. And I found out recently that he's being, he told me he's being phased out of the child tax credit and probably won't benefit from actually claiming the kids in the next couple of years.

And so I was wondering if it would be worth the hassle for me to, you know, pursue getting permission from the court and all of that for me to claim all the kids myself, or if I should just let that go. Well, I mean, it's worth some money. The question is how much it's going to cost to fool with it. If your attorney, if you guys can order, can agree to this, both of you sign off on it, your attorney could just file with the court an agreed order. Right.

So it should not be complicated. It shouldn't. The reason that I even, you know, had mention of it and knew about it was because I received this email from my ex who said, hey, you know, I just thought I might reach out to you and see maybe in 2023, you know, you could claim all the kids. I'll just let you claim all the kids. And in exchange, then, you know, whatever the child tax credit is for that year for those two kids that you'd be claiming of mine, then we would decrease the child support by the same amount. Why would you bother? Exactly. You can stay home and break even. Okay.

Right? I mean, I don't get how this is helpful. It's just a favor to him at that point. I mean, it's okay if you want to do him a favor. It helps him, but it helps you zero okay well that's kind of what i figured and it doesn't mathematically you follow me right yeah you're going to get the you're going to get the credit but he's going to reduce it by that amount so you're going to end up with exactly the same amount of money when the smoke clears and he's going to end up with more money yeah and it doesn't necessarily help the kids or no it doesn't affect the kids at all at all yeah i'm guessing

this is a pattern he has lived his life by i win you lose for sure which is why i saw the email and thought well he's definitely not going to be helping me out so that's very suspicious like what do you really want what do you what do you get out of this what does he really want he wants money this is this improves his financial situation phased out so therefore you know i thought this would be more fair and then you know i would get the i would get to keep the the state i mean you can run the numbers on it and figure out how many dollars it actually amounts to in your all's life uh and you could offer to split it with him instead of him being the only one benefiting if it's even worth it if that even pays the court cost to file the agreed order right the other thing i thought was i could offer to like to go ahead and file all of them for me

and claim them but then put whatever extra money i get into like toward college costs or something because our oldest is now 15 she's a sophomore well that would be a fair offer but either way you need to benefit enough that it um that that you net net net if you have to put it all into college and it reduces what he has to put into college then no you're just paying his bill for him right and you're doing his work for him again carrying his water for him again so no i mean he needs to benefit half of this you need to benefit half of it and it needs to be worth it to file the order in the actual savings it may not be worth it when you add it all up and then look at the legal cost it's probably

just don't screw with it's my guess but it might be enough i forget what is the child tax credit did you look it up two thousand per kid yeah which is why he was four thousand dollars tax savings yeah so if you got two thousand dollars he got two is why he was four thousand dollars tax savings yeah so if you got two thousand dollars he got two thousand dollars cost you five hundred dollars to do the order then that's fair yeah you get nothing he gets four thousand dollars no thank you well the first way you said it it sounded like a good idea but then when you added in the part that he was going to reduce you know right that then i said i don't know yeah then we just go and there's a pattern here i mean it's okay but uh if you just want to do him a favor but um but that's it i

yeah i usually in these situations there's more to the story as paul harvey used to say the rest of the story all right charlene's in char in Charleston, South Carolina. Hey, Charlene, what's up? Hi there. Thank you for taking my call. Sure. How can we help? Yes, I'm wondering. I am in, you know, close to $250,000 of medical school education debt,

and I also have an auto loan. I paid off all my credit cards. I'm on baby steps here, so I'm working on, you know, paying off my debt. I have $1,000 in savings. I'm on baby steps here. So I'm working on, you know, paying off my debt. I have a thousand dollars in savings. I'm sticking to my budget. But my question is, I'm just worried about not investing and not saving because, you know, paying off my school loans is going to take me several years probably. So I'm just like, is it really smart to only have a thousand dollars in my savings? If an emergency happens, I don't know if that's going to be enough if I don't have a credit card to like hang on. How old are you?

I'm 34. How long, if you get crazy because you're on baby step two, how long is it going to take you to pay off $250,000 of student loans? I calculated it and if I'm like really good and stick to my budget, I can probably do it in five years. Five years. What is your income? $195,000. You're a wussin. Are you single?

You're a wussin. I am. I'm a single and I have no children and I don't own a home. You can only pay off $50,000 out of a $200,000 income. Yeah, I'm with Dave. Wimpy! You gotta cut it down. You're killing me. I can only live on $150,000. You're killing me. can live i can only live on 150 000 you're killing me look now now is the time to get this done you're unattached you don't have kids there is no reason

in the world that you can't get scorched earth on this two years you have two years you get to do this in two years you get to do this in two years i think get to do this in two years. I think you need to flip it. Right now, you're only paying off $50,000 a year at that rate. You need to be living on $50,000 a year and put the rest towards this. Two years. Oh, gosh. Yeah. No life. No life.

You gave up your life when you went to med school. Here's the thing. If you keep making... I do love to travel. Yeah, I know. I do love a lot of stuff. I do love a lot with my friends. If you keep making excuses why you can't do more,

do you want to know what you're going to look up in five years and you're still going to have this debt? It's got to be more painful for you to stay like this than it is for you to change. You're a doc. Right. Are you an MD? Yeah, I am.

Okay, you have a specialization? Yeah, I'm a pediatrician. Okay, all right, cool. All right, good. Well, your income's not going to go shooting through the roof then, but you're probably going to see some increases. And, Charlene, you are a person who knows how to delay pleasure for a win. We know that about you because you actually went all the way through med school.

That's delaying pleasure for a win. Now you get to do it again. Delay pleasure for a win. Go live on nothing and clean this. The faster you clean this up, the richer you're going to be. The faster you clean this up, the less stress you're going to have. And you'll be able to invest more. The faster you clean this up, the more you're going to like the person in the mirror.

I would cut it to nothing. No, nothing. No eating out, no travel, no nothing. Get out moving one way, and that way isn't down. And if higher costs aren't enough, the wait times to see your doctor are longer, and it's harder than ever to get anything approved through the bureaucracy. So if you feel like the system is working against you, try a biblically-based alternative to health insurance, Christian Healthcare Ministries. CHM is a health cost-sharing ministry that's helped hundreds of thousands of families like yours take care of over $11 billion in medical bills since 1981. And CHM has also helped them

stay true to their values and avoid miles of red tape. And CHM support goes far beyond meeting financial needs. They'll also help meet spiritual needs. Members become part of a family who will pray with them and for them when they experience a medical event. So listen, y'all, there's no better way to take care of health care costs. CHM programs start as low as $98 a month. So learn more today and join at chministries.org slash budget. That's chministries.org slash budget. Hey, if you're a new listener and you want to dive deeper into this Ramsey baby steps, all this behind the scenes talk, debt snowballs, all these things we talk about,

click on get started at RamseySolutions.com. Completely free. We'll help you figure out the best next step for your financial journey based on exactly where you are today. RamseySolutions.com. Click get started. Our question of the day comes from Jacob in the Ramsey Baby Steps Millionaires group on Facebook. He says this. He says, I'm 20 years old and I'm looking to buy a house within six months to a year. Besides having 20% down,

what other tips would you recommend for a first-time home buyer? Also, is there anything that I need to look out for? Yeah, I would say there's a couple of things to keep in mind. I think it's great that you're putting 20% down. We would say to do a deal where your payment is no more than 25% of your take-home,

and that's taxes, insurance, all included in a conventional loan. And I love that you're putting 20% down because then you can avoid PMI, which is private mortgage insurance, and it's just an additional cost there. But with 20% down, you can avoid that. But I feel like you're in pretty good shape. I mean, other than that, it sounds pretty good to me. Yeah. A couple of things. Good idea. Good question, by the way. 15-year fixed rate, 25% of your take-home pay. Always, everyone, anytime you buy a piece of real estate, get title insurance, 100% of the time.

Anytime you're buying a piece of property that is not a traditional subdivision lot, meaning it's very, very predictable, always get a survey. So if you, you know, I bought three acres. It turned out to be 1.75. No, that, yeah, no. We, you get a survey on it, okay? Now, you got a standard subdivision lot that is pre-platted and has changed hands three or four times.

You don't have to worry about that. It is what it is. But if you're buying something otherwise, get a survey, get title insurance, get a home inspection, get a home inspection, get a home inspection. You're 20 years old. You're not an expert on much of anything in that house, unless you're just tired,

happened to be an electrician or something. And then you would be right. But yeah, get it, get a home inspection period. I bought and sold several thousand pieces of real estate. I get a home inspection last house i bought i got one okay um i can go in there and scratch around in the

crawl space and try to figure it out but for what it costs let somebody else do it right um that's the thing uh don't buy a house that is a great price but is ugly from the street first house i bought was that i got a great deal and this house was ugly from the street there's no fixing ugly yeah you can't fix ugly okay it's just still gonna be no well we could we could no don't don't don't don't try to fix ugly ugly you just look like you know oh i had plastic surgery and you shouldn't have bothered oh don't do it you know i mean i mean don't you just can't fix it leave it alone just don't don't it's not a good buy because if you get a good buy on it now when you get ready to sell it you know what you have an ugly house and you're gonna give somebody else a good deal because nobody wants an

ugly house so that there's a reason it was cheap when you bought it to give somebody else a good deal because nobody wants an ugly house so that there's a reason it was cheap when you bought it and there'll be a reason it's cheap when you sell it so good and that's also true with the actual floor plan i bought a house one time no actually i didn't buy i rented it one time that was a four bedroom but to get to one of the bedrooms you had to walk through the other bedroom oh yeah that's terrible this is uh we used to call these country built houses where you just keep adding on adding on adding on and you just go yeah well there there was actually no plan from the beginning and then you've got no plan so be careful with that kind of stuff you can you can get excited, particularly on your first buy, and try to buy something that's a little bit boring.

That's good advice. You know? Don't try to, like, reinvent the wheel. I'm going to do a rehab. Oh, God, no. Well, I mean, you could pick something that's got things that you can fix. Like, if the carpet's super ugly, there's things that are outdated. You can change that.

You can put the gutters up. That's fine. But don't tell me you you got to change the whole no yeah i gotta tear out i gotta add no no no no just you just boring means less risk going in and less risk going out and so a nice little house with a little picket fence and little bushes out front and it looks you look at it from the street and everybody goes oh that's cute that's the that's where you want to start what do you think about corner lots because when we bought in our neighborhood before we came here we thought we had a good lot because we were on the corner by the gate and for us it was great

we thought oh we could take the dog out it's easy access but then when we got ready to sell it sold for less lots are a mixed blessing because generally corner lots present well from the street right but you have no freaking backyard you got this little tiny triangle back there where they cram the house back inside at a 45 and so it depends on the subdivision depends on the lot size right all those kinds of things but generally speaking you get a nice presentation from the front and then you're pinched in the back yeah that's generally what you get so watch for that that's not the end of the world but watch for that again if you've got a concern when you're looking at it know that

they're the buyer when you get ready to sell it's going to have the same concern so just don't rat don't get so excited you rationalize your way into stupidity i know a guy who's done that a lot in his life and um that's how he has a radio show so be careful open phones at 888-825-5225 jason is up next in detroit hey jason welcome to the ramsey show hey guys thank you so much for the call i appreciate it sure um dave um yeah uh you Dave, you and God have changed my life. So I appreciate all that you've done over the years. Pretty fortunate to live completely debt-free, including my house at 48 years old. Way to go, Dave. And thanks, thanks. My wife and I have worked pretty hard to kind of get there financially.

I've actually been in full-time ministry most of my adult life, and currently I am part-time on staff in a church, and then part-time I operate a food pantry. And I absolutely love my work. I love what I do. The issue that I struggle with a little bit is I hardly make any money being in two nonprofit situations. My wife's a school teacher and has been for 20 plus years. So she's kind of at the top of the income scale. We're doing all the things. We have zero debt. We're, you know, she has the pension and then we've got some other investments and that sort of thing. But my question is, you know, I literally, I mean, with what I do, I take home

a couple thousand bucks a month at this stage in the game, and I'm about 30 years into my career. And I guess I'm just trying to decide, is that okay for me? You know, I don't – well, I guess that's what I – You're calling about it, so you don't think it is. Well, I'm just – I guess i just need some perspective i i'm i love what i do and i i i you know i get to help people every day and um it's extremely rewarding work and i can see myself doing it until i die i don't you know i want to die with my boots on but um without any debt and you know still being able to set aside, you know, funds for the future,

I guess I would love to make more money, but I just don't know if I'm ever going to find that in kind of a nonprofit world. So I guess I just was hoping for a little insight on that. Well, you're obviously a good man. You're obviously a guy who loves to help people. You're pastoring. You run a food pantry. You've got a big old heart. And there's no question about that. Eighty percent of pastors in North America are bivocational.

They have a day job. That's a wild number. And did you start this food pantry? I did not start it. However, I took it over and had to completely revamp it. It's kind of yours. Yeah, I thought so. I kind of smelled that the way you were talking about it.

There's nothing wrong spiritually, morally, ethically with what you're doing. Nothing wrong with that at all. There's also nothing wrong with exploring some other avenues that you could utilize that wonderful large heart of yours to help people. And in the process of serving them, you made more money. There's nothing wrong with that either. That's the seat I sit in. So, I mean, there's lots of ways you can help people and love people well, and they love paying you for it, by the way. So maybe a counseling ministry, maybe some other things you can add on. I don't know what it is, but I would look towards

that kind of a thing. Thank you for joining us, America. Open phones at 888-825-5225 annie is next in nashville hi annie welcome to the ramsey show hi how are you guys doing today better than we deserve how can we help so my husband and i are first-time homebuyers. We just started the process, and I've been talking to a local mortgage broker, and he gave us some information on 30-year versus 15-year mortgages. We want to do the 15-year. We're trying to follow the plan. We have a sizable down payment.

But he did say, which I thought this was kind of strange, I just don't understand this, that if we want the 15-year, we are required to do a rate buy-down to get like a little lower interest rate. So I just didn't know what that was. I'd never heard of that before. He said it would be about a point or a point and a half to get the rate buy down. You need to call Churchill Mortgage and get with a new mortgage broker. Okay.

There are two things you can do to buy down rates. I think I'm hearing that he just wants you to pay points. That is not a true buy down. That's just points. Each point is 1% of the loan amount and will reduce your interest rate by about an eighth, between an eighth and a quarter, somewhere in there, but usually around an eighth of a percent, which means it takes you eight years to recoup that. No, thank you. I'll pass.

So paying points is not a good thing, and I'm pretty sure. By the way, that increases what goes in his pocket at the closing. That's why I'm rolling my eyes a bit here. I don't know if you can hear it over the radio, but I was. And so an actual buy-down is like a 3-2-1 buy down, and it would be a 3% reduction the first year or a 2-1 buy down, 2% reduction the first year, 1% reduction the second year, and then it goes on up to the regular rate. And all that is, is you're just giving yourself some money up front to subsidize yourself. Now, if the seller pays your 2-1 buy down,

like in the old days when things were a little calmer than they are right now, a builder might pay for a 2-1 buy down. Okay. In other words, they would pay 2%, pay the, you know, just at 0.02, right? What it's going to cost you to reduce the rate by 2% and then 0.1. So it's going to cost them 3 percent out of pocket to do a two one buy down or six percent out of pocket to do a three two one buy down if the seller pays that that's free money you got a deal okay but if you're if you're going to pay for your own buy down uh that's, not as bad as points, but it's, there's no reason to do it. Okay. Does that make sense?

You understand the difference in what I'm saying? Points are prepaid interest. Both of these are prepaid interest. Points are a form of prepaid interest. And one point will reduce the roughly an eighth of a percent APR for the life of the loan. A true buy down is just it's a two one buy down age you take your current rate let's call it six percent it'd be four percent the first year five percent the second year and six percent from then on and you pay that difference up front

at the closing which you could have just done that for yourself if you're just swapping pockets. So actually, let me think about this, Cindy. If the seller's not paying it, we're going to do neither of these. That's the moral of the story. Okay. Is the seller paying it? He acted like I was, to get the 15-year, this is something I would have to do. Why? Do a rate buy-down. 15-year is generally cheaper than a 15-year, this is something I would have to do. Why?

Do a rate buy-down. 15-year is generally cheaper than a 30-year anyway, and are they saying you can't qualify? So he said that the 30-year would be 6.875, and 15-year would be the same unless i did this rate buy down then i can get like 6.5 or something that doesn't sound right new mortgage broker new one okay he just lost the business yeah because 15 year quoted at what we call a par quote 0.0 origination is always cheaper than a 30 year or 90 of the time it is, okay? And he's monkeying with you to put it in his pocket.

That's what I think. I'm not 100% sure, but having done about a bazillion of these, I'm pretty sure. Yeah, go to Churchill, talk to them, and see if they give you the exact same thing. If they do, I'll shut up and say that I was wrong about the guy's character. When is it better to just make a larger down payment as opposed to attempting a three two one the larger down payment uh doesn't reduce well it would reduce the payment but it doesn't reduce it as much mathematically um so actually it would be no it wouldn't it wouldn't because i guess what i'm saying is there is there math that you need to do to find out what

that point would be? Now, it's it's don't subsidize your own loan is the moral of the story. Both of them are a form of subsidizing your own interest rate. Prepaying it. By prepaying it in their different forms, points or buy downs. So if the seller is paying points or the seller is paying a buy down, that's different. Right. And all things being equal, meaning no points, no origination, which is called a par quote,

your 30 should match your 15 should be a little bit less. It should be a quarter of a point, half a point less on your APR. Generally speaking, it is. Now, there might be a glitch in the environment at this moment in the bond market that's doing that. the environment at this moment in the bond market that's doing that i i'm not 100 sure but most of the time throughout 30 almost 40 years of being in the real estate and around real estate business that's what my experience has been so but double check you need to get another quote i i just smell um i i don't it doesn't smell right that's Dave. Let's just leave it at that. All right. Jake is in Milwaukee.

Hi, Jake. How are you? Hi, Dave. Hi, Jade. Hi. I'm on baby step two, and I'm kind of in a little situation where I don't know how much I owe. So I, my father passed in 2016 2016 and he didn't have a will. The only thing he ever did, he told me is that he was going to set me as a beneficiary. And if anything happened that,

you know, I would have to take care of it for, for my sister, for myself and my sister. Um, and I mean, so he's only ever told me that verbally. And well, when he passed, we got 200,000, um, in a policy and it's coming up. I've been paying my sister monthly so she can go and finish school debt free, which she has now graduated. Um, and so there's about 5 000 left on just the half so 95 000 paid and i kind of don't know how much more i owe her because all the things i've done with the with the money have been kind of commingled with my own finances well you're certainly over the $5,000, right? Because that totals $100,000. Yeah, no doubt.

Okay. Then have you invested the money during this time? I did. I invested $100,000 of it in real estate. Okay. That would be your $100,000. And then I invested other parts in stock. Well, okay.

Well, I would have done better with your four-fund portfolio, but I've actually lost money on the part I invested in stock. Okay. I mean, I don't know what you owe her. You don't owe her anything legally. Morally, you told your dad she would get half the money, so we know she's getting the $5,000. Even if you screwed around and lost some of her half,

then you would still cover that $5,000 morally if you're doing what your dad asked you to do, right? Yeah. So how much money have you made on the real estate? On paper, I mean, before, you know, selling fees and all that it's probably like 75 000 okay what do you make a year uh actually i i make about that 75 what do you think the hello i mean probably just probably just cut that in half and then say and get and give her half of that yeah but i think you invested your half into real estate personally um i and i think you lost some of her half so i

think you cover the five and if you want to throw another 10 on there for fun to make you feel better, that's fine. But I don't think you owe her anything much more than that. And I'm certainly not going to have to sell the real estate to get her half out of that. That's so convoluted and wicked. No, thank you. Jade Warshaw, Ramsey personality is my co-host today thank you for joining us america our 2023 live event schedule is jam-packed and sold out coast to coast baby hey man we've had a blast we were just in indianapolis and then over in austin texas uh april 24th we'll be in salt lake

city utah with rachel cruz george camel, Christina Ellis and me. May 2nd will be Jade Warshaw. No, that's Christina Ellis. You did the first two. That's right. Okay. May 2nd, Sanaheim, California. Dr. John Deloney, Ken Coleman, Christina Ellis and me. And Smart Conference is back and we're going to kick it off, kick it up a notch with a full weekend

here at Nashville. This will be the inaugural event at the Ramsey Event Center where they're putting the final touches up there today, putting bushes down and rolling out the sod which is kind of like rolling out gold. And yeah,

it's going to be awesome. And we have the Money in Marriage. By the way, that's April 14th and 15th. There's a few tickets left. RamseySolutions.com events for all of these. Salt Lake City, Anaheim, Nashville for Smart Conference here on our campus. The Money and Marriage Getaway, a chance for you and your spouse to disconnect from everyday life. Spend a few days focusing on your marriage.

That'll be here in Nashville. October 19th through 21. Dr. John Deloney and Rachel Cruz make your plans to get to all of these. Don't miss any of them. RamseySolutions.com slash events. Good stuff. Note to everyone that is

over 18 and breathing, do not leave verbal instructions to your heirs. Do a will. It's the responsible adult thing to do. Do a will.

Go to mamabearlegalforms.com, get you a will. State-specific. Do a will. If you have moved states, you need a new will because state law handles your estate. So you need to do a will if you hate your relatives leave a large estate with mixed instructions verbally to all of them they will spend the next 25 years of their life fighting this is how you can screw up a family oh yeah you can screw up and leave your son feeling guilty for not having properly taken care of his little sister because he didn't have good instructions just split it with her i'm not gonna do it well oh you're killing me and can i take it a step further can you talk to your

family members about the will hello do a reading of the will do a reading of the will if you're gonna piss someone off do it while you're alive please you're doing cocaine junior you're out of the will go ahead and tell them that maybe they'll get off the cocaine who knew you know we don't we do not leave inheritance to heroin addicts and so i'm sorry i'm sorry suzy you're not in the will but dave there's can i just say as as this generation talking to my parents and our generation of people talking to our parents, they don't want to talk to us about money. I know. We can ask, hey, mom, dad, you know, I'm trying to plan.

I want to know about long-term care. I want to know about your will. I want to know. And they don't want to tell us what's going on. I know. And I'm yelling at them right now. Yeah. Let them know.

You're talking to my generation, I guess. Hey, my generation, you're being stupid. Do a will. Do a will. Do a will. Do a will. Do a will. Do a will.

Do a will. Do a will. Do a will. I don't care what you do with your money. It's your money, but do it on purpose. Live an act of diligence, an act of intentionality. Keep the government's hands off of it. It gets so convoluted and screwed up the lawyers end up with

everything and people end up pissed off for decades over a piece of furniture mama said you were gonna leave that to her oh gee yep it's a piece oh come on leave it do it will do it will do it will do it well. It's easy. And my wife actually cornered me on this the other day because I've got a very detailed estate plan. We have the update on the estate plan every year, a meeting with my whole family and my leadership team here at Ramsey. And this is what happens if Dave dies this year. I call it the Monty Python meeting.

I'm feeling much better. It's just a flesh wound. so um but it's uh it's awkward as crud to do this sure you know i'm here i'm okay i'm right here in the corner now this is what happens if dave dies this year right so uh but i hadn't done it like i have an antique water ski collection i have interesting i have a gun collection okay I have too many cars. And Sharon's the other day goes, what do you want me to do with all that crap? And I'm like, I don't know. Do whatever you want to with it. She goes, Dave Ramsey says have a plan.

It's not in, you don't have it. So I had to write up a document, not to do with the wheel, but just say, here's what you do with the water skis. Here's what you do with the cars.is here's what you do with the cars and here's what you do with the guns and um here here's who you call and uh which of our kids can help you with that process and because she wouldn't even yeah oh my gosh look i'm not mad at that i feel like that's a good call that's a good call a good call i mean she called me out on my own stuff so there you go do a will do a will all right kareem is with us in tampa hi kareem welcome to the ramsey show hi your wife sounds like a very smart woman yeah we know we've known that for a very long time and i'm morning and yet

i'm the one doing the show so how can i help well i'm really looking forward to listening to your great advice but right a little bit first i just wanted to mention my big brother, Gil, because he's the one that turned me on to listening to your podcast. And he followed your plan and to become debt free. And he is on his way to becoming a millionaire. Wow. Way to go, Gil. Way to go, Gil. Way to go, Gil.

He's listening, so I'm sure he's excited. Yay, Gil. All right. So my question, this is, this is the good stuff. All right. So we have an investment property. Okay. It's a condo. We owe about $250,000 on the condo and it's worth about 1.3 million. I hate it when that happens. I know, it's wonderful. You know, Tampa is booming right now. So we're really lucky to have come in right before. And the idea is this. We bought the condo at $350,000.

So our capital gains is going to be extremely high. It's going to be in the millions. And we don't know what to do because in a year and a half, our five-year arm ends and we're going to have to renegotiate our interest rate. And right now, our interest rate is 3%, and we are terrified to find out what the interest rate is going to be. So we don't know what to do with this. Do we do a 1031? We also owe about $900,000 on our current home, and our home rate right now is at 2.65%. So what do we do? What do we do?

There's so many options. What's the best option? Well, you've done very well on it. Congratulations. That's fabulous. If you do sell it, your capital gains rate will be 15% unless you're making over $450,000 household income, are you? Yeah, it's going to be 20%.

Okay, so 20% on probably over a million dollars. So it's going to be $200,000, $215,000, somewhere in there. That's your taxes to sell it. If you do that, you pay off your house. That's one option, right? Mm-hmm. You won't quite have enough to pay off your house, but you probably have some other money.

That'd be a cool option. Obviously, a 1031 defers those gains. That's a trading for another property. If your only reason for doing that is to avoid the fear of the mortgage, how much money do you have? In terms of cash flow or... Let me ask two questions. How much cash do you have, not counting retirement?

Cash and investments, non-retirement. Okay, so we have, I would say, total, total, about $200,000. Okay, and what's your household income? About $500,000. Okay, so if you want to keep this, just pay it off. I should just pay off the condo? Yeah, and then you don't have to worry about the five. Because I'm worried about the five years.

It's kind of funny because you make $500,000 a year and you only have a $250,000 mortgage. No, I'm not worried. I mean, it's not that you said you were. You said you were. You said you were. I'm freaked about the interest rates. I got a call coming. You have a five-year call, right? I mean, you have five years to make the decision.

So sometime in the next five years, preferably the next 18 months. No, one year. I have one year. One year. Oh, I misunderstood. I did, too. I thought you said it. No, no, no, no.

Our five-year arm is ending in a year. Oh, and is it going to adjust, or is it a call? It's going to adjust, right? Yeah, it's going to be adjusting. Oh, it's just an adjustment. So that's not the other one. But I would pay it off. I would try to pay it off and keep it if you like it.

If you like the property, the cleanest thing, just pay it off and keep it. I wouldn't be motivated to sell it by the mortgage, not with your income and your cash. And I think you like it. It sounds like she does. They like the area. I kind of like it. It's done well for them. It's been sweet, but it's just up to you. I mean, if you're going to keep it, if the only thing driving this is the mortgage, just pay the mortgage off in the next year.

You can do that. This is The Ramsey Show. Hey, what's up, guys? It's Jade. If you love the show and want a deeper dive on your money journey, we have a weekly newsletter that gives you trending and helpful articles and tips on following the Ramsey way. Just go to ramseysolutions.com today to sign up for our newsletter. Again, that's ramseysolutions.com to sign up for our weekly newsletter.