1st loan - 6.875 30 yr fixed with 10 yr interest only option / 2nd loan 9.875 25 yr fixed with 10 year interest only option. If I want to pay more than the interest only, should I just follow the regular amortization schedule, or pay interest only on lower rate and max out payment on high rate loan? I know for credit card focus on high rate, but over 30 years does it make a difference, especially if I am going to refi the loan eventually to get rid of the second??
First general strategy is to pay off all other interest bearing debts, like credit cards or auto loans, that are not tax deductable. (More specific figures can be shared if you need to know specifics to your case)
Then, when all the debt that you have is your two mortgages, pay off the higher rate first.
But consider this, if you are in a 25% tax bracket, you are essentially paying 9.875*.75=7.4% after the potential tax deduction. You could be easily investing that extra money into your 401K and be getting more than 7.4….so depending on your tax bracket, you should do neither and just save your money.
Feel free to email me for more specific advice to your situation.
May 14th, 2007 at 9:23 pm
First general strategy is to pay off all other interest bearing debts, like credit cards or auto loans, that are not tax deductable. (More specific figures can be shared if you need to know specifics to your case)
Then, when all the debt that you have is your two mortgages, pay off the higher rate first.
But consider this, if you are in a 25% tax bracket, you are essentially paying 9.875*.75=7.4% after the potential tax deduction. You could be easily investing that extra money into your 401K and be getting more than 7.4….so depending on your tax bracket, you should do neither and just save your money.
Feel free to email me for more specific advice to your situation.
References :
May 14th, 2007 at 9:49 pm
this is what you sould do if you are smart.. banks are smart and they are in the business of money and not real estate. so when a bank lends you money they are interested in making as much of it back as soon as possible. when you start paying the fully amt. rate you are paying more than 90% of the montly payment towards your interest for the first 9 years of the loan. homes apperciate value so if you pay interest only you will save more money in the long run because of your homes value in the future.. I am a commercial mortgage broker and used to do residential loans if you need some help E-mail me at dannyboyloans@yahoo.com and I can help you out. Thanks
References :