Mortgage Question

**Start-Living** · 05-17-2006, 01:02 AM

I have a situation, and need advice from all of you smart smart frugal gals.

Over a year ago, I enroll our mortgage payment into a bi-weekly payment plan. The mortgage company automatically take out $400 every 2 weeks. Now, $50 of the $400 is EXTRA towards the principle.

We're paying a total of $800 every 4 weeks, and $100 out of the $800 is extra principle that I choose to pay.

With this extra principle payment, and the bi-weekly plan, we will pay off our mortage in 15 years, instead of the original 30 years. Also, we are paying less and less on interest every month because of this extra $100 principle. (and the 2 extra payments every year)

My situation is, we are in the process of trying to snow-ball our debt.
Right now, I'm working on the credit card debt (owe $1350), then will tackle the CAR loan of $20,000, and on.... from there.

My question is, If you were me, would you remove the $100 that we pay extra towards principle on the mortgage, and use that to pay for the credit card, and snow-ball to the rest of the other debt? This means, that the mortgage now will take us alot longer to pay off.

Or, would it make more sense to keep things the way they are, and start snow-ball debt without the extra $100?

I guess my question is, Which option will save me the most money, or will pay off my debt faster. Is the $100 extra in mortgage worth more? or use that extra $100 to snow-ball my other debt worth more?

(FACTS: Current mortgage: $74,000 at 6.5% interest)
(Other debt to snow-ball : CC $1350-just transfer to 0% APR until 2007, Car loan $22,000 at 9.5%, 2nd mortgage $29,300 at 9.25%, student loans at 5% around $20K)

I'm NOT good at math, and have been trying to figure out WHERE the $100 will be worth more. But can't come to a conclusion.

Sorry for this long long thread.

**Nada.Leona** · 05-17-2006, 06:48 AM

Well, in my mind (and because I've never had any serious debt, you can take this as you wish) but I think you should leave the mortgage payments as they are. Here's my reasoning:

1. Paying it off the way you are, you're giving yourself excellent credit.
2. Also, you've cut the time you're paying it off in half. That's a great move.
3. Let's face it, $100 really isn't that great an amount. I don't really think it'll effect your mortgage payments or your debt payments, so I would just leave it where it is.
4. If you do take it off the mortgage, then that particular debt will take longer to pay off in the end. It's like if you're putting $50 a week into a savings account thru direct deposit -- you don't ever see it, so you don't miss it.

Not sure how much sense I'm making, but I'd try to pay the rest of the debt off without the extra $100. But that's just me.

**Early Bird** · 05-17-2006, 07:27 AM

1. Will you be able to pay off your 0% interest cc before it jumps?

2. Those are pretty high interest rates for your 2nd mortgage and your truck loan -- around 9%.

I guess I'd work on the 9% loans with any extra money. The lower-interest first mortgage, I'd leave till later.

But, as Nada said, $100/month isn't that big an amount ... and it is making a wonderful difference on your payment schedule. If you have other resources to work your truck and 2nd mortgage debt down faster, then I'd leave the mortgage payments as is.

**Darlene** · 05-17-2006, 07:40 AM

I'd get rid of the high interest debt first & snowball. That second mortgage & car payment are not nice. I wouldn't worry as much about the student loan debt. I consider the current main mortagage to be a good debt out of that bunch. Good luck!

**PrairieRose** · 05-17-2006, 08:10 AM

What we did was to pay off all of our other debt and then tackle the mortgage last. If I were you, that's what I'd do b/c the snowball will help you pay everything, including the student loans and the mortgage in 3-5 yrs. if you'll stick with it. Everything.

I speak from experience, we've paid off about $185,000 now using this method in little over 5 yrs.

**ama** · 05-17-2006, 08:33 AM

I also pay extra on my mortgage. I myself would leave it as is, its money you're not missing already.

**banana** · 05-17-2006, 09:22 AM

I would also continue with the extra $100 towards the mortgage. I think it is a very smart move to cut your loan from 30 year to 15 years, just think of all the money you will save!

**Valerie in WA** · 05-17-2006, 12:55 PM

How much are you paying each month to the other bills? And if it's more than the minimum payment, what is the minimum? Also how long is the term on the car loan and the 2nd mortgage? And how many of those months have you paid. (i.e. I personally have been paying for three years on my five-year mini-van loan - that sort of thing.) One other question: is your home worth at least $130,000?

I'll watch for these answers and then give you my suggestion.

While you are saving on mortgage interest, you may be paying heavily in interest on the other items.

**NoDebtMom** · 05-17-2006, 01:20 PM

Since I am a dyed in the wool Dave Ramsey fan, I would temporarily move the 100 to the other debt. Go crazy knocking that out and then walk right back up the steps and when you get to step 6 (pay off house) you will have more than 100 to add. Not all will agree and I see others' points, but that is how I would do it.

**Kelly0411** · 05-17-2006, 02:49 PM

As a mortgage loan officer, my advice to you is to stop paying extra on the mortgage and put that towards your other debt.

Since you are paying your payments on a bi-weekly basis you will still payoff your mortgage much earlier. You are technically paying an extra payment a year by paying bi-weekly.

**Start-Living** · 05-17-2006, 03:13 PM

Thank you for all the advices...and different views on this.

Valerie in WA: Answer to some of the questions.
1. I was paying a little extra on all the other bills. Until I join this site, and some of the very smart gals in here and told me to instead of doing that, I should pay the minimum on the lower interest bills, and use the extra to pay off the higher bill first, then snow-ball.
2. I am now paying minimum on all the other bills, except for the $100 extra towards mortgage, and what-ever I have left extra will go towards the credit card. (I want to pay off the credit card before the 0% APR jump in 2007)
3. The Term on the CAR is 60 months, and the 2nd mortgage is 15 years. We just bought the car on Jan-2006, so been paying for 4 months now at $447 monthly. 2nd-mortgage is 15 years, and we have been paying for it since FALL of last year (about 8 to 9 months now) at $309 monthly.

Oh, we will also have an extra $100 a month to pay towards these bills now too, since I just switch over auto INSURANCE, and will be saving a little over $100 a month.

This is what I was thinking of doing, but not sure if this is the best finacial decision.
1. I can afford to pay $250 a month on Credit Card (this includes all the extras $$$ towards principle. (owe $1350 on CC )
2. Leave the extra principle payment of $100 in the mortgage.
3. Once paid off the Credit card (takes about 6 months) I will put that extra $250 towards the Car Loan (makes total of around $700 monthly) which should pay off car in less than 3 years.
4. Snow ball this $700 towards the 2nd mortgage, makes it ($1010 towards the 2nd mortgage) Which should take about another 3 years to pay off.
5. Then I will snow-ball this extra $1010 towards the Student loans.

If I stick to this and nothing changes along the way, we should get rid of most of our debt in about 6 to 7 years. (That's a long time)

Should I do something different? Please give me your advice, suggestions, etc. (I like to look at it from everyone's view, it really helps)
thanks

**Valerie in WA** · 05-17-2006, 10:33 PM

Originally Posted by Start-Living

1. I can afford to pay $250 a month on Credit Card (this includes all the extras $$$ towards principle. (owe $1350 on CC )
2. Leave the extra principle payment of $100 in the mortgage.
3. Once paid off the Credit card (takes about 6 months) I will put that extra $250 towards the Car Loan (makes total of around $700 monthly) which should pay off car in less than 3 years.
4. Snow ball this $700 towards the 2nd mortgage, makes it ($1010 towards the 2nd mortgage) Which should take about another 3 years to pay off.
5. Then I will snow-ball this extra $1010 towards the Student loans.

The reason I asked if your home is worth at least $130,000 is that if it's not, you are probably paying PMI (private mortgage insurance) on your second mortgage. If that's the case, none of what is below applies, and you need to work to get rid of the PMI first. It's just money down the drain.

So that said: I would skip #2. You can still leave your mortgage on bi-monthly payments, which usually results in a 22yr payoff (on a 30 year loan). That is still a substantial savings.

Put that extra $100 to the CC. You'll pay it off in 4 months, then you can snowball the $350 onto the car loan, which should be close to doubling your principle payment.

I also think I would pay off the student loan before the 2nd mortgage (for tax purposes), but you have some time before you have to make that decision.

HTH!

**Start-Living** · 05-17-2006, 11:28 PM

Thanks for the advices.

I'm still paying for PMI.
So, what you're suggesting is, to pay the 20% off the mortgage first, (So I can remove PMI) before all other debt? I can remove PMI when my mortgage is $64,000. (Mortgage is currently at $74,000)

Anyone with any suggestions, please post them here.

**Start-Living** · 05-17-2006, 11:32 PM

Oh, Also, for 2nd mortgage, the original loan amount is $30,000 (We currently owe $29,000 on it) This is a 15years mortage. I was planning to pay this down within 5 years, but boyfriend decided to buy his car, and get us into more debt. So now it'll take longer. (He now learns his lesson, he have stop spending like crazy, and actually very good at helping me being frugal)

**PrairieRose** · 05-18-2006, 10:23 AM

I'd pay the credit cards off first b/c they're costing you more in interest most likely. Then I'd pay the 20% on my mortgage, start on the car loans, go down the list and even plan on paying your mortgage off early. Lots of people on this forum have no mortgage payments now b/c of this plan. You really don't have to have one for the rest of your life.