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What to Do....All Input Welcome

July 11th, 2017 at 07:26 pm

So...as you know, I have two mortgages (one residential and one rental) and an auto loan:

Principal Mortgage - Original Amt: $108K; Current Balance: $97K; Interest Rate: 4.125%; 25 years left

Rental Mortgage - Original Amt: $101K; Current Balance: $81K; Interest Rate: 7.9%; 18 years left

Auto Loan: Original Amt: $17K; Current Balance: $12K; Interest Rate: 3.6%; 4 years left

I need your opinion on which to pound away at and payoff early. If you could, support your advise with detail/data.

Look forward to your comment.

5 Responses to “What to Do....All Input Welcome”

  1. Jokeabee Says:

    Yikes! That interest rate in the rental property-can you refinance? Is rent covering mortgage plus property taxes? If I were you I would refinance the rental mortgage to a better rate and then knock out the auto loan. I know both mortgages have higher balances and interest rates but I think it would be a psychological boost to get rid of one monthly obligation. Then if debt reduction was my first priority (instead of, say, retirement or other savings) I would snowball my payments to the rental mortgage.

  2. MonkeyMama Says:

    I am not really sure what the big picture is. I see your age on the sidebar and your account balances in early/first post. But you don't have any mention of retirement savings of any note. I presume you have a pension or didn't mention work retirement details, since you also mention retiring in 6 years.

    Regardless of the big picture, that 7.9% interest rates is awful. It would be my primary goal to knock that down enough to refinance to a reasonable rate. In the meantime, you are paying over $500/month to interest on that loan.

    What is the purpose of $60,000 just sitting in cash? Beyond what you need for an ample emergency fund, it doesn't make sense to have cash sitting earning less than 1% while you have these interest rates on your loans. You have the cash available to refinance right now, it seems. So that is something I would consider.

  3. LivingAlmostLarge Says:

    Use $50k and wipe out as much as possible of rental? Aim to get it done this year?

  4. MonkeyMama Says:

    Er, $50k cash. Not sure where I got $60k figure from. Same advice either way.

  5. AnotherReader Says:

    You mentioned being a federal law enforcement officer. What is your pension like? At what age and years of service do you receive the full pension? Have you funded your TSP? The TSP one of the best defined contribution plans out there.

    In your shoes, I would look to max out all of the retirement savings vehicles available to you. Depending on what other debt you have, I would up my contributions to the TSP and set money aside to make the 2017 IRA contribution, if eligible.

    Do you have other debt? If so, consider using some of the $50k to pay it off.

    I would evaluate the rental property return before I refinanced. What is the property worth? What is the rent? Are you breaking even or are you cash flow positive after ALL expenses are considered. Selling might be a better option if the numbers don't support keeping it. If you keep it, consider various loans and your strategy in using them. Shop the loan if you are being offered 5.6 percent. That's too high.

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