Mortgage pay down question
 

Lets say you have 2 mortgages on 2 different properties :

1 mortgage is paid down to $13,904.22
Interest rate is 5.0%
Monthly payment is $291.65 (174.35 Principle & 57.93 Interest.) Rest is taxes.


1 mortgage is at $111,999.64
Interest rate is 6.25%
Monthly Payment is $982.74 (204.96 Principle & 583.16 Interest) Rest is taxes

Here's the question: If you had the $13,904.22 to pay off the #1 mortgage and apply the monthly payment of $232.28 (P&I-Taxes) to the second mortgage, would that be better than just applying the $13,904.22 to the # 2 mortgage ? Which would save you more money ?

Google Dr Calculator and see.

It should show you paying off one mortgage is the better move to get them both paid off quicker.

Pay off the one mortgage, then you can apply the extra towards the other. No brainer.

You're technically better off paying down the higher interest mortgage, but I would rather be free and clear on the other property.

Pay down the small one and refinance the big one. Interest rate seems high.

Funny I'm in the same boat - numbers a little different:

Mortgage #1 - $50,000 left monthly payment of $450
Mortgage #2 - $104,000 left monthly payment of $750

I have $55K to play with.

Who has a 6% or these days?

It adjusts to 5% in 3 more years.

Investment properties.

I'd probably just set both of them on fire and collect the insurance money.

Well, that screwed up my spreadsheet. Hang on.

Use both hands while jerking off the hogs, double you productivity/income. Pay off the mortgage twice as fast!

You're welcome

Sorry , but that's bad advice . One hand has to be holding the cup. No way around it.

Okay, here goes.

I estimated your baseline scenario of not paying either one of them down. Based on your numbers, I'm guessing that you have roughly 69 more payments on Mortgage 1 and 259 more payments on Mortgage 2.

The total interest that you would pay in the Baseline Scenario is approximately $77,580.64. Since most of this is paid in the future, the current time value of that is $63,841.73.


In Scenario 1, paying off the smaller mortgage, you have 0 more months on Mortgage 1 and roughly 190 months on Mortgage 2 since you're paying more on principal each month. Your total interest payments are $68,988.39, and if you discount for future inflation, the current value of that is $57,990.63.

In Scenario 2, paying down the larger mortgage, you have 69 more months on Mortgage 1 (which is unchanged) and roughly 204 months on Mortgage 2. Your total interest payments are $64,757.06, and if you discount for future inflation, the current value of that is $54,226.98.

It gets goofy since your interest rate changes midstream on the larger one, but I think I made a good estimate of that.

This result assumes that your mortgage interest payments recalibrate on Mortgage 2 to reflect the lower principal you owe after the paydown. I think most modern mortgages work this way, at least in terms of residential mortgages. If not, then you're better off paying Mortgage 1 off, but I don't think mortgages have fixed-interest payments any more.

Poorly documented spreadsheet attached if you want to review my numbers and assumptions.

Hmm hire two minimum wage cup holders? :D Or you may be able to get away with one, she looks like a pro!

http://3.bp.blogspot.com/-ou6rIBc9Uf...dsolodress.jpg

Of course, keep in mind that there's a Scenario 3. Invest in the Chiefsplanet Fanduel group and I suspect you'll pay both mortgages off very quickly.

Refinance 6% is awful

Get a bucket and set it on the ground, problem solved. Maybe you could use the extra hand and finger the butt hole to speed it up even more?

Thanks rain. Your number of Monthly payments don't quite match what I have but the bottom line you project is exactly what I calculate out. Better off to pay off the #1 and apply future excess to #2.


Here's the next quiz .And I ran this by you a few years ago.

Lets say you owe 50,000 on a property at 5.0%

You have an LOC at 6.25%.

You apply 10,000 from the LOC to the 50,000 paying it down immediately to 40,000

The LOC is paid off over 60 days at 1600 every 10 days at 6.25%.

Would that be a benefit to do that ?

OMG ! Hired !

This.

Esto.

Yep. In most cases, I say to attack the highest interest rates first, but you're also paying for getting rid of the hassle and uncertainty of having two different loans. It'd be worth it to me to get rid of the small one even though you'll lose a little bit in interest.

I like this answer. :clap:

I would travel west at 32.5 miles per hour and jerk off 4.2 pigs per hour.

This might not pay off my mortgage but **** it...The Royals won.

You said it is an investment. Are you wanting to sell the cheap one?

If you think you will sell it in the next few years pay off the little one.

Also, are your interests amortized or straight line. It affects the calculation significantly. If they are amortized your P and I will change each payment.