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Old 10-14-2015, 06:49 PM  
Hog's Gone Fishin Hog's Gone Fishin is offline
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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 ?
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Old 10-14-2015, 07:05 PM   #2
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Google Dr Calculator and see.

It should show you paying off one mortgage is the better move to get them both paid off quicker.
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Old 10-14-2015, 07:06 PM   #3
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Pay off the one mortgage, then you can apply the extra towards the other. No brainer.
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Old 10-14-2015, 07:08 PM   #4
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You're technically better off paying down the higher interest mortgage, but I would rather be free and clear on the other property.
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Old 10-14-2015, 07:13 PM   #5
aturnis aturnis is offline
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Pay down the small one and refinance the big one. Interest rate seems high.
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Old 10-14-2015, 07:15 PM   #6
DenverChief DenverChief is offline
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Quote:
Originally Posted by Hog Farmer View Post
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 ?
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.
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Old 10-14-2015, 07:19 PM   #7
HonestChieffan HonestChieffan is offline
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Who has a 6% or these days?
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Old 10-14-2015, 07:31 PM   #8
Hog's Gone Fishin Hog's Gone Fishin is offline
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Quote:
Originally Posted by aturnis View Post
Pay down the small one and refinance the big one. Interest rate seems high.

It adjusts to 5% in 3 more years.
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Old 10-14-2015, 07:32 PM   #9
Hog's Gone Fishin Hog's Gone Fishin is offline
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Quote:
Originally Posted by HonestChieffan View Post
Who has a 6% or these days?
Investment properties.
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Old 10-14-2015, 07:39 PM   #10
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I'd probably just set both of them on fire and collect the insurance money.
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Old 10-14-2015, 07:42 PM   #11
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Quote:
Originally Posted by Hog Farmer View Post
It adjusts to 5% in 3 more years.
Well, that screwed up my spreadsheet. Hang on.
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Old 10-14-2015, 07:43 PM   #12
Bwana Bwana is offline
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Use both hands while jerking off the hogs, double you productivity/income. Pay off the mortgage twice as fast!

You're welcome
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Old 10-14-2015, 07:49 PM   #13
Hog's Gone Fishin Hog's Gone Fishin is offline
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Quote:
Originally Posted by Bwana View Post
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.
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Old 10-14-2015, 07:50 PM   #14
Rain Man Rain Man is offline
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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.
Attached Files
File Type: xls Hog Farmer Mortgage.xls (161.0 KB, 48 views)
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Last edited by Rain Man; 10-14-2015 at 07:56 PM..
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Old 10-14-2015, 07:52 PM   #15
Bwana Bwana is offline
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Sorry , but that's bad advice . One hand has to be holding the cup. No way around it.
Hmm hire two minimum wage cup holders? Or you may be able to get away with one, she looks like a pro!

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