Haha, indeed on that one… I went back to renting a few years after posting this and love not having to mess with any of it again :) Though once we settle back down I’ll prob be jumping back into the ownership game.

A nice “problem” to have – congrats! :)

I’m not sure what the right answer is for you, but it seems that in either case you’d be sitting pretty. And maybe another option is to hold onto all the cash to be used towards the new home coming up too? Or do you already have enough there and are just amazing with money??? :)

I Have a Mortgage Loan and a maxed out HELOC.
Interest rates are only a .025% different. (HELOC is higher)
Balance on loans are only $2,000 apart.
so not too much difference in balance or interest rate.

Mortgage payment is $700 per month
HELOC payment is $200

I have enough to pay off one of them right now. Which one should I pay.
the HELOC with a little higher rate.
or the Mortgage which will reduce my debt to income ratio?

I am planning on building/buying a house in about 2 years.

hah! it’s funny reading this now after all these years and how my own mindset has changed :) and it’s pretty much the opposite of yours in that I actually *harness* my emotions now as I’ve found it propels me much faster than looking at the cold hard numbers… But that’s the beauty of personal finances eh? we all have our own methods that work? while some are better off ignoring their emotions – and i’ll agree here that it’s probably the majority vs the minority – there’s still validity in using your emotions to your advantage too… I would never be in the position as I am now having ignored them.

I’d like to add this: for an extra $500/month, and assuming I can refi at 3.5 fixed on the 1st (which I know is probably a bold assumption at this point):

I’d save 96k on the 1st vs 50k on the 2nd (total payments reduced 889k->792k and 123k->73k respectively).

The 1st is paid off in 22.25 years, 2nd in 7.75 years. So the total $ savings is more on the 1st loan being accelerated.

However I could start applying that extra $500 + the min payment on the 2nd ($360) towards the 1st after the 2nd is paid off, for the duration, basically keeping my monthly payments the same. If I did that, I’d be at ~458k balance on the 1st at the time of the 2nd payoff, and would save a further 72k and the 1st would be paid off in 22 years.

With this plan it seems my potential total savings would be 72k + 50k = 122k AND I’d own the place within 22 years, as opposed to 96k and 30 years.

Looking for confirmation that I’m not crazy but please also feel free to tear apart my maths if I’m off. Thanks again.

What would you suggest on a flipped deal like this:

1st: 550k 30yr 3.5 10/1 (so I’ll refi that within 10 yrs)
2nd: 65k 30yr 5.5 fixed

Right now I’m throwing more at the 2nd. Appreciate the input.

Great great comment, thanks for sharing my man! :)

Example: a 350,000 mortage at 5% with monthly payment of $2100

(here I am just making up some numbers)

Put zero extra a month savings on interest 0
put 300 extra a month total savings on interest 40,000 Difference 40,000
put 600 extra a month total savings on interest 77,000 Difference 37,000
put 900 extra a month total savings on interest 111,000 Difference 34,000
put 1200 extra a month total savings on interest 140,000 Difference 29,000

What you can see is that the first few hundred shave off the most amount on your mortgage interest and you would be a fool if you dont put at least 100, 200, 300, 400 extra a month.

as you put more and more each month the benefit decreases to a point that even if you put 4,000 a month!!!! it will not decrease the loan by much.

Same thing happens with the number of years you finish paying early.
The first few hundreds shave off the most months (years form the loan.
But If you put way too much like 4,000 a month. it will really only shave off just a few months.

the question is what is the BEST amount ( in math the point of maximizing the money we put in the loan)

You will have to crank the numbers for your scenerio and each time you mark the amount of money and time you saved. then you will see the point where the graph has like a hump (where is changes from negative to positive) That is your best amount to put each month in the mortgage.

So You must to a combination of the two.

Never stop putting a few hundred in to you loan. (did you know that in a 5% 350,000 dollar loan the difference between a 30 year and a 15 year loan is about (maximum) 700 a month.
Some people think that to lower the years in half from 30 to 15 you have to double the payment from 2100 to 4200. NO! That is amazing!! just a few hundred dollars will lower a great amount of time and interest paid.

So dont stop putting (In your case) about 500 a month in to the first, the rest you can get dump it in the Second.

when you are done paying the second, then snowball the amount on the first.

i was thinking that you can mayve put that number that helps you shave off years. The rest you can invest in a safe No load Index fund or something like that.