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we have a $195,000 mortgage at 4.25% APR/30 years, with taxes we pay $1370 every month, we also have a $17,000 car loan with RBFCU at 1.65%, 5 years plan.
Looking at my budget sheet (sad i even have one), my discover card, bill me later and sony debt will be paid off around April May next year. And I will have roughly $300-$400 to go on extra payments towards the mortgage and car.....would it be fine to split $200 extra to mortgage and $200 extra to car payments? Or how else could I decrease the debt that I have? would it be better to pay down the car first, then concentrate on paying down the mortgage. I'f i'm posting in the wrong forum also, please can a mod move it to the appropriate forum.
I'd pay it all toward the mortgage. It's a higher rate and even with the tax effect it's still higher than your car loan. You can significantly reduce the term of your mortgage by making extra principle payments each month. I have used this approach for multiple properties using a laddering approach as my income rose allowing me to pay the loan off in some cases in 1/4 of its term.
I pay the car off. The investment on a house is much longer term. The extra money on the car will dramatically cut that debt, and then you will have more to put toward the house or save.
I pay the car off. The investment on a house is much longer term. The extra money on the car will dramatically cut that debt, and then you will have more to put toward the house or save.
but the interest rate on the mortgage is higher. this isnt rocket science. if you want to pay down debt, you go with the higher interest first.
i wouldnt put extra money towards either; id invest the money.
Location: Chapel Hill, NC, formerly NoVA and Phila
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Do you have a rainy day fund aka emergency fund? I'd build up that before I'd put anything toward either debt.
If you have one, then I'd do an IRA or 401k toward retirement. If you are intent on paying down loans, the advantage of paying down the car is that you would free up that monthly payment very quickly. 5 years may become 3 years and you would lose that monthly payment. If you lose your job or something else happens, you would not have that burden anymore. If you pay it toward your house, while it is a higher interest rate, you will only shorten the term, it doesn't get you out of paying each month, so if something happens like job loss, you will still have both obligations for awhile.
Some people like to put the extra money in a fund earning interest and then when you have the money to pay off a loan in full, pay it off then. This way, it acts as extra liquid money if you should need it.
To get a better answer, though, you should give us more details - age, emergency fund, any other savings, etc.
but the interest rate on the mortgage is higher. this isnt rocket science. if you want to pay down debt, you go with the higher interest first.
i wouldnt put extra money towards either; id invest the money.
No fewer bills is better. The long term house payment will not go away as quickly as the car payment which will free up more money.
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Roth
