Paying Down Underwater Mortgage

[PawPrint53]

I just read a financial blog where the writer said she and her husband are planning a move in a year or so. Their house is underwater and the houses in her neighborhood are selling for $15-$20K less than what they paid. She plans to throw additional money at the principal in the next year. She stated they can't refinance so they "drastically need to reduce the mortgage balance" in order to sell.

Why would throwing extra money at the mortgage be a good thing to do? I would think that saving that money in some kind of safe interest-bearing vehicle and then just bringing it to the closing table if needed would be a better idea. Any thoughts?

 

[pb4uski]

But the economic benefit of less interest as a result of the paydown would presumably exceed the economic benefit of interest on a side savings account?

 

[Animorph]

I suppose it could spook some buyers, who now have to worry if the seller can come to the closing with a big check.