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Which Mortgage to pay off?
05-09-2008, 08:24 AM
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#1
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Thinks s/he gets paid by the post
Join Date: Feb 2008
Location: Indialantic FL
Posts: 1,330
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Which Mortgage to pay off?
I have a 175K mortgage on Primary Residence, 215K mortgage on Second Home. Next week we close on sale of vacation Home and will have about 230K after taxes. Question is which mortgage to payoff? We have another property for sale and intend to use a portion of the proceeds to pay down which ever mortgage is left prior to refinancing it.
Plan to Fire in OCT.
90K in annual pension income
300K in Retirement Savings
50K cash/short-term funds
Retirement budget about 60k in spending
Thanks
Jim
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05-09-2008, 08:31 AM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 49,327
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What are the interest rates on the mortgages? Generally you'd want to pay off the higher rate first.
__________________
Numbers is hard
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05-09-2008, 08:34 AM
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#3
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Thinks s/he gets paid by the post
Join Date: Nov 2007
Posts: 1,052
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Do both houses qualify for the same tax deductions on interest?
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05-09-2008, 08:50 AM
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#4
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Thinks s/he gets paid by the post
Join Date: Feb 2008
Location: Indialantic FL
Posts: 1,330
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Both are adjustable, (I know...never intended to keep the primary house in GA) current rate is 5.75 for both. The second home adjusts in 7 more years.
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05-09-2008, 08:51 AM
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#5
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Thinks s/he gets paid by the post
Join Date: Feb 2008
Location: Indialantic FL
Posts: 1,330
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 Quote:
Originally Posted by Art G
Do both houses qualify for the same tax deductions on interest?
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Yes, now they do, I am converting the second home from a rental. Had previously rented it for 7 years.
Jim
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05-09-2008, 09:02 AM
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#6
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Thinks s/he gets paid by the post
Join Date: Jul 2007
Posts: 2,487
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Might want to consider paying off the one that adjusts first. Also might want to pay off primary residence first (if you would prefer to live their in an unfortunate event).
BTW, hope you will have some other source of income, which I'm sure you do. Hate to say it but don't think your assets will last long at a 13.6 drawdown rate...
R
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05-09-2008, 09:09 AM
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#7
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Moderator Emeritus
Join Date: Sep 2007
Posts: 17,767
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Rambler, I think he has a $90K annual pension vs. his $60K in expenses, doesn't he? So he won't need a drawdown at all?
Is there a reason to keep the mortgage you are closest to paying off in time?
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05-09-2008, 09:18 AM
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#8
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Thinks s/he gets paid by the post
Join Date: Feb 2008
Location: Indialantic FL
Posts: 1,330
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Quote:
Originally Posted by Bestwifeever
Rambler, I think he has a $90K annual pension vs. his $60K in expenses, doesn't he? So he won't need a drawdown at all? Correct, should have a surplus of about 1k per month
Is there a reason to keep the mortgage you are closest to paying off in time?
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I'd have to refi either mortgage. In primary residence I have over 100k in equity already... 2nd home equity has been cut so now only have about 20-30k in equity.
Jim
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05-09-2008, 09:20 AM
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#9
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Moderator
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
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For the most financial advantage, I'd pay off the higher rate assuming the taxes are a wash.
But if the interest rates were close, I'd probably prefer to pay off my personal residence, because if your finances hit the fan at some point in the future, I'd rather lose a vacation home or investment property to foreclosure than my home.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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05-10-2008, 05:50 AM
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#10
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Thinks s/he gets paid by the post
Join Date: Feb 2008
Location: Indialantic FL
Posts: 1,330
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Thanks
I had thought that paying off the primary residence was the best idea and that has been confirmed by the replies.
We are moving household items to the florida place in the next three weeks or so. Using the spouses military retirement move so it won't cost us much. What a relief it will be to be down to one mortgage. Right now I am planning to work thru Oct. ER will be my 45th Birthday present to myself. I imagine that at some point I will work PT from a home office besides helping the wife with her at-home travel agency.
Jim
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05-10-2008, 07:03 AM
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#11
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Thinks s/he gets paid by the post
Join Date: Jul 2007
Posts: 2,487
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Quote:
Originally Posted by Bestwifeever
Rambler, I think he has a $90K annual pension vs. his $60K in expenses, doesn't he? So he won't need a drawdown at all?
Is there a reason to keep the mortgage you are closest to paying off in time?
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Oops, miss read it...sorry!
R
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05-10-2008, 08:11 PM
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#12
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Full time employment: Posting here.
Join Date: Mar 2005
Location: Northern, Florida
Posts: 925
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Quote:
Originally Posted by jimnjana
I'd have to refi either mortgage. In primary residence I have over 100k in equity already... 2nd home equity has been cut so now only have about 20-30k in equity.
Jim
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If you are currentlly paying PMI on the 2nd home, you might want to pay it down below the 80% level to eliminate that expense.
__________________
Retired in 2006 at age 49.
"Who among us is smart enough to learn from the mistakes of others?" - Voltaire
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05-11-2008, 04:13 PM
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#13
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Recycles dryer sheets
Join Date: Apr 2006
Posts: 143
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Quote:
Originally Posted by jimnjana
I had thought that paying off the primary residence was the best idea and that has been confirmed by the replies.
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I agree with the idea of paying off the primary residence mortgage first so that you'll be in a better situation and perhaps able to keep your home in case your finances turn sour unexpectedly.
For deciding which debts to pay off first in general, however, there is the "Debt Snowball" approach that gets people out of debt quickly ( Debt Snowball - How the Debt Snowball Helps Pay Off Debt Fast).
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05-29-2008, 06:25 AM
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#14
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Thinks s/he gets paid by the post
Join Date: Feb 2008
Location: Indialantic FL
Posts: 1,330
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Update.
Paid off primary residence yesterday! Feels great, especially after a stressful week or so... (Moved household goods from South Carolina to Atlanta (primary residence) from vacation home, closed on the sale of the vacation home, Moved from ATL and set-up house in Florida)
Jim
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