Pay off 2nd mortgage before selling home?


P

PRNole

I had posted this on another thread but later realized it was not
completely related to it (didn't mean to hijack the origional thread),
so I am reposting it as a new thread...

Is it better or wiser to continue to make extra payments on a 2nd
mortgage until it's paid off or, instead, make the minimum payments and
try to pay
it off whenever the home is sold?

In my case, I'm 58 y/o, plan to work another 8 to 10 years, and
currently owe about 50% of the max available loan. I send
them $1,000 monthly instead of the min. $225 required in monthy
payments.

So, I can either continue to make the $1,000 monthly payments and pay
the loan off in 3 more years -- or -- I can send the $225 minimum
payment, keep the $775 for something else, and close out the loan
balance whenever I sell
my home.

Which is wiser?
 
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E

Elle

What is the interest rate on the second mortgage? If it is well below the
rate of return for your timeframe that you expect from alternative
investments (like stocks or bonds), then strictly numerical, rational
decision-making says to pay the minimum each month, and invest the rest of
your money in the higher return vehicles.

OTOH, there is wisdom in wanting to have the feeling that one owns one's
house outright. That's not numerically rational, but plenty prefer the
feeling of freedom that being debt-free suggests.
 
P

PRNole

8.25%, which is well below the expected returns i have on investments,
at least historically...
 
E

Elle

Well, just for my taste in these days of still record low interest rates
with the fed threatening continued raising of them, driving people out of
stocks etc, 8.25% is too high. I'd pay this 2nd mortgage off as soon as
possible. If it were closer to 5%, I'd think again. But one has to go with
one's own comfort zone. :)
 
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A

Andy

PRNole said:
8.25%, which is well below the expected returns i have on investments,
at least historically...
Using your extra money to pay down your 2nd mortgage is the functional
equivalent of putting that money into a zero risk investment that
returns a guaranteed 8.25% tax free (it may be a little less because
you may get a mortgage interest deduction). I would really like to
know what investments you have that are zero risk and have a return of
8.25% after taxes because I want to liquidate everything and put it all
in what you are investing in!

Andy
 

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