[UPDATE: Operation Mortgage Pay Off is in full effect now!]
Hey guys! So you know I’m working on my new Mortgage Pay Off Plan, right? Well, I have a ton of good ideas on how to actually make this happen, BUT I’m currently stuck on something key here, and I want your input. Like, seriously – I’m not just saying that to make for an interesting blog post :)
Here’s the deal. Right now I am 100% debt-free except for our mortgages, and I absolutely can’t stand it any more. We got a head start with refinancing the other month, but my plan of “dealing with it later” regarding actually PAYING IT OFF has gone on for a good 4 solid years now, and I’m over it. It’s now time to actually DO SOMETHING about them – my only problem right now is that I’m stuck on *which* mortgage to concentrate on first?
I’ve ran a whole bunch of calculations, using some awesome mortgage calculators for like 2 straight hours, but the only variable standing in my way is that my 2nd mortgage has a VARIABLE rate! haha… and I don’t know what the Fed is gonna do over the next handful of years while I start implementing this new game plan of mine.
Here’s a refresher on our stupid mortgages: (yes, I’m still bitter about it, even though it’s totally my fault we’re in this mess to begin with ;))
- 1st Mortgage: $289,203.65 – 30 year conventional @ 5.5%
- 2nd Mortgage: $61,907.88 – Maxed out HELOC @ a variable 2.8%
And the way I see it, I have two options here. Or, maybe even 3…
- I concentrate on the 1st mortgage 100% since it has the highest interest rate @ 5.5% – Almost DOUBLE that of the 2nd mortgage! Factually, this is the smartest route to take. At least at this given moment in time.
- I concentrate on the 2nd mortgage 100% since that variable rate, in theory, could inch up any damn time it pleases. With this market, and the Fed saying they’re gonna leave the rates super low for the next 2 years, it *seems* like we’re still a ways off until that happens, BUT legally/contractually I’m on the hook if it triples over night. On the other hand though, this lump sum is only 1/5th of the 1st mortgage! Meaning I could knock it out MUCH faster, and have that good “win” under my belt continuing to motivate me even more.
- I pay off some combination of both mortgages – evening out my risk. This may make the most sense out of all of them, but to be honest, it just bores the $hit outta me. I like to go All In or nothing, baby! Haha… which adds an entirely different level to my financial planning of everything ;)
In case you couldn’t tell, I’m currently leaning toward option #2 the most. Though only by a little bit – maybe 10%? Part of me feels like if I can pay it all off entirely by the time the rate goes up, I would have gotten out just in time and saved a ton of heartache (and money). But on the other hand, if it took me, say, 5 years, then that’s 5 years I could have been paying off the 5.5% interest the whole time saving me even MORE money! Which is also kinda crazy if we’re strictly basing it off financials. Argh… see, this $hit is hard, even for us bloggers :) Too many options and no “Right” answer! Haha…
So that’s what my thought process is at the moment. Mrs. BudgetsAreSexy is cool with either route really, and is pretty much just leaving it up to me. So now I need YOUR help. And I can easily be convinced either way if you smarty pants make an epiphany go off in my head :)
And for the moment, just forget about any #’s as far as how much extra we’re gonna pay off every month, etc. That part’s important, but it doesn’t affect the decision on which to pay off first I don’t think? Plus I’m still working on that. Just pretend it’s a lot more than paying $100 extra every month like we’ve been doing! I don’t even wanna know how many years THAT would take to get rid of them both, bleh…
Okay, so your mission right now: What would YOU do if you were in my shoes? Do you see a clear cut answer here, or is there something *else* we’re not even considering? Tell me, I can’t wait!! You could very well change the course of our entire financial lives! ;)