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Mortgage pay down question

Johnny Longrifle

Johnny Longrifle

Slow learner
Joined
May 19, 2020
Member Number
147
Messages
436
Loc
Too close to the fawking neighbors
Lets say you recently came into some money. Lets say that the dollar amount is equal to almost half of the outstanding balance of your mortgage. This lump some was received from selling other property that I was making a monthly payment on. So, this debt is now paid off, and the monthly payment I was making will be freed up as well. Now, my current mortgage is about half way through the term, and it has a rather high interest rate compared to what is available at the moment. Im not really interested in refinancing (again) because I don't want to pay all the fees and deal with all the paperwork again.

Would it be wise to make a one time principal payment to my mortgage with this money, or should I stick it in savings and let it sit until I have saved enough to pay the mortgage off in full?

Then, the money that I was using to make that monthly payment...would it be best to pay down the mortgage monthly, or put it into savings, or split it between the two?

Ideally, my goals are to have my mortgage paid off in 2-3 years and be debt free. What say IBB?
 
Johnny Longrifle said:
Lets say you recently came into some money. Lets say that the dollar amount is equal to almost half of the outstanding balance of your mortgage. This lump some was received from selling other property that I was making a monthly payment on. So, this debt is now paid off, and the monthly payment I was making will be freed up as well. Now, my current mortgage is about half way through the term, and it has a rather high interest rate compared to what is available at the moment. Im not really interested in refinancing (again) because I don't want to pay all the fees and deal with all the paperwork again.

Would it be wise to make a one time principal payment to my mortgage with this money, or should I stick it in savings and let it sit until I have saved enough to pay the mortgage off in full?

Then, the money that I was using to make that monthly payment...would it be best to pay down the mortgage monthly, or put it into savings, or split it between the two?

Ideally, my goals are to have my mortgage paid off in 2-3 years and be debt free. What say IBB?
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lump sum and the payment from other property on mortgage. personally if half my mortgage was gone, i would get hell bent on making it go away as soon as possible with a big jump in progress.
 
Need to look at your amortization chart and see where you fall on lump payment vs refi and big down payment. Best bet is to talk to an accountant or spend some time playing with the numbers yourself.

Would need more information to truly have any worthy opinion on it numbers wise.
 
Simple math problem, what's going to leave you with the most money in your pocket? If your mortgage rate is higher than the rate you can earn on that money through investments/GIC's/pimping/whatever, then pay off the mortgage, otherwise don't.

Be aware of penalties and maximums for lump sums, usually they only allow 20% of the original principal or so per year for a lump sum up here. Also, make sure you have enough rainy day money set aside.
 
Assuming you're talking about having 15 years left on a 30 year mortgage you're probably going to save the most money doing a 15 year refi with larger down payment.your total balance ought to be close to the same but the amount of interest paid on that balance over the remaining 15 years will be lower.


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Don't forget about capitol gains on the property you just sold.

And if you can refinance, refinance. Pay someone do to the paperwork and get it done. Saving a point or two even over a reduced mortgage period will save lots. Fuck interest. Lower it when you can.
 
Property might not have been the correct term. The item I sold was not real estate, so it shouldn't be subject to capital gains?

I guess I'll be on the phone tomorrow with the bank checking on penalties and what the rules might be for pre-payment and principal payments.
 
Ask a tax professional in your state.


I would refi either way. Paying off principle means less principle left subject to compound interest.
 
Man, I'm really a crush debt, be free and clear kinda guy.
And still leaning that way with you saying your interest rate is too high.

But, with all this money printing, is there anything else you could put some capitol into?

What kind of work do you do?

Do you happen to have a decent sized spread that you could build a shop on, if you have ever considered some sort of trade work from home?

Any interest in building a guest house on your property for rebuttal income? With the potential for flipping you and the lady to the guest house upon retirement and renting the main house?

For the 1st time in 10 years I'm looking to borrow some money to pay it back with watered down dollars

just throwing some stuff out there.

anyways, good for you:smokin:
 
DRTDEVL said:
Is it still taxed as capital gains if he puts the proceeds onto another property within the year? If so, would that count if he were refinancing his primary residence and rolling the profit in there?
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yes,

to avoid tax liability, he would have had to setup a 1031 exchange prior to closing where the proceeds from sale go into a trust, and the like-kind replacement investment property needs to be identified in 45 days and closed in 6 mos.

When the proceeds hit his account, the taxable event occurred.
 
Johnny Longrifle said:
... Now, my current mortgage is about half way through the term, and it has a rather high interest rate compared to what is available at the moment. Im not really interested in refinancing (again) because I don't want to pay all the fees and deal with all the paperwork again.

...
Click to expand...

I'd keep the cash for other investment opportunities.

Money is really cheap right now, I might even consider taking cash out. You could refinance with no fees for 2.375% on a 15 yr mortgage, per bankrate.com
 
Mortgage rates have been at historical lows for years, so not sure why OP has a relatively high rate. Given that, the math is not hard. In order of best solutions, refinance to lower term and rate with large down payment, or pay down current mortgage. Last time I refinanced online. It was effortless. That said, I have a high credit score.
 
Wulf said:
Assuming you're talking about having 15 years left on a 30 year mortgage you're probably going to save the most money doing a 15 year refi with larger down payment.your total balance ought to be close to the same but the amount of interest paid on that balance over the remaining 15 years will be lower.


​​​​
Click to expand...

yeah a 15 or 10 year note would be likely lower enough in cost to be well worthwhile.

if it were me, i'd use the monthly payment i was making and put that towards the new reduced and pay it off quick.

i think my pre-payment penalty is $500 if paid within 3 years :laughing: cheap enough to not worry about vs making payments for an extra year
 
Johnny Longrifle said:
Im not really interested in refinancing (again) because I don't want to pay all the fees and deal with all the paperwork again.
Click to expand...

You don't want to save thousands and thousands of dollars because of a little paperwork? You don't want to sepnd money that guarantees you save money? To me these are extremely easy choices.
 
If you are paying off in 2-3 years no way a refi makes sense.

Without knowing numbers, I’d apply the lump to current mortgage. Seeing that will light a fire to pay off the rest. It’s more emotional than financial, it’s about momentum and seeing the finish line. If you let it set, it will get spent or absorbed by something else. Pay off the mortgage.

Imagine the freedom of not having that monthly payment...your cost of living just went way down. Hate your job, no problem taking a lower paying one that you like. With a huge monthly cash outlay you are trapped.

I know some broke people on here are smarter than Dave Ramsey, but his philosophy is on point.
 
Put it into the mortgage, unlikely you'll be able to make more off it then what the interest you're currently paying is costing you. And put the other payment you were making into the mortgage as well. Also, keep looking into refi. Run the numbers yourself, and be realistic with how long you think it will take to pay it off. Depending on what rate your at now, and what you're able to get with a refi, you'll find you are probably better off refinancing. My bank does refi's with no closing/ appraisal/ crap fees, etc, so check your bank instead of just looking at mortgage firms.

Don't worry about the pre-payment penalty, as already stated, its likely not more then $500. But i would check to make sure.

Once you don't have a mortgage, it's a lot easier to put money into other types of investments like stated above.

Hardest part about it is getting up and going to work when you no longer have that mortgage!
 
Johnny Longrifle said:
Lets say you recently came into some money. Lets say that the dollar amount is equal to almost half of the outstanding balance of your mortgage. This lump some was received from selling other property that I was making a monthly payment on. So, this debt is now paid off, and the monthly payment I was making will be freed up as well. Now, my current mortgage is about half way through the term, and it has a rather high interest rate compared to what is available at the moment. Im not really interested in refinancing (again) because I don't want to pay all the fees and deal with all the paperwork again.

Would it be wise to make a one time principal payment to my mortgage with this money, or should I stick it in savings and let it sit until I have saved enough to pay the mortgage off in full?

Then, the money that I was using to make that monthly payment...would it be best to pay down the mortgage monthly, or put it into savings, or split it between the two?

Ideally, my goals are to have my mortgage paid off in 2-3 years and be debt free. What say IBB?
Click to expand...

I’d be keeping it in savings for the next four years minimum.
 
My wife & I looked into refinancing our current mortgage (30 year @ 4%). We don't owe enough on the house to make it worthwhile with the current high closing costs. Avg closing costs for us were approaching 4-5 thousand dollars. Not to mention paperwork hassle, appraisal nonsense, and so forth. On top of that ... because the amount owed isn't that high (comparatively) --- we don't seem to qualify for the best rates (like for .... say a 400,000 dollar loan)

In our case .... we just decided to double up our monthly payments. Doing it this way means the house is payed off in 16 years 2 months, instead of 15 years. It did cost a little more going this route, but we didn't need to cough up 4-5 grand and deal with PMI nonsense for best rates. And if we run into a rough patch (God forbid) .... we can drop right back to our original payment amount.

All that said ..... I'd dump it into your current mortgage to speed up payoff. As someone suggested already, check on options/penalties in case there is a max limit on lump sum payments. Current interest rates (for savings) don't match the current loan rates (even at 2.75 or 3%) .... so I wouldn't bother trying to save it for later use --- so to speak.

Just my 2 cents ...
 
Are we talking about owing 50% on a $100,000 mortgage or a $500,000 one? If you only owe a small amount, do you have anything else to borrow money against? Vehicle loans where I live are 1.99% up to 72 months for vehicles back to 2012. I've considered borrowing $40,000 against my JLUR so I could build a garage, but I hate the though of owing money on a vehicle (even though money wasn't used for that). If you can mentally seperrate these thoughts there may be more creative ways to get money than a refinance. Instead of calling them mortgage and car loan, call them debt 1 and debt 2 and have a spreadsheet that shows how much interest on each you pay. It is always best to pay highest interest first. In the past that meant pay everything ecept for mortgage, now not so much.
 
refi, pay the fees, you'll break even pretty quick, and invest the money to make profit, let the money work for you debt is not a bad thing if you manage it.

I'm three years from retirement, Low house payment (sub $900) money to pay the house off is making more than the interest rate. I'm making money not paying off the house
 
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Cash out as much as you can on your current mortgage and keep the cash you have. In 6 mos, inflation will force 24% interest rates. You'll be making money by borrowing money. Ramsey will be pissed because you proved him wrong.
 
I have no advice to offer, but congrats on such an exciting time in life and I wish you the best and hope it works out best for you.
Paying off a mortgage, it's the American Dream to the power of 2. Congratulations, and be well.
 
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