My husband and I purchased a home at the beginning of December. We financed the home with an 80-15-5 mortgage. The term is 30 years. Fifteen percent of the mortgage is through a home equity loan in the amount of 25K. I received a coupon booklet for the payments and the payments are $89 per month. The first question is whether I should send extra with each monthly installment (say about $150), or should I send in a regular payment when I get paid (every 2 weeks). Second question is, what is the best way to pay off the loan early? We are both in our early 40's and don't relish the idea of paying a mortgage into our 70's.

Thanks for any input.

CaptainForest

I’m sure others will post as well, I just wanted to ask something.

Basically you asking, should I pay twice a month or once a month?

Question, when do the calculate your interest? Do they only calculate it based on your balance at the beg of the month? In which case, you should only pay once a month.

Dr D

Most mortgage companies offer bi-weekly plans that take 1/2 payment from your checking account every two weeks. That will shave about 7 years off a 30 year loan. The secret to this is that you make 26 half payments/year= 13 full payments. For that they will charge you a $250? set up fee and an additional $3 - $4 every two weeks. You can accomplish the same, and save the fees by adding extra $ to your regular payment. While it is great to pay the mortgage off early, you should do this only when: all of your other debt is paid off; you are making maximum contributions to your 401-K & IRA; you have a money-ball set aside to pay cash for the next vacation, new roof etc; and don't have an alternative investment vehicle providing the same after tax rate of return as your mortgage. If you are going to pay extra on your mortgages, pay off the second, as it is probably at a higher rate than the first. I have seen many people throwing extra money at their mortgage while they still have $25K in revolving debt - sheer insanity.

KAW1962

So are you suggesting that I work on paying off the 2nd loan, which is the home equity loan (25K)?

Dr D

If your second is a fixed rate, I guarantee that it is at a higher rate than the first. If it is a variable rate, it will probably go higher than present. Always throw money at the highest rate debt. That is why I recommend prepaying mortgage debt last. Because of the tax deductability of mortgage debt, the effective rate can be considerably lower than the note rate. Hope this helps.